Bancor introduces new staking pools and instant impermanence loss protection

Decentralized automated market maker (AMM) Bancor will launch new staking pools and upgrade its impermanent loss protection mechanism as part of its long-awaited Bancor 3 upgrade.

Founded in 2017, Bancor is the first DeFi protocol to introduce AMM on the blockchain. The Ethereum-based exchange and lending platform also allows users to earn staking rewards through various liquidity pools.

In a Nov. 30 blog post introducing the upcoming Bancor 3 update, the platform announced several new features and upgrades, including Omnipool, Infinity pools, and “instant impermanence loss protection.”

On AMMs like Bancor or Uniswap, impermanent loss (IL) occurs when the prices of two assets in a liquidity pool diverge significantly, with one of them rising or falling strongly in value.

In October 2020, Bancor first introduced a mechanism to address this issue, introducing (IL) Insurance, which guarantees that liquidity providers will receive up to 100% of initial capital, plus accrued fees after a 100-day waiting period.

As part of the instant impermanent loss protection upgrade, users will no longer have to wait for the initial 100 days, as they will be fully protected from day one.

The new Omnipool feature will see the creation of a single pool for staking BNT, providing yield from the entire network, rather than currently offering yield through separate pools of asset pairs such as ETH/BNT.

"Omnipool" allows all transactions on the network to happen in one transaction. In previous versions of Bancor, transactions required transfers via BNT, resulting in additional transactions and increased gas costs compared to competing DEXs.

The Infinity pool will offer unlimited deposits on Bancor, no longer requiring users to wait “in the pool before being able to deposit tokens”.

Other notable upgrades in Bancor 3 will include automatic compounding of liquidity mining rewards, two-way rewards to “allow third-party token projects to offer instant impermanent loss rewards in their pools,” and further support for multi-chains and second layers.

Bancor is managed by a Decentralized Autonomous Organization (DAO) and currently provides cross-chain support for the EOSIO blockchain. Bancor 3 will be launched in three phases, dubbed “Dawn, Sunrise, and Daylight,” the platform said, with the goal of launching in the first quarter of 2022, pending a vote from BancorDAO.

According to DeFi Llama, Bancor ranks 32nd among DeFi platforms, with a total value locked at $1.65 billion. At the time of writing, Bancor’s native token, BNT, is up 2.3% over the past 24 hours to $4.06, with a total market capitalization of $949.4 million.