Bancor has unveiled the next step in their new AMM design.
The 2.1 release introduces an elastic BNT supply, used to cover impermanent loss for LPs through a mechanism called Liquidity Protection. The update builds on the ability to add single-sided liquidity, or using one token to pool liquidity instead of two like Uniswap.
LPs are encouraged to keep their liquidity inside a Bancor pool to recoup the losses they would have incurred through impermanent loss, in addition to receiving swap fees. The longer they stay in the pool, the more protection they get
“We view this as liquidity mining 2.0,” Bancor’s head of growth Nate Hindman told The Defiant. “instead of arbitrarily paying LPs to provide liquidity on our protocol, we are compensating based exactly on their individual impermanent loss incurred. “
Those who stake BNT earn a governance-enabled wrapper called vBNT, granting voting power and a claim on protocol fees. vBNT is used to usher in protocol changes, including the 2.1 upgrade currently live for voting in the new governance dashboard.
60 different pools are currently being considered for the Bancor whitelist, half of which (illustrated in bold below) are eligible for Liquidity Protection today.
With the first Bancor V2 LINK pool reaching its cap of $300k in under 24 hours, it seems that many have been anticipating the next steps of AMM promising to eliminate impermanent loss while offering single-sided liquidity.
While the team seems to think they’ve found the answer, the community will now decide whether or not all checks out thanks to the first BNT governance poll.