Eternal Loss, Cryptocurrency’s Silent Killer, Threatens Core Principles of DeFi: Bancor 11/24/2021

Press release

Zug, Switzerland, November 22nd One of the original DeFi developers is looking to fix one of the industry’s most pressing problems.

When Bancor launched its first DeFi liquidity pool in 2017, the project’s founders saw a tragic flaw in their invention: that is, if a token increases in price, investors are vulnerable and lose money quickly. The problem known as “inconsistent loss” results in users losing billions of dollars in crypto every year. Now more than $ 20 billion has been placed in the affected liquidity pools.

Bancor released a solution in late 2020 that fully protects users from permanent loss by protecting against risks at the protocol level. Now, a year later, and with more than $ 200 million bancor depositors made in the past 10 months, the project is preparing to release a third version of the protocol. Like its predecessor, Bancor V3 will completely protect users from the threat of undermining DeFi’s core principles.

Permanent loss (IL) is the risk liquidity providers take in exchange for the fees they earn in liquidity pools. If the IL exceeds the fees a user earns on withdrawal, it means that the user has made a negative profit compared to just keeping their token out of the pool.

“Because of the complex nature of temporary losses, only a handful of the most active and experienced users can reliably hedge the risk and minimize its impact on their DeFi revenue,” said Nate Hindman, Head of Growth at Bancor.

“If liquidity pooling is only profitable for the most advanced users, liquidity could be concentrated in the hands of far fewer actors, reducing resistance to control. DeFi browsing and manipulation,” Hindman said.

A recent temporary loss study by crypto consultancy Topaze Blue found that around 50% of users who place their tokens in Uniswap V3 see negative returns. In certain groups, the percentage of users who lose more money from IL than they make from transaction fees is 70-75%.

Permanent loss is known in the industry as a silent killer because it is difficult for users to notice. The value of user stocks in the liquidity pool could increase as the price of the aggregated tokens increases, creating the illusion of profit. However, compared to just buying and holding the contributed assets for the contributed amount, users can still suffer losses.

To shed more light on the matter, Bancor and DeFi analytics provider APY Vision recently teamed up to launch il.wtf. On the website, users can enter their Ethereum wallet address and see how much IL they have accumulated in their life and which team burned them the most. Users who share their IL on Twitter using the hashtag #BancorBailouts are eligible for $ 1,000 relief. A new contribution Disclosure Loss of $ 400,585 by providing liquidity to 27 pools.

The pressure on users to deal with inconsistent losses and the associated risk to the decentralized liquidity market comes from Bancor preparing for the release of its upcoming V3. Core Contributors will be unveiling key features on November 29th at 8:30 p.m. EST on the community’s YouTube livestream.

“Bancor V3 is designed to make decentralized financing as easy and secure as possible for everyday users,” said Hindman. “DeFi’s soul is at stake. We need to prevent DeFi from becoming a playground for the rich and connected to extract values ​​from logs and toss over others – and this begins with the establishment of pools of liquidity. “

Introduction to the Bancor Protocol

Bancor is the only decentralized staking product that allows you to earn with a single token and that is completely protected from perishable losses. Bancor generates millions of monthly fees for users who deposit their tokens in the log and offers up to 40% APR for tokens such as Ether (ETH), Wrapped Bitcoin (WBTC), Chainlink (Url)), Tether (USDT), Polygon (MATIC)) and more. Bancor belongs to the community as a decentralized autonomous organization (BancorDAO).

Learn more about Bancor Protected Staking

Learn more about permanent loss

Contact vehicles:

Kim Bazak, MarketAcross

Or bancor

Nate Hindman, Tel. +972586993434

Head of growth

E-mail: [email protected]