The AMA Room
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The AMA Room

Bancor Network AMA with Nate Hindman

Brief Information

Bancor is an on-chain liquidity protocol that enables automated, decentralized exchange on Ethereum and across blockchains.

Introduction AMA

Eric: We are gonna start right now. Please welcome @natehindman from @bancor everyone!

Nate: Hey everyone! Great to be here!

Eric: Welcome the AMA room @natehindman. how has your day been?

Nate: Good! Lots of interesting conversations so far.

Eric: So we are here to talk about Bancor but first tell us your background and how you came to discover crypto and joined Bancor

Nate: Sure thing — I head up growth at Bancor Protocol. I studied economics and started my career as a journalist in the U.S. covering new financial technologies. Afterwards, I decided to learn some programming and launched a couple mobile Internet startups.

In 2017 I discovered Ethereum and started researching decentralized exchanges and trading tokens. One of the DEXs I used to trade was Bancor and after poking around the exchange I noticed a peculiar feature: there were no order books. Instead, a set of smart contract-based automated market-makers (AMMs) was used to perform the exchange’s core operations, like listing, order-matching and the circulation of trading fees.

I started reading about AMM liquidity pools (Bancor called them “relays” or “smart tokens” at the time) and learning about how they could be programmed. I reached out to the Bancor team and started working on the project full-time in late 2017. It’s been a wild ride ever since

Eric: Interesting background. So what is Bancor in your own words?

Nate: Bancor is a protocol that allows users to customize and deploy AMM liquidity pools, provide liquidity and swap tokens. Providing liquidity to Bancor is permissionless (no central party can block or control the process) and easy for everyday users (add/withdraw liquidity in a couple clicks).

Unlike other AMM protocols, Bancor uses its protocol token, BNT, as the counterpart asset in every pool. This allows the protocol to co-invest in pools alongside LPs, enabling single-sided exposure and impermanent loss insurance for LPs.

You can try it out at bancor.network

staking guide here: https://bankless.substack.com/p/how-to-protect-yourself-from-impermanent

Eric: Oh wow. that's cool. So the BNT token’s main utility is to be the counterasset in the lp. Any other utilities?

Nate: Its main utility is as the counter-asset each pool and to enable the unique features of single-sided exposure and impermanent loss insurance.

BNT is also a cash-flow token, in that protocol fees are burned for BNT. Plus a new admin fee has been proposed to distribute liquidity provider fees to BNT holders who stake their BNT in a pool: https://gov.bancor.network/t/add-an-admin-fee-to-be-partially-burned-distributed-to-bnt-holders/245

Also when you stake BNT In a pool you receive in return vBNT, which represents your stake and allows you to vote in governance

Eric: nice. how that proposal looking. you think itll pass? is Bancor a DAO?

Nate: Bancor is indeed a DAO. We launched governance and have seen a ton of interesting proposals launched since then, several of which have passed and played a big role in the protocol’s expansion. You can participate in governance here: gov.bancor.network

Eric: Its no secret that Uniswap is the breakout star of this year and has dominated the DEX and AMM conversation, How do you see them in relation to Bancor and how does the project plan to compete going forward?

Nate: Governance also determines which tokens (/pools) receive BNT liquidity mining rewards. We have live vote for the next two tokens that only has 24h left before it’s finished!
Currently SNX and AAVE are in the lead as the next token to receive BNT liquidity rewards:
https://twitter.com/Bancor/status/1340658305518219264?s=20

To answer your question, not sure whether the admin fee proposal will pass, but it’s being discussed by the community and evolving pretty fast, with quite a bit of support!

[In reply to Eric staking @ exnt.io]
Liquidity is the most important aspect of AMM DEXs like Uniswap and Bancor, and it’s worth noting the Uniswap was actually inspired by Bancor, which launched the first AMM on Ethereum in late 2017.

Liquidity providers on Uniswap have two big issues they’re facing:

1) they must provide BOTH sides of a liquidity pool (i.e., ERC20 token + ETH), thereby losing their long position on their favorite token
2) they suffer from impermanent loss — i.e., price changes in the pool’s underlying tokens can lead to them losing large amounts of money vs. holding the tokens on their own.

Bancor’s latest version — v2.1 solves these issues — offering LPs both single-sided exposure as well as insurance against impermanent loss.
This allows LPs to earn both swap fees and BNT liquidity mining rewards without living in fear of impermanent loss.

Just in the last month, we’ve seen total value locked on Bancor jump over 7X as a result — now at around $120M and rising. And this is with limits in place.
As these limits are gradually removed and as more LPs realize the benefits of single-sided exposure & IL insurance, we believe Bancor will recapture market share and drive a ton of value to liquidity providers and BNT holders.

You can read about our latest progress here:
https://blog.bancor.network/bancor-progress-update-november-2020-2a32db170c8c?source=collection_home---4------0-----------------------

Also check out this cool tool made by someone in the community — which shows the effect of impermanent loss on LP returns. You can see real historical data on Uniswap pools, and see how much more LPs would have made with Bancor’s IL insurance: https://amm.vav.me/

Eric: Love how its fast growing. Excuse my ignorance, Bancor indeed came out first

Nate: A few examples. As the price of ETH rises, Uniswap LPs get rekt

Eric: wow. this is quite compelling. So how big is the active core team now?

Nate: The lines between core team and community are pretty blurry. We work with a ton of devs also on a part-time basis and issue community grants regularly.

Full-time “core” team is probably about 15 at this point and we’re hiring:
https://twitter.com/Bancor/status/1339903240993947649?s=20

UX/UI Designer: http://ban.cr/UIUX
Man technologist Backend Dev: http://ban.cr/BackendDev
Woman technologist Frontend Dev: http://ban.cr/FrontendDev

Eric: So a big difference would be Uniswap lets just anyone create a pair while at bancor, it has to pass thr governance, correct?

Nate: Nope that is not correct.
Anyone can create a pair at Bancor.

You can create a pool in a couple clicks here — https://app.bancor.network/eth/pool/create — and you have more flexibility than Uniswap as the pair can be set with any fee (uniswap requires 0.3%), any number of tokens in the pool (uniswap limited to 2 tokens) and any weights like 90/10 or 80/20 pools (uniswap requires 50/50)

Now in order to be eligible for single-sided exposure and IL protection the pool needs to be voted into the whitelist by bancor governance

Eric: ah thats what that is for. Got it now.

Nate: Currently there are around 60 pools in the whitelist:

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, 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.

You can see the pools in the whitelist on bancor.network — those with a shield next to them

Eric: thanks, i am heavily considering moving my assets there.

You have been recently listed at coinbase. How has that been for the project?

Nate: Awesome!!
Kind of a dream come true for a builder in the space.
It’s brought a lot of new people into the ecosystem — so we’ve been racing to educate newcomers on how AMMs work and the benefits of IL insurance.

Our FAQs are a good place to start: https://docs.bancor.network/faqs

Eric: Ok, we will move on to the community questions. AMAroomers please prepare your well thought out questions for @natehindman !

Community AMA

Q: My favorite coin is not in the list of coin up for vote. How can I add my favorite coin to compete for BNT Liquidity reward?

Nate: First things first, check if your favorite token is whitelisted for IL insurance and single-sided exposure.
If it’s not, here’s a guide on how to get it whitelisted: https://medium.com/@bancor/how-to-whitelist-a-token-on-bancor-v2-1-c867b82675d4

From there, you should join Bancor telegram channels and suggest the token for liquidity mining rewards.

Here’s how BNT liquidity mining rewards works, along with some details on how tokens are chosen by the community:
https://blog.bancor.network/announcing-bnt-liquidity-mining-b30be90a008d

The rewards are distributed weekly to selected pools, and you can see the APY from rewards in the second column of the main page at bancor.network:

The red indicates how much longer the 12-week rewards cycle lasts.
In total, BNT liquidity mining rewards is scheduled to last for 72 weeks, with two new tokens voted in every two weeks.

Good luck getting your token voted in !

Q: One of the benefits of LP on the ETH pool is impermanent loss insurance. Where does the insurance funds come from? Also how can my friends and I whom are LPs protect ourselves from impermanent loss as IL is very common?

Nate: IL insurance is enabled by the elastic BNT supply

BNT is continuously co-invested and burned by the protocol to support this feature.

Keep in mind that single-sided liquidity and IL insurance does not necessarily require new BNT being emitted. BNT co-invested by the protocol is ultimately burned when an LP withdraws. Similarly, the cost of IL insurance is only paid by the protocol when an LP withdraws, and may be less than fees earned from protocol-invested BNT, allowing the protocol to offset an LP’s IL without emitting new BNT.

These changes effectively turn BNT into a cash-flow token with a built-in burning mechanism that deflates supply as swap fee income is earned by the protocol.

Additional revenue may be generated by the protocol by charging LPs for impermanent loss insurance. This would work by taking a percentage of swap fees earned by non-BNT token liquidity providers who enjoy IL insurance and distributing the fees to vBNT holders (BNT liquidity providers) and/or burning them for BNT.
Discussed here: https://gov.bancor.network/t/add-an-admin-fee-to-be-partially-burned-distributed-to-bnt-holders/245

Track data on BNT burning and other v2.1 here: https://explore.duneanalytics.com/dashboard/bancor-protected-v2-1-data

Q: What is the utility of the $BNT token on this on-chain liquidity protocol overall? Can you briefly explain about the design of Bancor reserve on the overall Bancor ecosystem? #bancorAMAroom

Nate: Check out this thread on the utility of BNT:
https://twitter.com/Bancor/status/1336686255225049088?s=20

As mentioned it is the counterpart asset in each pool, and its elastic supply enables IL insurance and single-sided exposure.

These changes effectively turn BNT into a cash-flow token with a built-in burning mechanism that deflates supply as swap fee income is earned by the protocol.

More info on the utility of the BNT token, and how liquidity growth creates a “black hole” effect:
https://twitter.com/Bancor/status/1334389351036424193?s=20

Q: I really hadn’t heard of the Bancor Network before, but I have used Uniswap, would like to try though. Does it have the same operation and is it easy to manipulate? What differentiates bancor from Uniswap?

Nate: Bancor and Uniswap are very similar. As mentioned, Uniswap was inspired by Bancor.
The main difference on Uniswap is you are exposed to impermanent loss as a liquidity provider and also must provide two tokens to a liquidity pool.

On Bancor you’re not exposed to impermanent loss as a liquidity provider and can maintain 100% exposure to a single token in the pool.

More on how this works, can be found in our FAQs:
https://docs.bancor.network/faqs

Also in case you’re unfamiliar with impermanent loss — check out this article:
https://blog.bancor.network/beginners-guide-to-getting-rekt-by-impermanent-loss-7c9510cb2f22

Closing Remarks

Nate: Alright guys — that’s all I can answer for now as we’re running out of time.
But you can feel free to ask additional questions in our telegram: https://t.me/bancor

Or our trader’s channel: https://t.me/bancortraders

Or just DM me

Eric: alright. thanks for the time @natehindman and damn, im legit impressed wth Bancor now

Nate: Great to hear and thanks for setting this up Eric!

Eric: Awesome project. Will surely be more active in it going forward. Thanks everyone who sent in and participated.

To join in on the discussion feel free to join our group @amaroom

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