With the whitelisting of renBTC, renZEC and REN on Bancor v2.1, users can now stake their tokens and earn swap fees and BNT liquidity mining rewards while maintaining 100% exposure to their desired token and with protection against impermanent loss.
This means safer and better returns for liquidity providers, without splitting your tokens into a separate reserve asset (like ETH) and without living in fear of price movements reducing the value of your initial stake.
The following chart shows the returns from providing liquidity to the renBTC/ETH pool on Uniswap in recent months. The yellow line shows returns with Bancor’s impermanent loss protection, while the green line shows returns without protection. With protection, LPs earn 11.26% more.
Note that impermanent loss protection starts 30 days after your deposit, at a rate of 30% and gradually increases 1% per day until you reach 100% protection. In other words, after 100 days in the pool, any impermanent loss you may have in the first 100 days or any time thereafter is fully compensated by Bancor.
You can always withdraw your liquidity at any time before the 100 days, however, you would be subject to the same risk of impermanent loss incurred in a normal AMM pool.