Bancor, a longtime leader in automated market making (AMM), has released Bancor V2, a super-powered platform loaded with features to spur widespread adoption. Bancor V2 keeps the on-chain liquidity protocol firmly in the vanguard, as automated market making sees a meteoric rise in the DeFi space.
Bancor, which enables automated, decentralized token exchange, just last month deployed its V2 smart contracts to the Ethereum mainnet. Bancor V2 provides 100% exposure to a single asset, as much as 20x liquidity amplification, and protection against “impermanent loss” -- all new benefits for DeFi users who have been clamoring for more efficient AMMs.
“Bancor V2 is here to help users trade tokens at any time,” Bancor’s head of product Asaf Shachaf said. “This is something the market has been desperate for and we are excited to be the ones to deliver this innovation.”
It should be no surprise, then, that we at Alchemy are incredibly proud to support Bancor, which relies on the Alchemy Developer Platform for all of its node needs. Bancor can now leave its infrastructure worries behind and focus on what it does best -- provide on-chain liquidity.
AMMs fundamentally changed how users trade cryptocurrencies. Typically markets use a buy/sell order book, but with AMMs such as Bancor, Kyber, and Uniswap, both sides of the trades are pre-funded by on-chain liquidity pools. Thanks to these liquidity pools, users can switch effortlessly between tokens, and the process is both decentralized and non-custodial. Not only that, the liquidity providers earn passive income via trading fees based on the percentage of their contribution to the pool.
This is how Bancor, as an AMM, differs from decentralized exchanges. While DEXs work by matching buy and sell orders in a bid/ask system using order books or a matching engine to fulfill trades, Bancor allows users to buy and sell tokens without giving up custody of their tokens or private keys. Instead of using an order book to process conversions, Bancor uses a network of on-chain liquidity pools.
With years of experience providing on-chain liquidity, Bancor foresaw the evolution of crypto markets and identified the biggest obstacles to the widespread adoption of AMMs as:
Exposure to impermanent loss (where liquidity providers can see their staked tokens lose value compared to simply holding the token).
Lack of exposure to multiple assets.
Capital inefficiency (i.e., high slippage).
Opportunity cost of providing liquidity.
Bancor V2 is designed to directly address these issues with its main new features:
A new AMM liquidity pool integrated with Chainlink price oracles that mitigates the risk of impermanent loss for both stable and volatile tokens.
“Early on, we found ourselves having to be experts in everything. Back in 2017 as we solved for our needs, it was like the Internet in the 1990s when the infrastructure had not caught up,” Asaf said. “But really what was most important for us was to focus on our expertise -- on-chain liquidity. Thankfully, everything changed when we started using Alchemy. Basically, we stopped having to worry about anything to do with infrastructure, so we could just focus on our core competencies.”
Asaf is of course referring to the Alchemy Developer Platform, our supercharged Ethereum suite of tools which provides reliable and scalable infrastructure to leading blockchain applications worldwide. Developers know that using Alchemy is the best way to ensure their application runs smoothly. It is inspiring for us to hear how we help companies like Bancor sleep easy at night knowing Alchemy has them covered, even as they scale at the dizzying speeds we are seeing in DeFi.
“Put simply, we no longer have to worry,” Asaf said. “Since relying on Alchemy, we have never had a node fail. The Alchemy team actually solves problems before we have even noticed them.” The keys to success have been security, reliability, and ensuring Bancor can focus on its core, Asaf said.
DeFi And Devs
Bancor is a permissionless protocol, so anyone can create a liquidity pool on Bancor without having to interact directly with their core development team. A liquidity provider might be the founder of a token project or a user who simply wants to add liquidity to a token and generate fees from its transaction volume. Whatever the case may be, Bancor V2 gives users a more robust and efficient AMM liquidity pool.
DeFi is experiencing explosive growth, and Bancor is a well-established AMM leader in the space. That is why we are so excited to be able to support Bancor and do our part to help AMMs achieve widespread adoption.
Interested in learning more about Bancor? Go here.