Bancor Temporarily Pauses its Impermanent Loss Protection
Table of contents
Bancor's Liquidity Pool
Bancor claimed in a Market Conditions blog post on Saturday that there is no ongoing attack and funds on the protocol remain secure. All of Bancor's liquidity pools are still open for business. The decision to protect the protocol from "potentially manipulative individuals" was made to give it some "breathing room and recovery," according to Bancor's post. It comes as digital asset ecosystems continue to struggle due to a liquidity crisis and market contagion due to crypto lender Celsius' decision to stop accepting withdrawals and transfers from its platform.
Impermanent Loss
In the world of decentralized finance, impermanent loss (IL) is a one-of-a-kind occurrence. It arises when the value of liquidity providers' staked assets differs from the dual asset pairs in AMM pools compared to external market pricing. Changes in external pricing outside of a protocol's pool are not automatically updated, leaving opportunities for arbitrage to profit from price differentials. An IL is computed by comparing the current value of a liquidity provider's staked asset to the asset's value if kept in a wallet or exchange.