1/ Announcing Bancor’s proposal for $BNT Liquidity Mining (LM) — aimed at driving new liquidity to Bancor pools & incentivizing long-term liquidity provision.
— Bancor (@Bancor) November 16, 2020
The reasoning behind this proposal is that with more liquidity, Bancor can attract more trading volume, which then generates additional fees for liquidity providers and protocol revenue. This news comes just as Uniswap liquidity mining rewards are coming to an end. Proponents of this proposal believe that it will be a good way to attract new liquidity providers that have yet to experience the unique benefits of Bancor v2.1. As a quick refresher, Bancorv2.1 includes benefits for liquidity providers such as single-asset staking and built-in impermanent loss protection.
At a high level, the current proposal involves incentivizing 8 token pools in the first round of BNT liquidity mining including the following:
Large-Caps: ETH, WBTC, USDT, USDC, DAI, LINK
Mid-Caps: OCEAN and renBTC
The large-cap pools will receive 100,000 – 200,000 BNT per week whereas the mid-cap pools will receive 10,000 – 20,000 BNT per week. Initial estimates provided by the Bancor team hint that yields will range between lows of 20% APY and all the way up to 3000% APY based on the amount of liquidity provided by users per pool. The proposed scheme will also allow two new token pools to be incentivized and each time a new token pool is added, it will receive BNT rewards for 12 consecutive weeks by default. These new pools must be voted in by Bancor governance and the same pool can be incentivized multiple times.
For those interested in participating in Bancor liquidity mining, it’s important to note that liquidity providers who keep their rewards staked to Bancor will receive a bonus multiplier that can increase their rewards by up to x2 per week. Alternatively, users can also choose to claim their BNT rewards and move them to their wallet, doing this would reset any multiplier on rewards that the liquidity provider had previously accrued. The same multiplier reset occurs when you withdraw your liquidity from the Bancor pools.
This proposal also includes retroactive liquidity mining rewards for any users that are providing liquidity to the previously mentioned pools starting on November 16, 2020. Keep up to date with Bancor by following them on Twitter.