- Fee allocation
- Protocol owned liquidity
- The invention of new bonding curves
- The introduction of Carbon DeFi and the simulator
- The Arb Fast Lane — A First of Its Kind
- 69 pools permanently closed in a state of surplus
The Bancor DAO and its community have made significant headway on multiple efforts over the past 18 months. The results of these endeavors are becoming increasingly apparent, as evidenced by the closure of 69 pools in a state of surplus. Notably, ten pools in the first two weeks of November, following the earlier closure of 59 others. This period was characterized by relentless innovation, including the invention of new bonding curves which foreshadowed the inception and subsequent launch of Carbon DeFi, the Carbon DeFi simulator, and the conceptualization and development of the Arb Fast Lane. Moreover, the community has actively engaged in voting on and implementing numerous proposals, all aimed at driving the v3 pools into a state of surplus. This period of intense activity and dedication reflects a strong commitment to this objective, advancing the Bancor ecosystem, and building out a comprehensive suite of DeFi primitives.
As the impact of these initiatives becomes evident, exploring the strategic decisions and innovations that have shaped Bancor’s direction over the past 18 months will provide valuable insights.
The Bancor DAO has presented numerous proposals aimed at achieving a surplus state for v3 pools. A few of the most significant decisions were the DAO’s votes to allocate all fees accrued from v2.1, v3, and Carbon DeFi towards this initiative.
Protocol owned liquidity
In addition, the Bancor DAO voted in favor of using protocol owned liquidity, or POL, in July 2023, resulting in the passing of the Protocol Owned ETH Spending Proposition [Public Function Method, in October 2023 in which the Bancor DAO approved the sale of 1800 ETH to directly assist in bringing v3 pools into surplus.
The invention of new bonding curves
Bancor has always been at the forefront of DeFi innovation, beginning in 2017 with the invention of two types of bonding curves, including constant product and concentrated liquidity (then referred to as amplified liquidity) pool tokens (known then as smart tokens, or relay tokens), and the AMM. In October 2022, Bancor disclosed their latest invention, Novel Invariant Function and Asymmetric Liquidity Pools, now referred to as Asymmetric Liquidity and Adjustable Bonding Curves.
Introducing Carbon DeFi and the Simulator
Carbon DeFi is a sophisticated onchain trading protocol that provides orderbook-like functionalities, driven by asymmetric liquidity and adjustable bonding curves. It was launched on Ethereum mainnet April 2023 and enables users to develop automated trading strategies through a variety of innovative order types, such as native onchain limit orders, range orders, and recurring orders. A key aspect of Carbon DeFi is its alignment with the objective of driving v3 pools to surplus, as all revenue generated by the protocol is dedicated to this purpose.
Alongside the introduction of Carbon DeFi, the most recent product under the Bancor umbrella, is the Carbon simulator, a powerful tool used for backtesting trading strategies. Anyone may enter specific data, resulting in the comparison of liquidity provisioning strategies using Uni v2-style canonical constant product, Uni v3-style concentrated liquidity portfolios, and a Carbon DeFi asymmetric liquidity portfolio. The simulator has proven a valuable tool in assisting makers in creating their strategies, as the recent announcement by WOO Network states.
The Arb Fast Lane — A First of Its Kind
The Arb Fast Lane Protocol first made its way to the Bancor Governance Forum in February 2023, as a Proof of Concept. The Arb Fast Lane, a pioneering initiative, now represents one of Bancor’s latest DeFi primitives and is a major driver in the overall trajectory of the Bancor Network. This first of its kind protocol is unique in that it offers users the opportunity to engage in arbitrage within the Bancor ecosystem and across various onchain exchanges. As an open-source and permissionless system, the Arb Fast Lane encourages widespread user involvement in arbitrage activities, with half of the profits going to the caller. Importantly, the strategy of redirecting the other 50% of arbitrage earnings back into the Bancor ecosystem serves to bring v3 pools into surplus, bolster protocol revenue, and enhance the long-term viability of its development.
The Arb Fast Lane incentivizes users by waiving the trading fee on v3. While it might appear to be a setback in terms of increasing v3 fee revenues, this strategy has been quite effective. This is particularly noteworthy as it is poised to expand across additional chains, in conjunction with the DeFi protocols who licensed the source code and the right to deploy the smart contracts that power Carbon DeFi. Although the licensed smart contract deployments are not under Bancor DAO management or control, the launch and management of the Arb Fast Lane remain under its purview. Consistently, the earnings will continue to be allocated to driving v3 pools towards a state of surplus.
The Arb Fast Lane saw a significant enhancement shortly after its initial launch, marking its third major advancement. Originally, arbitrage routes across protocols were restricted to concluding in BNT. However, subsequent updates have greatly expanded its capabilities. It now has the ability to perform complex triangular and polygonal trades, involving a multitude of tokens across various decentralized exchanges, recently integrated Balancer and PancakeSwap v2 and v3, and most notably the Arb Fast Lane now allows arbitrage to conclude with any standard ERC20 token. This feature is particularly advantageous, as it ensures that when a v3 pool exists for a given token (TKN), trades are conducted through that pool, directly aiding the goal of moving all v3 pools towards a state of surplus.
Closed in a State of Surplus
The Bancor DAO and its dedicated community have achieved a notable milestone, with their diligent efforts culminating in the successful closure of 69 pools in a state of surplus. All LPs of the below tokens may withdraw their full initial deposits.
In the past 18 months, the tireless efforts of the Bancor DAO and community are yielding remarkable results. This journey of relentless advancements has brought us new bonding curves, the subsequent development of Carbon DeFi, the Carbon DeFi simulator, and the Arb Fast Lane. It has been a period of intense dedication, innovation, and building the Bancor ecosystem. Here’s to continued growth and ongoing progress as the last 14 pools are brought to a state of surplus and Bancor’s discoveries and DeFi primitives continue to expand.