Bancor discontinues the “Impermanent Loss Protection” feature

After the recent fluctuations of the market, the next name the community took out to be the topic of discussion this time was Bancor when this DEX floor suspended the “Impermanent Loss Protection” feature.

According to the announcement, due to market fluctuations, Bancor (the first AMM exchange of the DeFi market) has published proposal BIP21, to suspend the protection of users from Impermanent Loss (IL).

The team says user assets are safe and this is not an incident of hacking. Impermanent Loss has long been a problem for many swap users on AMM exchanges. This is the difference, loss when users swap, or farm in the liquidity pools of AMM exchanges.

The current version of Bancor uses the Single-sided Staking mechanism. This model means that users when providing liquidity only need to deposit one token, instead of 2 like most traditional farm pairs.

From the above single-sided model, Bancor will extract a source of money to offset IL between pools. It can be considered as bringing money from the pool with high fees and re-sharpening it to the pools that meet IL.

And this is the crux of the matter, when if there is not enough fee to pay for IL, Bancor will mint more BNT to make up the difference, and the general pattern increases the supply of BNT.

Soon, KOLs on Twitter also quickly protested this decision. The Cobie account said that turning off IL protection when people needed it most was “ridiculous”.

Sassal.eth also did not forget to poke fun at Solend itself, the controversial project after the proposal to usurpation liquidates a whale wallet on this platform.

It can be said that many projects are facing many design problems. And when the market fluctuated, these limitations were gradually revealed, causing the team to directly “strike down”, reducing the decentralization required of a DeFi project.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

Join CoinCu Telegram to keep track of news: https://t.me/coincunews

Follow CoinCu Youtube Channel | Follow CoinCu Facebook page

Harold

CoinCu News