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23 April 2021

Bancor releases no-liquidation lending with Vortex as AMMs continue diversification

Bancor releases no-liquidation lending with Vortex as AMMs continue diversification


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Automated market maker exchange Bancor has rolled out a new mechanism that allows users to increase their capital efficiency while providing liquidity in its pools.

Called Vortex, the solution allows users providing liquidity in BNT, Bancor’s utility token, to borrow funds while continuing to obtain yield from swap fees.

The Vortex mechanism reworks the existing mechanism of vBNT, a special version of the BNT token that entitles users to participate in governance.

The voting token is automatically received when staking BNT into a liquidity pool, and it can be defined as Bancor’s pool token.

The “no-liquidation” part of the loan comes from the fact that vBNT and BNT are essentially the same token, and the rise in price of the BNT collateral is very likely to be mirrored by vBNT.

A potential arbitrage mechanism means that vBNT is unlikely to ever be worth more than 1 BNT, as arbitrageurs could simply stake BNT, sell the vBNT and obtain more BNT than they started with.

A governance-defined portion of the protocol’s fee revenue will be diverted to periodically buy and destroy vBNT from the pool with BNT, providing a constant buying pressure.

After the Uniswap V3 announcement and its heavy focus on swap efficiency — partially at the expense of liquidity pool automation — it became clear that AMM projects are starting to diversify into different niches

With SushiSwap’s focus on additional features like margin trading, Balancer’s push for composability, and Bancor’s approach focusing on the LP and the BNT token, the AMM space is becoming more and more varied.

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