Bancor v2.1 Staking for (DeFi) Dummies

This article was first published on Bancor - Medium
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The post provides a high-level overview of staking in single-sided liquidity pools on bancor.network

Contents:

  1. Single-Sided Liquidity
  2. Impermanent Loss Protection
  3. Liquidity Mining Rewards

Summary:

  • Compared to other AMMs, Bancor protocol offers several unique features to LPs including single-sided exposure and impermanent loss protection.
  • These features are designed to generate higher, more reliable yield from swap fees & liquidity mining rewards.

1. Single-Sided Liquidity

A user may provide liquidity to a Bancor pool with a single token and maintain 100% exposure to the token. In contrast, other AMMs require LPs to take on exposure to multiple assets. With single-sided liquidity, LPs can stay long on a single asset and collect HODL returns, while earning swap fees and mining rewards.

Swap fees auto-compound in the pool and are paid in the tokens staked, while rewards (discussed below) may be manually re-staked to the protocol in a single-sided fashion to compound yield.

How it works:

  • Provide liquidity to a pool in the risk asset (e.g., ETH, WBTC, LINK) or in the Bancor Network Token (BNT).
  • To support single-sided, non-BNT deposits, the protocol co-invests BNT in its pools to match user deposits. For example, a user deposit of $100K LINK triggers $100K of BNT emissions by the protocol into the LINK pool.
  • Protocol-invested BNT generally remains in the pool earning fees until the associated stake (i.e., user-deposited $100K LINK) is withdrawn, at which point the protocol burns the BNT it had invested and its accumulated fees....

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To keep reading, please go to the original article at:
Bancor - Medium

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