The Bancor community has now officially passed the BNT liquidity mining governance proposal with a striking approval rate. Ending on November 21, the proposal reached a quorum of 89.76% with 100% ‘For’ votes at 2.5 million vBNT. Now, the developer team prepares to integrate the new liquidity program in the coming weeks.
The liquidity mining program is a new yield farming initiative created to attract new liquidity to Bancor liquidity pools. Moreover, it aims to create ‘stickiness’ which would lead to long-term liquidity provision. Michal Herzyk, the Quantitative and Economic Consultant at Bancor created the proposal on November 17. After only a few days of discussion and voting, the community has successfully approved the new feature.
As Defiye previously reported, Bancor announced the proposal on November 16 as a part of reviving the protocol’s liquidity. Following the feature’s implementation, Bancor would host the program for the next 12 weeks for 8 pools. These pools include ETH, WBTC, USDT, USDC, DAI, LINK, OCEAN, and renBTC.
Community members are able to vote for two new liquidity pools every two weeks via proposals. After each LP’s addition, it will run for the next 12 weeks. Additionally, an LP can be selected multiple times.
With this initiative, Bancor plans to distribute 70% of an LP’s rewards via BNT and 30% via the LP’s ERC20 token. Moreover, Bancor will reward long-term liquidity providers significantly more than their peers. These providers will receive a ‘Bonus Rewards Multiplier’ that increases their BNT rewards by up to 2X per week.
Confident in the governance proposal, Bancor decided to implement retroactive LP rewards for everyone who participates in the selected pools. As we now see, the feature’s massive popularity resulted in a 100% approval rate.
Bancor Governance move leads to new ATH for TVL
It did not take too much time for Bancor to profit on its newest move. The DEX gained $60 million in collateralized assets within a short time. According to a Twitter post, the protocol attracted more than 1000 individual liquidity providers.
At the time of writing, Bancor grew even larger and has breached its old all-time high. Market data aggregator DeFi Pulse reveals that Bancor hosts $78 million in locked crypto assets, far more than the team originally predicted. However, the protocol does not grow fast enough as it dropped two places on the DeFi Pulse leaderboard.
While the overall DeFi market booms, we suspect that certain factors hinder it. Due to the nature of impermanent loss, altcoin holders may be scared to join LPs at the moment. Following Bitcoin’s recent major move, almost touching $19,000, other cryptocurrencies started to move as well. For example, Ethereum ‘melted faces’ last week as it increased in value by more than $100.
At the start of last week, one ETH cost only $443. Now, the same cryptocurrency costs $596. Similarly, other altcoins are beginning to move as well, supported by the strong move ETH made. Because impermanent loss occurs when we have volatile prices, holders may be too scared to join LPs. We can deduce this by the fact that DeFi only grew $1 billion in value last week, despite Ethereum’s swift rise.
If the situation were to calm down, market participants would certainly use their new profits to create passive income via LPs. In that case, projects with new initiatives such as Bancor would be the first ones to receive a significant influx of liquidity.