Bancor launches its v3 called Bancor 3: it’ll offer impermanent loss protection

By: Charles Thuo
Charles Thuo
Charles holds a degree in mechatronic engineering but was intrigued by the fascinating world of cryptocurrencies and blockchain. He… read more.
on May 11, 2022
  • Bancor was the first decentralized finance protocol to introduce liquidity pools.
  • Bancor has launched its version three solution called Bancor 3.
  • Bancor 3 shall offer impermanent loss protection to liquidity providers.

Bancor has announced its v3 called Bancor 3 which comes with a new solution for liquidity providers. The Bancor 3 comes with a completely new liquidity mining strategy that aims at bringing organic on-chain liquidity to the protocol to make decentralized finance (DeFi) staking easier, especially for decentralized autonomous organizations (DAOs).

One of the most prominent features that Bancor 3 will offer users is protection against impermanent loss for liquidity providers.

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The version 3 project has attracted support from over 30 blockchain projects including Polygon, Synthetic Network, Yearn.Finance, Barve, Flexa, and Enjin among others.

Bancor v3 vs Bancor v2

In Bancors V2, single-sided staking was introduced with the intention of protecting traders against impermanent loss. However, it suffered high gas fees.

Bancor v3 aims at offering full impermanent loss protection while maintaining minimal gas fees.

While Liquidity is the backbone of DeFi, many DeFi protocols face an uphill task in maintaining a long-term mining strategy that protects users from exaggerated gas fees while reducing the risks involved.

In an interview with Cointelegraph, the Product Architect at Bancor, Mark Richardson, addressed the key infrastructural changes that Bancor introduces ad said:

“In Bancor 3, the protocol utilizes an improved set of operations that allows the network to better manage its liabilities, resulting in a more cost-efficient method of providing impermanent loss compensation.”

Some of the new architectural changes that Bancor 3 introduces include Omnipool, auto-compounding rewards, instant impermanent loss protection, superfluid liquidity, and dual rewards. The Ominpool is a single virtual token liquidity vault that uses the fees earned in one pool on the protocol to compensate for the impermanent loss in another pool.

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