A core design of the liquid mining plan is to increase the reward multiplier mechanism, which will magnify the basic BNT reward by up to two times.
Written by: Karen
As liquidity mining enters the second half, the decentralized transaction protocol Bancor’s upcoming liquidity mining plan with a novel incentive model and liquidity protection has attracted the attention of many investors.
On November 22, Bancor’s proposed decentralized transaction protocol Bancor (BNT) liquidity mining proposal won the community to attract new liquidity into the fund pool and cultivate user stickiness. According to the reward plan, the first batch of BNT liquidity mining will support 8 fund pools, and a certain amount of BNT will be allocated to liquidity providers every week. Every two weeks, two new tokens will be added to the plan through governance.
One of the core design of Bancor’s liquidity mining plan is to increase the reward multiplier mechanism, which will magnify the basic BNT reward by up to two times , which means that users who provide liquidity can get up to the basis corresponding to the amount and time of their pledged tokens Twice the token reward.
BNT liquidity mining details
1. Continuous cycle and types of fund pools supported
The entire BNT liquidity mining plan is expected to last 72 weeks. The first batch will support 8 fund pools , namely 6 large fund pools ETH, WBTC, USDT, USDC, DAI, LINK, and 2 medium-sized fund pools OCEAN and renBTC.
In addition, every two weeks, Bancor will add two new tokens to the plan through governance. After activation, the relevant fund pool can receive BNT rewards for 12 consecutive weeks. Among them, a fund pool can be selected multiple times to participate in liquidity mining.
2. Incentive plan = basic BNT reward * reward multiplier
In general, Bancor will allocate 100,000 to 200,000 BNTs to large capital pools and 10,000 to 20,000 BNTs to medium-sized capital pools each week . Among them, 70% of the total BNT rewards will be allocated to the liquidity capital pool. On the BNT side, the remaining 30% will be allocated to the base ERC 20 (TKN) side.
In order to incentivize users to continue to provide liquidity, Bancor has increased the reward multiplier, magnifying the basic BNT reward by up to two times.
This means that participating in BNT liquidity mining can obtain basic rewards and additional rewards derived from reward multipliers. The total amount of BNT rewards obtained each week will be doubled at most.
The rules of “Bonus Rewards Multiplier” (BRM for short) are as follows: Each eligible position will have its own reward multiplier, starting from 1 and increasing by 0.25 every week, and the maximum multiplier is 2 times .
For example, if the liquidity provider chooses to claim the reward after 4 weeks of pledge and its weekly reward is 100 BNT, then the cumulative reward for the user after 4 weeks is 100 BNT* 2 BRM*4 weeks = 800 BNT. In this example, if you choose to pledge, the reward multiplier is calculated as 1+0.25+0.5+0.75=2.5. Since this value is greater than 2, the reward multiplier is doubled. Among them, the fixed amount of token rewards will be determined according to the pledge duration and quantity.
In addition, liquidity providers who directly pledge token rewards to the Bancor protocol can also enjoy the “reward multiplier” rule, that is, after choosing to re-stake, these rewards will also be compounded through continuous mining during the remaining period of the cycle .
However, if the following three actions occur, the reward multiplier will be reset to 1 .
- Claim rewards from the fund pool and no longer pledge;
- Withdraw part or all of the positions before claiming the reward;
- Transfer rewards from the fund pool to other wallets.
3. What are the benefits?
According to Bancor simulations, when the large and medium-sized capital pools reach a liquidity depth of 60 million U.S. dollars and 6 million U.S. dollars respectively, before deducting the exchange fee, the expected annualized return (APY) allocated to the TKN side is 20%, and the BNT side Expected APY is also 40%.
The analysis of the first-class positions stated that “Bancor’s market-making mechanism is designed so that market makers tend not to withdraw liquidity in the first three months (12 weeks) of liquidity mining in order to maintain the highest returns, and after the 12-week liquidity reward is issued, , The liquidity protection has just reached the full coverage period of 3 months, so the LP who made the market in these 3 months not only enjoyed high rewards, but also received 100% compensation for impermanent losses, and the comprehensive income was very high, especially in the future market With greater volatility, the advantages of Bancor v2.1’s impermanent loss plan will be further reflected. The higher the liquidity, the lower the slippage, which can bring higher transaction volume, better returns, and attract more liquidity providers To form a virtuous circle.”
4. How about inflation?
Although the mining rewards provided by Bancor are newly minted, it should be noted that since BNT rewards are calculated dynamically on the chain, users can view the number of tokens that can be withdrawn in real time. However, before claiming the rewards , Bancor will not mint these tokens.
But there is no doubt that minting tokens will trigger inflation. Bancor estimates that a maximum of 28 million BNT will be minted during the 72-week liquidity mining period. As of November 23, according to data provided by CoinGecko, the current circulating supply of BNT is 84.11 million, which means that liquid mining can lead to an inflation rate of about 33% .
Bancor stated that considering the design of the incentive model and reward multiplier mechanism, it is expected that part of the rewards will be re-pledged, and the liquidity mining plan lasts for up to 72 weeks. Therefore, the speed of casting and issuing these BNT rewards will be Gradually and slowly.
Mining guide
The Bancor liquidity mining process is mainly divided into the following processes, which are pledge, claim rewards to the wallet or reuse rewards in the fund pool, and withdraw funds.
1. Pledge
If users want to participate in the Bancor liquidity mining program to receive BNT rewards, they need to provide liquidity to the qualified fund pool and protect assets from impermanent losses, and the unprotected fund pool tokens held will not be eligible for BNT liquidity Mining rewards.
The Bancor v2.1 version launched in mid-October provides the AMM (automated market maker) pool with impermanent loss protection and unilateral exposure through flexible BNT supply.
In addition to providing liquidity to the pledged assets of the fund pool, retroactive rewards can be obtained in two other cases.
The first scenario is that users who provide protected liquidity for these 8 initial fund pools will be rewarded retroactively before the program is launched. For example, if a user is currently providing protected liquidity to one of the fund pools and BNT liquidity mining starts after 3 weeks, when the plan finally starts, the user will receive BNT rewards for the past 3 weeks, and You can enjoy the bonus multiplier amplification rules.
The second scenario is that any new protected positions created before the plan is launched will also be eligible for BNT liquidity mining retrospective rewards. After the liquidity mining contract takes effect, the protected position in the contract can claim retroactive rewards.
2. Claim rewards or “Pledge after claiming”
There are two main ways to deal with the rewards obtained by participating in liquidity mining. One is that the user directly claims the reward to the wallet, which will reset the reward multiplier of the user’s position in the relevant fund pool to 1 times.
The other is to pledge the reward to the fund pool after claiming the reward. This processing method will get the following benefits, such as maintaining the user’s position reward multiplier and creating a new pledge position. After creating a new pledge position, the user is eligible for impermanent loss protection, earning exchange fees, and BNT mining rewards .
3. Withdraw liquidity
Users can withdraw liquidity at any time. After withdrawing liquidity, the multiplier for all eligible positions will be reset to 1 times.
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