This a living document continuously updated by the community and therefore a work in progress.
FAQs below are divided into the following sections:
Liquidity pools are automated market-maker (AMM) smart contracts that exchange assets algorithmically using on-chain reserves. They turn pooled market-maker liquidity into an asset class (“liquidity positions”), allowing for broader, more competitive involvement in market-making.
Impermanent loss is the difference between holding tokens in an AMM liquidity pool and holding them in your wallet.
It occurs when the price of tokens inside an AMM diverge in any direction. The more divergence, the greater the impermanent loss.
Why “impermanent”? Because as long as the relative prices of tokens in the AMM return to their original state when you entered the AMM, the loss disappears and you earn 100% of the trading fees. However, this is rarely the case. Impermanent loss often becomes permanent, eating into your trade income & liquidity mining rewards or leaving you with negative returns.
Liquidity pools consist of multiple tokens paired together in a pool. If one of the tokens changes in price relative to its paired token, an arbitrage opportunity emerges, incentivizing re-balancing of the pool (and resulting in a loss for liquidity providers).
As one token’s price is rising relative to its paired asset, the pool re-balances by selling the rising token while buying the token whose price is falling. Once you withdraw your liquidity, you are left holding less of the token that mooned, and more of the token that dumped.
Bancor v2.1 is designed to ensure that a liquidity provider gets back the same value of tokens originally deposited (as if they held the tokens in their wallet) using a novel mechanism called Impermanent Loss Protection.
Even if a token moons, an LP is entitled to withdraw the full value of the tokens they staked, so long as they have accrued full protection. In other words, if you stake 1 ETH, even if the ETH price doubles, you will still get the equivalent value of 1 ETH back, plus trading fees/rewards.
Bancor uses its protocol token, BNT, as the counterpart asset in every pool. Using an elastic BNT supply, the protocol is able to co-invest in pools alongside liquidity providers and pay for the cost of impermanent loss with swap fees earned from its co-investments.
If fees earned by the protocol from its co-invested BNT are greater than IL compensation, the protocol is able to offset IL for LPs without emitting new BNT. If there are not sufficient tokens in a pool to fully compensate an LP for IL in the staked ERC20 token, part of the protection may be paid out in an equal value of BNT.
By design, the protection offered by Bancor is earned by LPs over time. When a user makes a new deposit, the cover offered by the protocol increases at a rate of 1% each day the stake remains live, and matures to full protection after 100 days.
After this period, any impermanent loss that occurred in the first 100 days or any time thereafter is covered by the protocol at the time of withdrawal. Withdrawals prior to the 100-day maturity are only eligible for partial compensation. For example, withdrawals after 60 days in the pool receive 60% compensation on any impermanent loss incurred. Also, there is no compensation offered at all for stakes withdrawn within the first 30 days.
To support single-sided, non-BNT deposits, the protocol invests BNT into whitelisted pools. For example, a $100K deposit of LINK triggers $100K of BNT emissions into the LINK pool.
Protocol-supplied BNT generally remains in the pool earning fees for the protocol until the BNT (and its accrued fees) are eventually burned. The amount of protection offered by the protocol is governed the DAO and determined by BNT holders.
Each pool has a limit on the amount of BNT that can be provided by the protocol (“co-investment limit”). When this limit is reached, BNT must be provided by users in order for the pool to expand, or governance can vote to increase the limit.
Only if you withdraw your tokens before 30 days in the pool. Impermanent loss protection starts vesting immediately when you deposit. But you must be in the pool for at least 30 days until the cliff is reached and before the insurance can be utilized.
This information can be viewed in the ”Protection” tab of bancor.network, on the right side (where you can also find a countdown timer for complete elimination of impermanent loss). Each liquidity position has its own separate coverage, depending on when you deposited. Within the same pairs, there is no relation between different liquidity positions.
Protected value is the amount of tokens you can withdraw with 100% protection + fees.
Claimable value is the amount of tokens you can withdraw right now (assuming you have not earned full IL protection and there has been IL, this value will be lower than Protected Value).
No. There’s no relation nor correlation between different liquidity providers positions. You can view returns on each of your individual liquidity pool positions in the bancor.network protection tab.
The protocol co-invests BNT and these BNTs accrue fees. These fees are used to compensate any possible IL. In cases where the trading fees accrued by the co-invested BNT does not outweigh the IL, BNT equivalent (calculated at the current pool rate) will be minted from the protocol as compensation.
Only if you withdraw. If you withdrew before the 30 day cliff, you are not eligible for any insurance. Withdrawing between 30 and 100 days qualifies you for the achieved percentage - for instance, if after 60 days in the pool you withdraw and there is $100 USD worth of IL, you’ll receive compensation for 60% (or $60 USD) of the loss.
Only pools voted into the Bancor v2.1 whitelist by Bancor governance are eligible to receive impermanent loss protection and single-sided exposure. Currently roughly 60 tokens are listed in the Bancor v2.1 whitelist.
You can swap or stake with Bancor protocol on bancor.network or any site integrated with Bancor smart contracts. Users connect via Web3 wallets such as MetaMask. Make sure your wallet is connected by checking the connection status in the upper right-hand corner of bancor.network.
Yes. MetaMask supports hardware wallets like Trezor and Ledger directly. There’s no need to keep it connected to your PC after you’ve finished with the interactions.
Funds are sent to a smart contract that keeps record of the liquidity, but you always maintain ownership - it's non-custodial as it is based on the smart contracts.
Your hardware wallet, like a ledger, is not a storage device; it is an encryption device. So when you 'move' coins into a ledger wallet, you are really just moving them to an address on the blockchain, that can only be decrypted by the ledger. Staking from the ledger just means that the ledger encrypted address will still maintain control of the coins. And interacting with the contract will require the ledger for cryptographic signing. This means that any interaction with the Bancor protocol will require the physical ledger device. i.e it is impossible for a hacker to do anything with your funds without the ledger in their hands.
Single-asset staking (single-sided exposure): Bancor’s unique design gives you the option to remain 100% long on your favorite token while earning swap fees & liquidity mining rewards. In most liquidity pools, deposits require selling part of the staked tokens for ETH or another “reserve asset” like USDC, exposing the LP to a different asset during the staking period. With Bancor single-asset staking, you do not have to sell part of your tokens and be exposed to another token in the pool.
Specifically for single-asset staking of BNT (or any impermanent loss insurance paid out in BNT), any BNT being withdrawn from the system is subject to a 24-hour lockup to guarantee the security of the protocol and its pools.
When a user deposits single-sided liquidity into a pool, the process to support such a deposit is as follows. ("TKN" is used to represent any ERC20 token whitelisted in Bancor v2.1).
To match user deposits of single-sided TKN, new BNT is co-invested by the protocol into the TKN pool (e.g., a $100K deposit of LINK triggers $100K of BNT emissions into the LINK pool).
Protocol-invested BNT is minted into the pools and not onto the external market.
The BNT remains in the pools and earns fees until the BNT and its accrued fees are eventually burned.
The burning of protocol-invested BNT and its associated fees happens when the TKN provider withdraws their deposit, or when a BNT holder stakes their BNT in the pool, taking over the protocol’s position.
Co-investment limits, which are governed by the BancorDAO, determine the number of BNT that can be emitted by the protocol into a given pool to support single-sided TKN deposits.
The option to provide single-sided liquidity is available only if there’s sufficient space on the other side of the pair, which is BNT.
If there is not enough space in a given pool for providing single-sided ERC20 liquidity, an LP has two options: provide BNT to open up space, wait until another user provides BNT to open space, or work with governance to increase the pool's BNT co-investment limit.
Any transaction on the Ethereum network costs gas. You can look at estimations once you attempt to transact, the gas prices should appear on MetaMask. You can also check gas prices by checking Eth Gas Station.
This may be due to a contract bug. You should not approve it, and instead refresh your browser and MetaMask, or reconnect the wallet and try again. If you still experience issues, please reach out to us via ban.cr/support.
vBNT is the governance token of Bancor. It is generated by users who stake BNT in any whitelisted pool and represents their % ownership of the pool. This makes vBNT similar to an LP token, except you can also use it to vote in Bancor governance via https://app.bancor.network/eth/vote/. To withdraw BNT from a pool, you must have the associated vBNT in your wallet. With the release of Vortex, you are also able to use vBNT to borrow against your staked liquidity by swapping your vBNT for any token in the network. the system will also generate swap fees burned for vBNT. See the Bancor Vortex Proposal for more details.
When using vBNT to vote, you will need to stake your vBNT in the governance contract as first step. Once staked, there’s a 72-hour lockup period to un-stake vBNT from the governance contract.
Governance ERC20 address: 0x48Fb253446873234F2fEBbF9BdeAA72d9d387f94
Please check the protection tab to see all metrics for the different LP positions you have, such as how many fees you’ve earned, your ROI (return on investment), daily/weekly APR (annual percentage rate) and more.
You will get the swap fees for swaps in one direction. The APY is dependent on trading activity, and fluctuates accordingly, as well as BNT liquidity mining rewards that Bancor governance has approved for distribution to the pool.
Please refer to the “Fees + Rewards” column in the Protection tab.
As a pool increases in size and more liquidity is added, it attracts more swaps and generates more swap fees for LPs. The deeper the pool gets, the lower the slippage. So deep pools attract the most and largest swaps - and therefore more fees.
APR in the Data table refers to annual percentage returns specifically from swap fees.
The APR depends on how many swaps are executed in the pool within a given time frame. The more swaps, the higher the APR will be, and vice versa. On bancor.network, these fees are measured within a given time frame (1-day, 7-day and 1-month), divided by current liquidity in the pool, and then annualized. For example if there are $30,000 worth of fees in a pool with $10M liquidity over the course of 7 days. The APR is $30,000 / $10,000,000 * 100 * 52 weeks = 15.6%.
APR from BNT Liquidity Mining is measured similarly. BNT distributed to the pool in a given week, divided by liquidity, and then annualized. This metric can be viewed in the "Rewards" column in the Data table.
BNT Liquidity Mining (LM) program started at November 16 and aims at achieving two primary goals:
Attracting new liquidity into Bancor pools
Creating stickiness to incentivize long-term liquidity provision
The program started on November 16 and the rewards accrue continuously. It will last for a year and a half - 72 weeks total.
Initially a pool that is selected for LM rewards receives it for 84 consecutive days (12 weeks). It may get voted again once or before its reward cycle ends, subject to the governance decision via on-chain voting.
Only whitelisted pools are eligible for rewards. Of the rewards pool, the program initially started with 8 pools: 6 “large cap” and 2 “mid cap” pools. (Large cap pools receive 100,000-200,000 BNT per week, while Mid cap pools receive 10,000-20,000 BNT per week.)
Voting for new tokens to be added to the BNT liquidity mining rewards program is subject to the community and the BancorDAO. You can see the pools that have rewards as they'll have information available in the "Rewards" section, and a timer showing how much time left for the rewards unless it's extended by the DAO.
If your token is whitelisted, it can be proposed as a pool that can receive LM. Reach out to the governance via our Discord chat!
A whitelisted pool is a pool deemed worthy by BNT governance to receive IL insurance, single-sided staking and possibly LM rewards (subject to a separate on-chain voting). You can request to whitelist new projects by initiating discussion on Discord and in the Bancor governance forum. See instructions on how to whitelist a token. Below is the initial list of whitelisted pools:
AAVE, ALEPH, ANT, BAL, BAND, BAT, BNB, BUSD, BZRX, CEL, CHERRY, COMP, CRO, CRV, DAI, DXD, ELF, ENJ, ETH, EWTB, FTT, GNO, gUSD, JRT, KNC, LEND, LINK, LRC, MANA, MATIC, MKR, MLN, MTA, NMR, OCEAN, OMG, pBTC, RARI, RCN, REN, renBTC, renZEC, RPL, RSR, SNX, SRM, STAKE, sBTC, sUSD, SUSHI, SWRV, SXP, TRB, TOMOE, UNI, USDC, USDT, WBTC, wNXM, XDCE, YFI, UMA, QNT, ZRX.
BNT liquidity mining rewards will be distributed as follows: 70% to the BNT side of the liquidity pool and 30% to the base ERC20 token side of the pool. Rewards are distributed continuously per block.
The rewards from the LM program are provided in BNT only. This is unrelated to the swap fees, which comes from trading activity on that pool and may be received in the staked token.
First, visit the Protection Tab. At the top right side you will see a Rewards dashboard, showing total rewards to date, and the claimable amount you currently can stake or withdraw. From there, you have three options:
1.Stake: You will be able to choose a pool to direct your BNT rewards to. Staking your BNT rewards allows the rewards to earn swap fees and additional rewards, which can also be staked, while maintaining bonus multipliers on all live stakes.
2. Hold: Holding rewards in the contract has no impact on your bonus multipliers; however, doing so will not generate additional rewards. You can stake or withdraw your rewards from the rewards contract at any time. There is no deadline to take action.
3.Withdraw: Withdrawing your BNT rewards sends the rewards directly to your wallet and resets your multipliers to 1x on all of your existing LP positions. This temporarily reduces your earnings potential on your staked liquidity until the multipliers return.
Liquidity providers who keep their rewards staked to the protocol receive a “Bonus Rewards Multiplier”, which increases their BNT rewards by up to x2 per week. Each position in a liquidity pool has its own multiplier. The Bonus Rewards Multiplier (BRM) starts at x1 and increases by 0.25 every week. The max possible multiplier is x2, achieved after 4 weeks in a pool.
Multipliers are per pool. If you have a max multiplier in dai/bnt and you add another dai/bnt position, that position immediately has max multiplier.
The Bonus Rewards Multiplier (BRM) starts at x1 and increases by 0.25 every week. The max possible multiplier is x2, achieved after 4 weeks in a pool. The BRM is applied retroactively - e.g., if the LP chooses to withdraw rewards after 4 weeks, and the base weekly reward is 100 BNT, then accumulated rewards at the start of week 5 will be 100 BNT * 2 BRM * 4 weeks = 800 BNT.
Below we’ll consider a few different scenarios & the theoretical impact on LP returns.
I stake BNT in the LINK pool
The LINK pool gets 100K BNT rewards per week
70% of rewards (or 70K BNT) go to the BNT side, 30% of rewards (or 30K BNT) go to the LINK side
My average ownership of the BNT side is 1%
My average weekly reward is therefore 1% of 70K BNT, or 700 BNT
Scenario 1: After 3 weeks in the pool, I withdraw rewards:
I’m entitled to 3wks x 700 BNT = 2,100 BNT
Since I was in the pool for 3 weeks, I get a 1.75x multiplier on my rewards
I'm entitled withdraw 2,100 BNT rewards x 1.75 multiplier = 3,675 BNT
Scenario 2: After 8 weeks, I withdraw rewards:
I’m entitled to 8wks x 700 BNT = 5,600 BNT
Since I was in the pool for more than 4 weeks, I get a 2x multiplier on my rewards
I'm entitled to withdraw 5,600 BNT rewards x 2 multiplier = 11,200 BNT
Scenario 3: After 8 weeks in the LINK pool, I stake my earned BNT rewards to the YFI pool for 5 weeks:
I take my 11,200 BNT (rewards from the LINK pool) and stake it in the YFI pool
This opens a 11,200 BNT initial stake in the YFI pool
YFI gets 10K in BNT rewards per week
My average ownership of the BNT side of the YFI pool is 1%, entitling me to 100 BNT earned continuously per week
At the start of week 5, the value of my rewards from the YFI pool is 100 BNT x 4 weeks x 2x multiplier = 800 BNT
Thus, the combined value of my initial stake in the YFI pool (11,200 BNT) + BNT rewards (800 BNT) = 12,000 BNT (+ swap fees accrued on my initial stake in the YFI pool)
No, the rewards are earned continuously on your initial stake per block. You can stake or withdraw your rewards from the rewards contract at any time. There is no deadline to take action.
Keep in mind holding rewards in the contract has no impact on your bonus multipliers; however, simply holding rewards in the contract and not staking them means you are not earning compounded yield / additional rewards.
Go to https://app.bancor.network/eth/pool/create. Select the ratio (we recommend 50/50 as only 50/50 pools can currently become eligible for IL insurance, single-sided exposure and liquidity mining rewards). Select the token and click continue. Note that this is a complex transaction which might cost more gas than a usual transaction.
Please check out this guide: https://medium.com/@bancor/how-to-whitelist-a-token-on-bancor-v2-1-c867b82675d4
Currently, pool owners determine the pool's fee, however this is subject to change via governance, with the introduction of a standardized fee that is dynamic or the introduction of LP voting on each pool's fees. More information can be found in Bancor's Discord and Governance forum.
As the AMM uses Ethereum network, all transactions will incur gas costs, which are unrelated to Bancor. Different wallets such as MetaMask will show you gas estimates. You can also track the current gas prices in sites like https://ethgasstation.info/ to choose the best time to swap.
Besides the ETH gas fees, there's a fee for each trade and it depends on the pool. You can see the pool's fee under "Fees" here.
In order to swap tokens, you will need to first approve allowance for the relevant tokens. You can choose Unlimited approval in case you do not want to approve each time you trade these tokens, or Limited Approval if you do not want the contracts to keep ownership of moving these tokens on your behalf.