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The decentralized finance (DeFi) ecosystem is one of the most innovative spheres of the entire blockchain and cryptocurrency space. Despite its huge growth, the DeFi ecosystem is still very much nascent. This means that this truly amazing sphere also has a lot of fundamental issues.
Bancor Network, one of the founding fathers of decentralized finance (DeFi), is set to usher in a new era of DeFi. The network recently announced the launch of its V3 beta version. The much-anticipated Bancor V3 beta is set to completely revolutionize the decentralized finance ecosystem. Analysts are also of the opinion that the V3 beta upgrade will be a “[…] great next step for DeFi.”
Before we move on to the intimate details of Bancor V3 upgrade, let’s find out more about Bancor Network.
What You Should Know About Bancor Network
Bancor Network is the world’s first-ever decentralized trading protocol. It is also permissionless and provides interested persons with access to an open financial marketplace. Everyone (traders, liquidity providers, developers, etc.) is welcome on Bancor.
Bancor is also one of the OGs of the decentralized finance (DeFi) ecosystem. Also, the network was the first to introduce liquidity pools, which is a major pillar of the DeFi ecosystem. In 2017, Bancor completed one of the most successful ICOs in the history of the blockchain and crypto space. The network raised a whopping $153 million in under three hours.
Despite the huge potential of the DeFi ecosystem, this truly innovative sphere also has its fair share of pitfalls. Some of the challenges facing the DeFi ecosystem include:
- Impermanent loss (IL)
- Forced exposure
Bancor Network is focused on propounding lasting solutions to these issues, hence the launch of its V3 upgrade.
The Road to Bancor V3
Since its inception, Bancor has been focused on solving the issues facing decentralized finance. Its V2 upgrade employed single-sided staking to help protect users from impermanent loss. However, the upgrade was not also foolproof. Bancor V2 suffered from issues like:
- Ridiculously high gas fees
- Restricted entry into liquidity pools, amongst other issues.
Following years of research, Bancor’s much-anticipated V3 upgrade is finally live. The upgrade will bring about important innovations like:
- Immediate protection from impermanent loss. This protection will also commence from day one as compared to its v2 upgrade protection which is only available from day 100.
- Also, the upgrade will incorporate a no insurance schedule.
- The V3 upgrade will also serve as a much-better DeFi protocol not just for users but for the protocol itself too. As it will facilitate much-reduced gas usage. A good example of this is the amount of gas needed to stake BNT tokens. The required gas fees are down from over one million to about 220,000. This means that V3 staking will result in an estimated 80% reduction in gas fees as compared to the Bancor V2.1 upgrade.
Numbers are in!
Staking $BNT into @Bancor #B3 requires about 220k in gas. This is down from ~1+ Million required in gas in v2.1.
In other words, early numbers show that staking in #B3 will cost 80% LESS than staking in v2.1. 🤯#crypto $bnt $vbnt #ethhttps://t.co/5xrFy9e7ad pic.twitter.com/Go9fPwQch1
— Banclord (B, 3) (@Banclord) April 20, 2022
More on the Bancor V3 Upgrade
As part of the V3 upgrade, Bancor will also introduce auto-compounding rewards. Now all fees and LP mining rewards will be auto compounded. Thereby, providing liquidity providers with the opportunity to earn higher rewards. Therefore, completely eliminating the need to have to manually restake rewards.
5/ Auto-compounding makes Bancor the only major DEX that offers this type of feature to its liquidity providers.
Watch @MBRichardson87 explain all the benefits of auto-compounding in 2 minutes 👇
Full video: https://t.co/HVVCXUPptx pic.twitter.com/pFs73BuaY2
— Bancor (@Bancor) December 23, 2021
Interestingly, Bancor is currently the only DEX protocol to offer auto compounding features to its liquidity providers. The V3 protocol is also focused on addressing inflation issues.
Other important features of the V3 beta upgrade include:
- Strategic integration of Chainlink Keepers
- Omnipool
- Infinity Pools
- Third-party impermanent loss (IL) protection, and
- Lastly, revamped front-end and generally improved UX.