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Frequently asked questions about Bancor Protocol |
This a living document continuously updated by the community and therefore a work in progress. It is divided into the following sections:
- Liquidity Pools
- Why Use Bancor?
- Bancor Safe Staking
- Depositing & Withdrawing Liquidity
- Liquidity Mining Rewards
- Pool Management
- Trading
- Further Resources
- Helpful Links
Liquidity pools are automated market-maker **** (AMM) smart contracts that exchange assets algorithmically using on-chain reserves.
Liquidity on traditional asset exchanges has historically been provided by a small handful of professional trading firms with permissioned access and specialized tools. This concentrates liquidity in the hands of a few actors who can withdraw their assets during periods of volatility and restrict trading of an asset when users need it the most.
In contrast, AMM pools allow liquidity to flow from an unlimited number of everyday users, lowering the barrier to token creation and yield generation, and increasing resistance to market manipulation and censorship.
Launched in June 2017, Bancor created the first-ever network of AMMs on the blockchain. Since then, AMM liquidity pools have evolved into a core building block of decentralized finance (DeFi), attracting over $30 billion in locked value across numerous blockchains.
The normal user experience staking on DEXs is as follows: You want to earn yield on the tokens you own. You stake the tokens in a liquidity pool, and your money facilitates trading and earns fees from traders. Your tokens may go up or down in price - that volatility encourages trading which generates fees.
On Bancor, we designed a system called "Safe Staking" which protects your holdings no matter how your token moves, so you can earn higher yield on your staked tokens with less risk.
- Stake the token you love: no more 50/50 split; earn with 100% upside exposure, single sided.
- Auto-compounding fees: fees are automatically re-added to your stake, compounding your gains.
- Rewards: earn BNT rewards.
{% embed url="https://www.youtube.com/watch?v=2Mz7wh3hm8Y" %} The co-founder of Axie Infinity demos staking AXS single-sided on Bancor. {% endembed %}
Safe Staking allows you to deposit your tokens in a liquidity pool and earn passive yield with single-token exposure.
This means users only need to deposit a single token in Bancor instead of pairing tokens 50/50 with another asset (like ETH or USDC). Depositors then earn trading fees that auto-compound and are paid in the token they've staked.
To support Staking, the Bancor protocol uses its protocol-owned BNT to jointly fund pools alongside user deposits. In other words, when a user deposits $100,000 in a supported token ("TKN"), the protocol matches the user's deposit by providing $100,000 worth of BNT to the pool. In return, both the user and the protocol receive fee-accruing LP tokens (pool tokens).
When a user withdraws their liquidity, the user's and protocol's LP tokens are both burned.
The amount of BNT offered by the protocol to support trading in a given token is governed by the Bancor DAO. The DAO aims to offer protocol liquidity in amounts that are profitable for the network, i.e..
Bancor uses its protocol token, BNT, as the counterpart asset in every pool. Using an elastic BNT supply, the protocol is able to provide BNT liquidity alongside an LP.
Two burning mechanisms place deflationary pressure on the BNT token:
- LP withdrawal: The initial BNT provided by the protocol, in addition to the fees it earned, are burned when an LP withdraws from the system.
- Continuous vBNT Burning: A percentage of every transaction on the network is used to burn vBNT (which represents staked BNT) via the Bancor Vortex, locking BNT in the protocol forever.
You can stake and earn on 100+ tokens in the Bancor protocol on bancor.network or any site integrated with Bancor smart contracts. Users connect via Web3 wallets such as MetaMask.
Watch the founder of Axie Infinity walk through staking in Bancor:
{% embed url="https://www.youtube.com/watch?v=2Mz7wh3hm8Y" %} AXS is one of 100+ tokens whitelisted by the Bancor protocol, allowing users to stake and earn AXS with single-token exposure. {% endembed %}
Read: Step-by-step staking guide****
This information can be viewed in the "Portfolio" tab under the "Earn" section of app.bancor.network. Your Bancor Earn Portfolio allows you to connect your wallet and track your individual LP positions including fees earned, your ROI (return on investment) and more.
For each individual stake in a pool, the Portfolio page displays:
- “Initial Stake” — the total number of tokens initially staked
- “Protected” — the value of your position
- “Claimable” — value available for withdrawal. If IL has occurred, and the stake is less than 100 days old, Claimable will be lower than Protected.
- "Fees & Rewards"
- total fees paid in BNT or non-BNT tokens, depending on whether you've staked BNT or non-BNT tokens
- total rewards (BNT mining rewards) paid on a given pool position. Your rewards multiplier accrues weekly with a max at X2 after 4 weeks in a pool. Multipliers on all active LP positions reset if an LP withdraws liquidity from any Bancor pool.
- ROI — An LP's ROI, or "return on investment", is calculated as follows:
Protected Stake Value-Initial Stake Value/Initial Stake Value*100
Read: How to Provide Liquidity on Bancor****
When you deposit your tokens on Bancor, you earn a percentage fee from trades that occur in the token you've staked. For example, if you deposit LINK, you will earn a fee from trades that occur in LINK. The estimated annual percentage return (APR) is dependent on trading and other network activity, and fluctuates accordingly, as well as liquidity mining rewards that Bancor governance approves per pool.
The bancor.network front-end estimates APR based off the past 24h of trading fees. The APR also includes mining rewards (if they are listed as "Active" in the "Rewards" column). Trading fees are paid in the token you've staked, whereas rewards can be paid out in the tokens you've staked or BNT.
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As a pool increases in size and more liquidity is added, it attracts more trades and generates more trading fees for LPs. The deeper the pool, the lower the slippage. So deep pools attract the most and the largest trades - and therefore more trading fees.
"APR" in the Pools table refers to annual percentage returns from both trading fees and mining rewards.
The bancor.network front-end measures estimated APR from these two sources:
- Trading fees: APR from trading fees is calculated by measuring the total fees earned by the pool over a given time (e.g., 1 day or 7 days), dividing it by the current liquidity in the pool, and then annualizing it. For example, if there are $30,000 worth of fees in a pool with $10M liquidity over the course of 7 days, the APR is $30,000 / $10,000,000 * 100 * 52 weeks = 15.6%.
- Liquidity Mining Rewards: APR from rewards is measured similarly. Rewards distributed to the pool in a given week, divided by liquidity, and then annualized. The "Rewards" column in the Pools table indicates whether rewards are currently "Active" in a given pool.
In Bancor v2.1, trading fees automatically accrue in the pool, compounding the LP's gains. Liquidity mining rewards, on the other hand, accrue in a separate rewards contract, requiring an individual LP to manually re-add their earned rewards to the pool. In Bancor v3, both trading fees and liquidity mining rewards are auto-compounding (more info).
vBNT is the governance token of Bancor. Users who stake BNT in any whitelisted pool receive vBNT in return representing their % ownership of the pool. This makes vBNT similar to an LP token, except you can also use it to vote in Bancor governance via https://app.bancor.network/eth/vote/.
When using vBNT to vote, you will need to stake your vBNT in the governance contract as a first step. Once staked, there’s a 72-hour lockup period to un-stake vBNT from the governance contract. Voting Guide
Per the vBNT Burner Proposal, a 5-20% share of network trading fee revenue can be used to buy and burn vBNT, reducing the circulating supply of BNT tokens and locking BNT in the protocol permanently.
To withdraw staked BNT from a pool, you must have the same number of vBNT in your wallet, though not necessarily the same vBNT tokens. In other words, you can trade your vBNT for other tokens while your BNT is staked, and buy vBNT back if/when you want to withdraw your BNT from Bancor. Only your wallet can withdraw your staked BNT using the necessary number of vBNT.
Make sure you understand the risks of trading your vBNT before doing so.
Yes. MetaMask supports hardware wallets like Trezor and Ledger directly. There’s no need to keep it connected to your PC after you’ve finished with the interactions.
Funds are sent to a smart contract that keeps record of the liquidity, but you always maintain ownership - it's non-custodial as it is based on the smart contracts.
Your hardware wallet, like a Ledger wallet, is not a storage device; it is an encryption device. So when you 'move' coins into a ledger wallet, you are really moving them to an address on the blockchain, that can only be decrypted by the ledger. Staking from the Ledger just means that the Ledger encrypted address will still maintain control of the coins. And interacting with the contract will require the Ledger for cryptographic signing. This means that any interaction with the Bancor protocol will require the physical Ledger device.
The option to provide single-sided liquidity is available only if there’s sufficient space on the other side of the pair, which is BNT.
If there is not enough space in a given pool for providing single-sided ERC20 liquidity, an LP has two options: provide BNT to open up space, wait until another user provides BNT to open space, or work with governance to increase the limit of protocol-owned BNT that can be provided to the pool.
Any transaction on the Ethereum network costs gas. You can look at estimations once you attempt to transact, the gas prices should appear on MetaMask. You can also check gas prices by checking Eth Gas Station.
This may be due to a contract bug. You should not approve it, and instead refresh your browser and MetaMask, or reconnect the wallet and try again. If you still experience issues, please reach out to us via ban.cr/support.
BNT rewards aims to achieve two primary goals:
- Attract new liquidity into Bancor pools
- Create stickiness to incentivize long-term liquidity provision
See the initial BNT Liquidity Mining proposal here.
The period of time a pool receives rewards is configurable and is voted on by the BancorDAO and subject to the governance decision via on-chain voting.
Only whitelisted pools are eligible for rewards.
Voting for new tokens to be added to the BNT liquidity mining rewards program is subject to the community and the BancorDAO. You can see the pools that have rewards as they'll "Active" in the "Rewards" section.
If your token is whitelisted, it can be proposed as a pool that can receive LM. Reach out to the governance via our Discord chat!
A whitelisted pool is a pool deemed worthy by BNT governance to receive single-sided staking and possibly LM rewards (subject to a separate on-chain voting). You can request to whitelist new projects by initiating discussion on Discord and in the Bancor governance forum. See **** instructions on how to whitelist a token. Below is the initial list of whitelisted pools:
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, RCN, 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.
BNT liquidity mining rewards will be distributed as follows: 70% to the BNT side of the liquidity pool and 30% to the base ERC20 token side of the pool. Rewards are distributed continuously per block.
The rewards from the LM program are provided in BNT only. This is unrelated to the swap fees, which comes from trading activity on that pool and may be received in the staked token.
First, visit the "Portfolio" section under the "Earn" tab in app.bancor.network. At the top right side you will see a Rewards dashboard, showing total rewards to date, and the claimable amount you currently can stake or withdraw. From there, you have three options:
1.Stake: You will be able to choose a pool to direct your BNT rewards to. Staking your BNT rewards allows the rewards to earn swap fees and additional rewards, which can also be staked, while maintaining bonus multipliers on all live stakes.
2. Hold: Holding rewards in the contract has no impact on your bonus multipliers; however, doing so will not generate additional rewards. You can stake or withdraw your rewards from the rewards contract at any time. There is no deadline to take action.
3.Withdraw: Withdrawing your BNT rewards sends the rewards directly to your wallet and resets your multipliers to 1x on all of your existing LP positions. This temporarily reduces your earnings potential on your staked liquidity until the multipliers return.
Liquidity providers who keep their rewards staked to the protocol receive a “Bonus Rewards Multiplier”, which increases their BNT rewards by up to x2 per week. Each position in a liquidity pool has its own multiplier. The Bonus Rewards Multiplier (BRM) starts at x1 and increases by 0.25 every week. The max possible multiplier is x2, achieved after 4 weeks in a pool.
Multipliers are per pool. If you have a max multiplier in dai/bnt and you add another dai/bnt position, that position immediately has max multiplier.
{% hint style="info" %} Withdrawing your BNT rewards or withdrawing liquidity from any pool resets multipliers on all your live stakes across all pools.
You will have to wait for four weeks to get the 2x multiplier into full effect again (0.25x added each week). {% endhint %}
No, the rewards are earned continuously on your initial stake per block. You can stake or withdraw your rewards from the rewards contract at any time. There is no deadline to take action.
Keep in mind holding rewards in the contract has no impact on your bonus multipliers; however, simply holding rewards in the contract and not staking them means you are not earning compounded yield / additional rewards.
Go to https://app.bancor.network/eth/pool/create. Select the ratio (we recommend 50/50 as only 50/50 pools can currently become eligible for IL insurance, single-sided exposure and liquidity mining rewards). Select the token and click continue. Note that this is a complex transaction which might cost more gas than a usual transaction.
Please check out this guide: https://medium.com/@bancor/how-to-whitelist-a-token-on-bancor-v2-1-c867b82675d4
Currently, pool owners set the pool's initial fee The fee can then be updated via on-chain voting in Bancor governance.
As Bancor exists on the Ethereum network, all transactions will incur ETH gas costs, which are unrelated to Bancor. Different wallets such as MetaMask will show you gas estimates. You can also track the current gas prices in sites like https://ethgasstation.info/ to choose the best time to swap.
Besides the ETH gas fees, each pool is set with a percentage fee on each trade, which is sent to liquidity providers in the pool. For example, an ETH to LINK trade on Bancor generates a fee distributed to users providing LINK on Bancor.
In order to swap tokens, you will need to first approve allowance for the relevant tokens. You can choose Unlimited approval in case you do not want to approve each time you trade these tokens, or Limited Approval if you do not want the contracts to keep ownership of moving these tokens on your behalf.
- Bancor Resources page
- Bancor v2.1 Technical Explainer
- GUIDE: Single-Sided Staking on Bancor V2.1
- Bankless: How Bancor v2.1 protects LPs
- How to submit a BIP in Bancor Governance
- How to Whitelist a Token on Bancor v2.1
- Staking BNT liquidity mining rewards
- Using Bancor Vortex
- Telegram groups: Bancor Protocol, Bancor Devs, Bancor Traders
- Bancor Discord
- Governance: http://gov.bancor.network/
- Bancor blog: blog.bancor.network
- Bancor.network customer support: ban.cr/support