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Why is #Bancor $BNT going to turn into a Black Hole that sucks all liquidity up? My fellow $LINK Marines, pay attention...
Let's start in 2017. Bancor basically invented the idea of Liquidity Pooling/AMM. Other AMM's "copied" their code and released it, and rose to prominence.
Let's start in 2017. Bancor basically invented the idea of Liquidity Pooling/AMM. Other AMM's "copied" their code and released it, and rose to prominence.
So #Bancor spent the last couple years developing something that no other DEX is doing -
1) Single-sided liquidity pooling
2) Impermanent Loss protection
1) Single-sided liquidity pooling
2) Impermanent Loss protection
First I have to give you a quick rundown on what IL is, and why Bancor is going to become a black hole that sucks all liquidity into the protocol...
If you want to provide liquidity to Uniswap/Sushiswap/Balancer/any of these AMM Dex’s, you earn a portion of the trading fees which is sick.
But when you pool tokens on Uniswap etc, you have to do it in pairs. So you have to pool equal parts, for example, ETH & RSR.
But when you pool tokens on Uniswap etc, you have to do it in pairs. So you have to pool equal parts, for example, ETH & RSR.
There’s two problems with this: #1: You have to essentially keep equal parts ETH locked up.
Which as you can imagine, if I have say $10k worth of RSR, I also need to have $10k worth of ETH locked up in that liquidity pool
Which as you can imagine, if I have say $10k worth of RSR, I also need to have $10k worth of ETH locked up in that liquidity pool
But the second reason is a lot more painful. If one side of those pairs moons, or rises too fast, you get this thing called impermanent loss.
Basically, you lose a portion of the initial liquidity that you provided.
Basically, you lose a portion of the initial liquidity that you provided.
So for coins that are really stable, or during a bear market, it’s not a huge deal.
But during a bull market, one side of that pair might go 10X. And you may lose a significant portion of your underlying asset, on one side.
But during a bull market, one side of that pair might go 10X. And you may lose a significant portion of your underlying asset, on one side.
Now you do get back SOME of the other side, but not the full equal USD value.
So for example, I’m farming BAO right now, and I pooled 1M token in Uniswap along with .3 ETH, and I am down to only 400k BAO, and .5 ETH, with a total P&L of -$600.
So for example, I’m farming BAO right now, and I pooled 1M token in Uniswap along with .3 ETH, and I am down to only 400k BAO, and .5 ETH, with a total P&L of -$600.
Now my farming gains make up for this, but it’s still shitty to lose your underlying asset.
I'm not a huge wallet but the suck level is proportionate to the size of a liquidity provider's wallet.
I'm not a huge wallet but the suck level is proportionate to the size of a liquidity provider's wallet.
Bancor basically solves this, by allowing you to do both SINGLE sided liquidity pooling, as well as 100% Impermanent Loss protection.
Last note: Now single-sided staking and IL protection isn’t a huge deal for retail investors putting in $500 or whatever.
But actual investors with real liquidity, who pool 7/8/9 Figures into AMM DEX’s this is a MASSIVE deal.
But actual investors with real liquidity, who pool 7/8/9 Figures into AMM DEX’s this is a MASSIVE deal.
These big wallets can see their P&L swing by 6 or 7 figures per WEEK just due to IL. Bancor is going to hit an exponential growth curve where it just sucks all the liquidity out of UNI etc.
That’s why I’m bullish to the max.
That’s why I’m bullish to the max.
IYKYK. If you're another $LINK #Chainlink OG Marine, drop a GIF or meme below.
