The Bancorian | A Weekly Summary-November 14th, 2021

10 min readNov 21, 2021

💻Development

The current development of V3 is progressing quite well and audits are underway. We have pushed some significant updates on the contracts side in preparation for the V3 migration. We are trying our best to make the migration as smooth, seamless, and cheap as possible for liquidity providers.

We will also shift the main web application to a faster version in the coming days and you can expect a significant redesign to the front end as part of this process. This will include a mechanism that would alleviate the cost of restaking $BNT rewards. Currently, $BNT rewards accrue in a single rewards contract and restaking rewards effectively pulls rewards from every pool where a stake exists. We are looking to grant LPs the ability to restake rewards from an individual pool. Since there are fewer calculations that need to happen and pools that the contract needs to read from, the cost of restaking should come down. In terms of broader gas savings, these are expected with the release of V3.

New UI screens are now live on the redesigned interface. This includes:

A new pools🤿
A new tokens page💰
A new portfolio page📒
A new voting interface🗳
A new safe staking landing page✅
A new impermanent loss landing page ✅

🌐Ecosystem

🌀Bancor Vortex🔥

For this week, we saw roughly ~40K in $vBNT that was burned by the vortex. At current $BNT prices (~$4.00) this equates to ~$160K worth of $BNT locked forever.🔒

+-----------------+--------------+
|      time       | burnedamount |
+-----------------+--------------+
| 11/7/2021 0:00  |  3955.023369 |
| 11/8/2021 0:00  |  4132.348741 |
| 11/9/2021 0:00  |  4573.391976 |
| 11/10/2021 0:00 |  5045.115276 |
| 11/11/2021 0:00 |  7014.224356 |
| 11/12/2021 0:00 |    3842.3932 |
| 11/13/2021 0:00 |  11225.96749 |
+-----------------+--------------+

The cumulative burned amount increased from ~1.554m on 11/6 to ~1.593m on 11/13.

📊Key Metrics

7-day total cumulative fee revenue: ~1.34m

30-day total cumulative fee revenue: ~$5.4m

Source: token terminal

📈 The average daily revenue for different time periods:

7 days ~$191.4K
30 days ~$180K

The 30 day annualized daily revenue equates to ~$65.7m in annual trading fees paid to LPs. For the past 30 days, trading fee revenue is up (~$1.4m) as compared to the previous 30 days.

💰 In terms of protocol revenue, Bancor earned around ~$2.39m in monthly revenue for $BNT holders. It is ranked the 10th lowest by Price to Sales (P/S) ratio compared to other crypto projects

🔌Integrations and Updates

We will be announcing the details of Bancor V3 Phase one on November 29th at 8:30 PM EST via a YouTube live stream. Mark is going to do a presentation on the V3 features and zoom out on the industry and where we see the future of liquidity. This will be followed by a roundtable discussion with core contributors and other folks from the community. The following day, we will be announcing V3 at the DCentral Conference in Miami. For day one Mark will be doing a talk on Bancor V3 and for day two a talk on our findings on the Uniswap V3 study.
We are investigating enabling certain plugins for Snapshot to improve DAO operations. This includes enabling a comment box to have an active discussion on Snapshot (this would be in addition to discourse), as well as adding the graphs plugin that would let us view analytics about votes. There is a post in discourse that details both of these plugins and provides examples. Please share any feedback there.
We are still working on integrating POAPs as part of governance to encourage participation and engagement in the DAO. There are some cool designs being worked on behind the scenes for the community. Expect to hear more in the upcoming weeks.
We have launched il.wtf in partnership with apy.vision. In il.wtf you enter your wallet and it scans every pool that you have ever provided liquidity to. It shows you whether you have suffered impermanent loss (divergence loss). We are defining impermanent loss as the difference between the value of your pool plus fees and just holding those tokens in your wallet. We are incentivizing people to share their impermanent loss and we will be selecting LPs (1 per day, Monday through Friday) randomly to bail them out ($1000 worth of $BNT).
Our economics and analytics team spent time analyzing Uniswap V3 to produce a study on impermanent loss. A brief description can be found here: “AMMs are autonomous smart contracts deployed on a blockchain that make markets between different assets that live on that chain. In this paper we are examining a specific class of AMMs called Constant Function Market Makers whose trading profile, ignoring fees, is determined by their bonding curve. This class of AMM suffers from what is commonly referred to as Impermanent Loss, which we have previously identified as the Gamma component of the associated self-financing trading strategy and which is the risk that LP providers wager against potential fee earnings.
The recent Uniswap v3 release has popularized the concept of leveraged liquidity provision — wherein the trading range in which liquidity is provided is reduced and achieves a higher degree of capital efficiency through elimination of unused collateral. This leverage increases the fees earned, but it also increases the risk taken, ie the IL. Fee levels on Uniswap v3 are well publicized so, in this paper, we focus on calculating the IL.
We found that for the 17 pools we analyzed, covering 43% of TVL and chosen by size, composite tokens and data availability, total fees earned since inception until the cut-off date was $199.3m. We also found that the total IL suffered by LPs during this period was USD 260.1m, meaning that in aggregate those LPs would have been better off by USD 60.8m had they simply HODLd.”

💪Social Channels

😠IL.WTF 💢

This week we saw the launch of il.wtf, which is a tool that calculates the impermanent loss that you have suffered. We have already started to see a lot of REKT LPs posting their losses and applying for a #bancorbailout. This campaign is looking to raise awareness around IL while at the same time putting Bancor in the spotlight as the only AMM where all LPs stand to win. How is this accomplished? In Bancor, the IL risk is diversified across 100s of pools. This essentially turns Bancor into an insurance provider where some pools have little no IL while others might experience IL.

🎲Random Musings

Our friends from Chainsight Analytica wrote a great thread on “Just in Time” liquidity attacks (a new type of MEV A.K.A miner extractable value). This affects Uniswap V3 LPs as opposed to traders (typically what MEV targets) and the attack drains fees that would otherwise go to those LPs. As a UNI V3 LP you are already exposed to higher than normal IL due to concentrated liquidity. With this new type of attack, you are also losing out on fees to bots. This is only possible on Uniswap V3 due to its unique architecture and does not affect other AMMs.

Continuing with Uniswap V3, our recent study has also revealed that automated LPs don’t perform much better than lazy LPs (just pool and chill 😎🏖). In fact, 50% of LPs are losing money on Uni V3 and certain pools are underwater. If you are an LP on Uniswap V3, there are better AMMs out there where you don’t have to suffer 😉.

A great write-up from a fellow #bancorian on Bancor V3. He starts by covering V2.1 and what to expect in V3 phase one. I highly recommend reading the thread and showing him some love for his efforts.

Our very own Mark was featured in a podcast this week. Worth the listen if you are looking to learn more about Bancor and the inner workings of the protocol.

If you haven’t been following the recent narrative about so-called “DeFi 2.0” protocols and the “new” features that they are bringing to the table then it might not be a surprise to learn that these “new” features have already been on Bancor V2.1 since October of 2020. 😆

Bancor has always been a pioneered and with V3 we are once again looking to reinvent AMMs.

Some tweets from the official Bancor account in case you missed them

🎩Bancorians in the Wild

A collection of weekly tweets from some of the greatest Bancorians🧠💪

☑Governance

👈Previous Proposals

This past week (11/7/21), we saw two proposals on Snapshot:

both of these proposals met quorum requirements.

👉Current Proposals

For this week (11/14/21), we have a number of proposals on Snapshot for voting:

Head over to Snapshot to cast your votes.

❗If you aren’t voting regularly make sure you unstake your vBNT from governance and delegate instead. Self-nominated delegates maintain a page on Discourse to inform other community members of their intended voting behavior. If you disagree with the way your delegate votes, you can always vote manually to override their decision on your behalf.❗

☎Bancor Weekly Call

In this week’s Community Call recording, Bancor shared the development updates above.

Q&A

In anticipation of V3, should we be whitelisting more?

Whitelisting is always important, but everything we whitelist between now and V3 increases the migration volume. Following the migration, we should look to whitelist as many projects as possible; In the meantime, we have more urgent priorities. That said, we shouldn’t stop whitelisting now either.

How do we get tokens whitelisted and bootstrapped on Bancor immediately after they launch?

The community needs to devise a good policy for managing these tokens. Sometimes, you don’t need a huge pool right away, but an adequately sized one.

Can we explore new Snapshot features?

We have a number of idle features on Snapshot that we can explore activating:

Comment box: to have active discussions on Snapshot rather than on Discourse.
Graphs: To shower voter activity by time and type of action taken.
POAPs: collectible NFTs to collect for participating in votes.

Can middle-men yield optimizers game or utilize the system for profit, e.g. Popsicle?

There’s no indication that they can achieve profit sustainably. Moreover, they will charge a fee for sharing their profits, which is often modest, to begin with. The margins may be too small. But, let’s wait and see.

How long will the IL.WTF campaign last?

3 weeks initially, but it’s open to extension.

Will Bancor be whitelisting any new stablecoins in the future?

We want to be careful with them because:

Any ERC-20 pegged to the USD causes significant drag because USD is constantly losing value against the cryptocurrency market. We only want the optimal amount of stablecoin liquidity in our protocol.
Algorithmic stables have a long history of failure, being unable to recover peg after losing it.
There could be adverse legal consequences of allowing people to trade these algorithmic stables on Bancor.

IL.WTF launch

IL.WTF has launched! — enter your wallet address to see if you’ve suffered impermanent loss and how much. Share a tweet with your findings directly from the website for a chance to win $1,000! One winner per day Monday to Friday. Doing this will not expose your wallet address.

Keep an eye out for famous wallet addresses so we can see how much IL they’ve suffered!

IL.WTF currently includes fees earned but not liquidity mining rewards. V3 will introduce external LM rewards, allowing other projects to provide TKN LM rewards alongside the BNT we provide on the other side.

Don’t tease or roast people who’ve suffered a lot of IL — be nice!

Uniswap V3 data study

Please find here the technical report on impermanent loss in Uniswap V3.

The study has found that over 50% of LPs on Uniswap V3 are losing money — the fees they’ve earned have been outpaced by IL.

The understatement of the risk of IL on other protocols is not only a risk to your investment but also undermines the decentralization of liquidity and the promises of decentralized finance.

🤝Connect Projects with Steven, Bancor Business Development Lead:

Are there tokens you’re holding that we should whitelist on Bancor? DM @FoxSteven about it or connect us with any community leaders/core contributors on the project. Steven leads all our BD efforts and will connect with the team and work with them to get whitelisted or build a deeper pool.

📔Bancor Grants:

We have content grants active at all times. Any users that want to create videos or guides, please reach out to Nate Hindman (@NateHindman on Twitter or telegram).
We have analytics grants. If you want to work on Bancor data projects or if you are good with working on blockchain data and APIs, we can always use your help!
As always, we have rolling developer grants for those who want to build and innovate on Bancor’s infrastructure.