Bancor Upgrades its “Set and Forget” Staking Product with Introduction of Impermanent Loss Protection
es.Bancor, a blockchain technology that enables users to change tokens directly rather than via exchanges, has disclosed the first information about its third iteration. Bancor’s newest version, named “Bancor 3,” provides liquidity providers with numerous critical features, including dual-sided incentives and complete irreversible loss protection.
The enhanced protocol contributes to increased trading volume and makes it simpler for users to profit on their preferred coins. With traders and liquidity providers in mind, the latest edition expands on the “set and forget” staking solution.
Bancor announced the launch of a new feature dubbed “Omnipool,” which enables all transactions on the network to occur in a single transaction. While limiting temporary losses was a primary objective of the v2.1 update, this necessitated the processing of deals through BNT. As a consequence, the second iteration included an additional transaction and increased the cost of gas in comparison to rival DEXs.
Omnipool alleviates gas cost concerns and allows Bancor to charge higher trading fees while maintaining the same level of liquidity, hence increasing the protocol’s capital efficiency. The project implemented ‘Infinity Pools’ for liquidity providers as part of the Bancor 3 architecture to incentivise long-term staking. More precisely, deposit constraints for Bancor liquidity pools have been removed (previously, users had to wait for available space in a pool before depositing their tokens, limiting the protocol’s development).
Bancor 3 offers two unique ideas under the Infinity Pools: “trading liquidity” and “superfluid liquidity.” The business says that trading liquidity is utilized for market-making, whereas superfluid liquidity may be used for fee-earning techniques both native and external to the protocol. Interestingly, Bancor developers continue to place a premium on temporary loss control.
While fee profits exceeded the cost of impermanent loss compensation, Bancor 3 will provide complete impermanent loss protection from the start. Additionally, token projects may give incentives on their pools, allowing depositors to earn both BNT and the token they’re staking.
This further confirms the V2 method, which employs economic incentives to offset the cost of temporary loss, a phenomena induced by LP portfolios that are regularly re-balanced. Additionally, both trading fees and rewards are now re-added to the pool automatically, enabling users to earn even more while doing less.
A noteworthy feature of the current update is BancorDAO’s ability to vote to reduce the protocol’s ownership of BNT in underperforming pools and reroute BNT liquidity to more successful pools. Finally, Bancor 3 will include additional features like as multichain and L2 compatibility, integration with Chainlink Keepers to enable more efficient token burning, a redesigned front-end, third-party impermanent loss prevention, and single-click migration to various DeFi protocols.
Nate Hindman, Bancor’s head of growth, commented on the possible effect of Bancor 3: “Across the industry, the problem of impermanent loss threatens to undermine the key concepts of DeFi by rendering liquidity pools inaccessible to all but the most skilled and rich users. We must avoid DeFi becoming a playground for the wealthy and connected to extract value from protocols and dump it on the rest of us — and this begins with correcting liquidity pools.”
“Bancor 3 ushers in a new era for DeFi,” Hindman said, “one in which people and initiatives reclaim DeFi’s fundamental building block in order to offer community-sourced liquidity to the public.”