This article was first published on Bancor - Medium
The post provides a high-level overview of staking in single-sided liquidity pools on bancor.network
- Single-Sided Liquidity
- Impermanent Loss Protection
- Liquidity Mining Rewards
- 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BNT generally remains in the pool earning fees until the associated stake (i.e., user-deposited $100K LINK) is withdrawn, at which point the protocol burns the BNT it had invested and its accumulated fees....
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Bancor - Medium