Idle DAO will benefit from Bancor single-sided liquidity deployment and impermanent loss protection, while reducing slippage on DEX.
Furthermore, the DAO will increase the robustness of Uni v3 oracle, allowing more users to safely interact with $IDLE lending platforms.
Bancor deployed the first-ever automated market makers (AMMs) on Ethereum in 2017, and currently manages $1.3b in total liquidity. Bancor Protocol was audited multiple times, and its DAO launched a $100k bug bounty program via Immunefi.
The IDLE/BNT pool currently has $100k in liquidity, half in IDLE and half in BNT. Bancor DAO is voting on increasing the depth of the pool to 250K BNT (snapshot will end on January 5th, and it will be valid if the poll will reach 35% quorum and 66.7% supermajority).
At a conservative rate (3$/BNT), this single-sided liquidity deployment will be worth $750k.
This liquidity provision will empower the pool to receive the same size of IDLE liquidity, able to reach a total of $1.5m.
This proposal aims to deploy 187k IDLE from the current Smart treasury (Balancer pool) to the IDLE/BNT pool and earn a yield from that deposit.
At the time of writing, this token deployment could result in ~$900k pool liquidity.
$IDLE token holders will be able to further deploy single-sided liquidity up to ~$600k.
Bancor lets users provide liquidity on one side and offers 1% impermanent loss protection every day the liquidity stays in the pool. After 100 days of liquidity provision, 100% of the liquidity will be protected. If there aren’t sufficient tokens in the pool to fully pay-out impermanent loss compensations in the staked token, part of the insurance may be paid out in an equivalent value of BNT.
A larger IDLE/BNT pool will result in having approximately 2x the liquidity currently held in Sushi IDLE/WETH pool, without the burden of incentivizing liquidity provision (Idle DAO already distributed 180k IDLE during a 6-month program) or owning the other asset of the pair.
With ~$900k TVL, the potential slippage will be as follows:
|Amount||Bancor Slippage||vs Sushi||vs Paraswap|
The slippage reduction will be extended to Paraswap too, as the DEX aggregator will simultaneously route the funds across multiple AMMs.
This liquidity deployment can represent the first step of a liquidity expansion strategy, with Bancor DAO providing more BNT.
Bancor community already discussed and approved liquidity extensions up to 2m BNT, more than $6m on a single side.
Once the pool is migrated to Bancor V3, there will be no cap on liquidity deployment from Bancor’s side (infinity pool). No proposals will be needed to increase the liquidity.
Furthermore, Bancor V3 will also enable auto compounding rewards and instant impermanent loss protection. The team will offer 1-click migration from V2.1 to V3, allowing a smooth pool update.
The 10% fee stream routed into the Smart treasury will be addressed to FeeTreasury, increasing its share to 20% of total performance revenues.
14 WETH and equivalent IDLE value (~23k IDLE at the time of writing) now sitting into the Balancer pool will be deployed in UNI v3, covering the full price range.
Idle DAO already funded UNI v3 pool with $120k in October, unlocking the Fuse listing.
That oracle is currently used by Euler too, lending primitive with isolated markets.
More liquidity into the Uni v3 will strengthen the oracle resiliency against manipulation attacks.
We are going to leave this thread open for discussions and in about 3 days, if there are no objections, we will proceed with the Temperature Check. In case of approval, an on-chain proposal will follow.