This guide shows you how to stake and earn AAVE in the single-sided AAVE liquidity pool on Bancor v2.1.
Bancor v2.1 is a dramatic improvement over the existing AMM model, as LPs can now stay long on their tokens and earn swap fees without having to worry about price movements reducing the value of their stake.
Single-sided liquidity
Bancor v2.1 allows liquidity providers to stake in the AAVE liquidity pool on bancor.network and maintain 100% exposure to AAVE, instead of taking on exposure to a separate paired asset like ETH.
This allows LPs to stay long on their tokens while earning:
- AAVE swap fees
- liquidity mining rewards*
- impermanent loss insurance
*The AAVE pool was recently selected for BNT liquidity mining. Once the pool receives $400K USD in liquidity, it starts receiving 10K–20K BNT per week as well as up to 1M+ BNT in impermanent loss insurance. If the pool’s insurance limits are reached, adding single-sided AAVE requires more BNT being provided by users, or the insurance limits to be increased by governance
Impermanent Loss Insurance
Impermanent loss insurance accrues for LPs over time, increasing 1% per day until 100% insurance (full protection against IL) is achieved after 100 days in the pool.
Meaning, if you stake 100 AAVE in the pool for 100 days, even if AAVE moons, you’ll still get the equivalent value of 100 AAVE back — plus swap fees & rewards. Learn more about impermanent loss insurance.
The chart below shows the impact of impermanent loss on LP returns in the AAVE/ETH pool on Uniswap, November 5-December 23, 2020. All else held equal, Bancor’s impermanent loss insurance protects against periods of negative returns and improves profits for LPs nearly 3X.
How to Stake & Earn AAVE on Bancor
1. Go to bancor.network
Select the AAVE pool & enter the amount of AAVE to stake:
If there is 0 space available in the pool for AAVE, you can open space by adding BNT. Both AAVE and BNT stakes are protected from IL.
Note: Once activated for liquidity mining rewards, the protocol can provide up to 1M+ of BNT to support single-sided AAVE deposits. After limits are reached, adding single-sided AAVE requires more BNT to be provided by users or insurance limits to be adjusted by governance.
2. Manage
After your AAVE or BNT is deposited, your stake opens a new position in the Protection tab’s pool manager.
Track the overall value of your stakes, see returns & impermanent loss insurance for each individual position. Manage liquidity and (coming soon) claim and re-stake BNT liquidity mining rewards.
(BNT liquidity mining rewards scheduled to go live in the bancor.network front-end in January 2021).
- Initial Stake = Number of tokens deposit
- Protected = Number of tokens you can withdraw with 100% protection + fees
- Claimable = Number of tokens you can withdraw now
- Fees = Total fees earned
- ROI = Protected value/Initial Stake value
- APR = Projected annual returns (e.g., 7d = 7d fees/liquidity * 365)
- Current Coverage = impermanent loss insurance accrued (time until 100% protection)
3. Analyze pools
View aggregate pool data in the main data table. See projected APR from BNT liquidity mining rewards in the “Rewards” column, 24h swap fee income (“Fees”) and annual percentage yield (“APR”).
