How to Earn Yield Safely Using Bancor v3 IL-Protected LPs
Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
After one of the most volatile weeks in crypto market history, I wanted to cover a simpler, relatively safer DeFi strategy, ideal for any type of market and one that might even earn more yield thanks to higher volatility!
Back in early May, I covered the new and improved benefits for impermanent loss (IL) protected single-sided LPs on Bancor v3. Just under 2 years ago, Bancor introduced an innovative new concept called single-sided liquidity provisions where you can deposit a single token and Bancor will pair BNT with the token to create the LP, while still providing protection against impermanent loss.
Quick reminder: Impermanent loss is a temporary loss of funds when providing liquidity. It’s simply the difference between holding an asset versus providing liquidity in that asset.
Since May, Bancor v3 has grown to just under $300M TVL with significant improvements to their IL-protected single-sided LPs including:
- 150 pools live with 30-40 fully activated as of this writing
- Live migrations for any v2 pools with a corresponding v3 pool
- Instant IL-protection for both new v3 LPs and migrated v2 LPs
- A single pool deposit for easier yield earning among BNT holders
- Noticeably lower gas fees on Ethereum L1 than in v2
What’s just around the corner are 2 major developments:
- First is auto-compounding for liquidity mining reward tokens + dual rewards (BNT + Token) to start enabling more protocols to launch more capital efficient LP mining programs. The audit for
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