— Bancor (@Bancor) July 31, 2020
Boasting a new interface resembling the likes of Uniswap, Balancer, and Kyber, Bancor V2 is underpinned by an innovative new liquidity pool structure said to offer 20x liquidity amplification relative to other AMMs.
In the spirit of user safety, liquidity pools are being capped at $500k per reserve, giving each pool a maximum of $1M of total liquidity. While this may seem minute relative to Balancer pools boasting $50M+ of liquidity, it’s worth noting that $1M in liquidity in Bancor is said to offer the same depth as $20M worth on Uniswap.
According to the Bancor team, Bancor V2 will be gradually rolled out in phases, starting with basic LP functions & token swaps. In the near future, Bancor V2 aims to offer more advanced features, and pool stats (like APR) to give users a better understanding of which pools are set to offer the highest returns on any given day.
What’s to Know?
Starting today, Bancor is opening deposits for its very first pool – LINK/BNT. As many know, LINK has quickly established itself as one of the most dedicated communities to date, making them the perfect candidate for tokenholders wishing to capture trading feels while mitigating impermanent loss. For those who missed it, Bancor V2’s novel design offers:
- 100% single token exposure
- Impermanent loss mitigation
- Drastically reduced slippage
In the coming week, Bancor has stated they will be opening V2 pools for popular DeFi tokens like LEND, REN, rentBTC and SNX – soon to be followed by virtually every major Ethereum token on the market.
Now, while the new design is certainly appetizing, Bancor will need to compete with the likes of Balancer offering upwards of 55% Return on Liquidity (RoL) on given pools. To this front, we’re keeping a close eye on the launch of BancorDAO – a new initiative to seed key ecosystem incentives including liquidity provisions.
While it’s still a few weeks away, Bancor has openly stated that V2 will bring about BNT staking, allowing users to capture BNT inflation by staking to the liquidity pools which are collecting the most fees on any given day.
This incentive should act as a major catalyst for Bancor liquidity, giving the DEX a leg up when it comes to providing liquidity for new or slippage prone tokens.
DEX Liquidity Wars
As we alluded to before, the war for different liquidity aggregators to capture the most capital is quickly heating up. While liquidity incentives are a good short term way to motivate LPs to provide capital, it’s likely that new forms of engagements will become more and more necessary in the coming months.
Luckily for the end-user, DEX aggregators like 1inch are quickly becoming the primary point of contact for savvy traders, and with Bancor’s new V2 design, it stands to offer the best price at minimal slippage for support tokens like LINK.
For those Bancor community, the V2 launch comes as a new chapter in the project’s growth and we here at DeFi Rate are excited to watch it pan out!
Cooper is the Editor of DeFi Rate and a contributor to leading DeFi outlets like the Defiant and Bankless. He is active in the DAO ecosystem through projects like MetaCartel and Raid Guild where he seeks to incubate governance models and grassroots community development. He is an ambassador of Set Protocol and the Director of Fitzner Blockchain Consulting where he authors a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.