Bancor announced the launch of the second version of the popular automated liquidity provider protocol on Apr 29. The Bancor v2 will be launched in the second quarter of this year. It will feature integration with Chainlink for price oracles to obtain reliable and tamper free data for stable automated market marker (AMM) operation, provision for a user to contribute to a liquidity pool with only one token, reduced slippage design (reducing volatility and providing smooth liquidity) and supper for lending pools.
The technical details, documentation and source code will be released later by the team. Bancor v2 launch will highly benefit the rising field of Decentralized Finance (DeFi) by solving major problems associated with automated liquidity providers.
Liquidity Provision Impermanent Loss Problem: Why Stake When Buy And Hold Gives Better Returns?
There’s a reason why people don’t stake tokens readily, they cause a reduction in value compared to a simple token holding strategy. Its called impermanent loss and Bancor aims to solve this by pegging automated market makers with liquidity pools. The relative value of the automated market maker (AMM) reserves will be held constant using Chainlink oracles, which supply reliable price data to the smart contract from multiple sources. Bancor v2 will extend this protection to volatile assets, without requiring liquidity providers to hold additional assets.
Single Asset Liquidity Provision
Bancor v2 will allow liquidity providers to maintain exposure to a single ERC20 token asset, instead of having to maintain reserves of ever single asset (usually 2 or 3). This will grant greater flexibility to user, who want to minimize exposure to any other asset. Also, custom percentages (1-100) can also be set for assets.
Reduced Slippage Redesign
Bancor v2 will be redesigned from the get go to favor reduced slippage, which will allow it to compete better with order-book based exchanges. It will do so by offering customizable bonding curve logic and enhancing capital efficiency.
Support For Lending Pools
Bancor v2 will support lending pools, so liquidity providers can earn interest alongside the fees from trading. It will maximize the profitability for the users and motivate more people to stake assets.