Bancor 3 aims to be the most transparent protocol for liquidity provisioning. Bancor v2.1 had some pain points which were addressed on Bancor 3, with extra features on top that make it one of the most attractive DeFi protocols right now. Here’s a summary of the features and already existing mechanics - consider this thread a one stop shop for all Bancor 3 info.

Feel free to jump to summary for tldr.

Breakdown

The release will have three phases - first one is called Dawn. Below are its main features.

Instant Impermanent Loss (IL) Protection

IL protection from day 1. There is a 7-day cooldown period to withdraw and 0.25% withdrawal fee that is used by the protocol to rebalance the pools and make IL easier to pay out.

Auto-compounding rewards and fees

All rewards and fees auto-compound automatically gaslessly. Rewards in the pool’s token (like LINK rewards on the LINK pool) auto-compound. Rewards in different tokens than the pool’s token (like USDC, BNT, etc on the LINK pool) need to be claimed or staked from a separate contracts.

LP tokens

The LP tokens constantly grow in value as they represent a bigger share of the liquidity fees rewards in the pool over time, and have no IL downside, making them “up-only” in the underlying token numeraire. Essentially, if you hold bnBNT, bnLINK, bnETH, etc, their value is always increasing over time, making them ideal collateral for DeFi legos.

Ominpool - one place to stake

On Bancor 3, for any token you hold, there is one place to stake it. The omnipools allows holders of BNT, ETH, LINK, MATIC, etc, to have one place to stake and along with IL protection, makes the staking experience in a DeFi protocol much more like a “Interest Savings Account”

Infinite single-sided staking

On Bancor 3, there is infinite single-sided IL protected space for any token. This is possible because some of the pool’s liquidity is used for trading and some will be used for new strategies that the team has said will come in the next Bancor 3 phases.

Bancor Vortex

The vortex has been live since Bancor v2.1. Any LPs get vBNT bnBNT 1:1 when they stake BNT. vBNT is only given to BNT LPs and can also be bought directly on Bancor. The protocol uses 15% of the swap fees to buy vBNT and burn it. This means that the protocol locks more and more BNT forever as vBNT is burnt, because LPs have to use their vBNT to unstake their BNT LP positions.

Lower gas fees

Not really a feature but worth mentioning because right now the volume on Bancor v2.1 is low because of high gas fees to swap that destroy any volume that comes from smaller swaps. Bigger swaps still happen on Bancor for tokens that have most of their Ethereum liquidity there, like LINK, SNX, FARM, ENJ, BAT, wNXM.

Other features

Not as important but still worth mentioning are other features such as individual pool fee setting, flashloans, new UI coming, migration tool from Uniswap v2 and Sushiswap v1, Third-party IL protection (for tokens with smaller mcap), use of Chainlink Keepers, revised tokenomics for vBNT and multichain deployment.

TL;DR

For non-BNT LPs

I stake any token that is listed on Bancor and get bnETH, bnLINK, etc. My LP tokens are protected against Impermanent Loss and always increase in value as I get fees and rewards on that pool.

If I want to unstake, I need to do so with my LP tokens, wait 7 days, pay 0.25% withdrawal fee then leave the pool. Withdrawal fee is low enough that it is quickly recouped after some days of staking (for example, takes less than 5 days at 20% APY).

For BNT LPs

When I stake BNT, I get bnBNT vBNT. All previously mentioned applies to bnBNT. vBNT can be used to vote, sold on Bancor, kind of like a collateral-free loan (that I have to buy back later to unstake), and to stake in the vBNT pool and get more yield.

If I want to unstake, I need my LP tokens AND vBNT.

More info on Bancor 3

It’s a hard protocol to understand, but once you realize how non-transparent the LP experience is because of IL, and wrap your head around Bancor 3, is definitely worth supporting, for a more transparent ecosystem.

Blog post: https://blog.bancor.network/introducing-bancor-3-962a3c601c25

Mark’s presentation on V3: https://www.youtube.com/watch?v=qi1geks1n8A

Landing page: try.bancor.network

Governance forum Bancor 3 spec (detailed): https://gov.bancor.network/t/bip15-proposing-bancor-3/3445/