Bancor Network Stopped Providing Impermanent Loss Protection
Citing “hostile market conditions,” Bancor Network has stopped providing impermanent loss protection (ILP) to its liquidity providers (LPs). The decentralized exchange also voted through its DAO to stop paying out rewards on its main liquidity pools.
The ILP feature was first introduced in 2020 and has been enhanced with the launch of Bancor 3 this May. However, the recent market turmoil that resulted in a 70% drop in most cryptocurrencies has had a negative impact on the DeFi market as well, leading to several critical changes being made to DeFi protocols.
Bancor hopes that shutting down the ILP function will help the protocol rest and recover. However, many in the crypto community are unhappy with this decision. Cobie, host of the Uponly TV crypto podcast, criticized Bancor for suspending the IRL feature when liquidity providers need it most. Hasu, a researcher at Paradigm, questioned the strategy behind ILP's compensations and said Bancor's shell game of hiding impermanent losses was collapsing.
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