Bancor 3 introduces new features that aim to increase trading volume and make it easier and cheaper for everyday users to earn on their favorite tokens. By removing impermanent loss risk for depositors in Bancor V2.1, the protocol has already distinguished itself in the market as a true “set and forget” staking product for token holders seeking safe and reliable yields. Bancor 3 takes this design principle a step further. As professional, high-frequency users converge on DeFi, Bancor contributors have said that maintaining level playing-fields for everyday users is crucial to preserving decentralized liquidity markets.
Bancor 3 highlights:
- An “Omnipool” that allows for all trades on the network to occur in a single transaction. Bancor’s previous version required trades to be processed via BNT, creating an extra transaction and added gas costs compared with competing DEXs. Omnipool will reduce gas costs and enable Bancor to attract more trading fees with the same level of liquidity, making the protocol more capital efficient.
- Infinity Pools: There are no longer deposit limits on Bancor liquidity pools (previously, users had to wait for space to open up in a pool before being able to deposit their tokens, constraining the protocol’s growth). Infinity pools also introduce the concept of “trading liquidity” and “superfluid liquidity”. Trading liquidity is used for market-making, while superfluid liquidity can be used in fee-earning strategies that are both native and external to the protocol.
- Instant Impermanent Loss Protection: In Bancor v2.1, full Impermanent Loss Protection was accrued by staking your tokens in a pool for 100 days or more. Bancor 3 will offer full Impermanent Loss Protection from day one.
- Auto-Compounding Rewards: Previously in Bancor v2.1, a user had to manually re-add their rewards to the pool which cost them gas each time, while only trading fees were automatically re-added by the protocol. Now both the trading fees and rewards are automatically re-added to the pool, allowing users to earn even more while doing less.
- Dual-Sided Rewards: In Bancor v2.1, only Bancor could incentivize its liquidity pools with BNT rewards. In Bancor 3, token projects can now also offer rewards on their pools, so depositors can benefit from dual-sided rewards, earning more BNT and more of the token they’re staking, free from the risk of impermanent loss.
- Liquidity Direction: In Bancor 3, the BancorDAO now has the power to not only invest protocol-owned BNT in its pools and generate fees for the protocol. The DAO can also now vote to shrink the protocol-owned BNT in any pool if the pool is under-performing, and direct the BNT liquidity to more profitable pools. By directing BNT away from under-performing pools and towards the most profitable pools in the network, the DAO can more effectively optimize protocol fees earned by Bancor, BNT holders and LPs.
The code for Bancor 3’s Dawn phase will be open-sourced in the coming weeks with a public bug bounty and eventually activated pending a vote by the BancorDAO. A target release is planned for early 2022. Bancor contributors will unveil Bancor 3 on Tuesday, November 30 at the upcoming Dcentralcon conference in Miami. At the event, community members will hand out custom “Safe DEX” Bancor condoms as a reminder to always use impermanent loss protection.
Nate Hindman, Bancor’s Head of Growth, said:
“Across the industry, the issue of impermanent loss threatens to undermine the core tenets of DeFi by making liquidity pools unusable by ordinary users, and accessible to only the most sophisticated and wealthy users. We must prevent DeFi from becoming a playground for the rich and connected to extract value from protocols and dump on everyone else -- and this starts with fixing liquidity pools.” Hindman added:
“Bancor 3 marks a new day for DeFi -- one in which people and projects retake DeFi’s core building block to bring community-sourced liquidity to masses.”
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