0/ Teaching an old DEX new tricks ($BNT)

4 months ago, Bancor released their flagship single sided Impermanent Loss protection solution for LPs.

70x increase in TVL and 55x increase in volume later,
I present a deep dive on a forgotten DEX that may be the dark horse of 2021
1/ Story so far

Bancor is a OG DEX launched in 2018 (to much fanfare) but suffered from an overcomplicated token model and lacked noticeable traction despite lofty promises.

2/ After 2 years of behind the scenes product iteration and a leadership reshuffle, the original Bancor vision is being realised. Consequently, the Bancorian community is stronger than ever led by @yudilevi @NateHindman @MBRichardson87.
3/ The Bancor Thesis

The TLDR is simple. Create a highly desired product with insane tokenomics that goes unnoticed by the market.

1. Single sided IL Insured Liquidity Provision
2. Immense liquidity sinkhole tokenomics
3. Extremely underpriced relative to broader DEX peers
4/ IL Insurance

IL has been a major pain point for LPs since the inception of AMMs. With Bancor 2.1, LPs can now stake single sided assets to earn 60-100% yields and receive FULL IL protection.

This is material as it is the Pareto Optimal choice for all LPs
5/ IL Insurance

How does this work?

Bancor uses a portion of swap fees generated across all pools to pay for protocol wide realised IL.

For every $1 in earned swap fees, ~2.8c is used to cover realised IL. No $BNT is minted or issued to subsidize this.
6/ IL Insurance

This means that Bancor has created a self-sustaining non subsidized solution for IL. The catch? You have to keep your tokens staked for 100 days.

This is crucial to unlock capital lower down the risk curve that can now obtain IL free single sided exposure
7/ BNT Sinkhole

Bancor's token model is by far the most elegant one to date (matched only by $SNX). By integrating $BNT as the base asset, liquidity providers and tokenholders are one and the same.

@shomakishi details below:
8/ BNT Sinkhole

As a $BNT holder, there is an immense incentive to stake your BNT (thereby improving the liquidity of the protocol) to earn IL free 50-100% APYs. Since v2.1, BNT staked on the platform has shot up tremendously (currently 61%)

h/t @fiebsy
9/ Bancor Vortex

But this is just one part of the sinkhole puzzle...enter Vortex. An extension on BNT's capital efficiency by offering interest and liquidation free leverage capped at 1.0x

How does it work? See below.
10/ Bancor Vortex 🌀

With this mechanism, by holding $BNT, you can:

1. Stake BNT to earn swap fees + LM rewards
2. Obtain vBNT to deposit into Vortex and borrow more BNT (whilst earning LM rewards)
3. Use borrowed BNT to buy any asset with NO interest or liquidation risk.
11/ Benefits of the TKN / BNT model

Due to the token model above, $BNT stakers also receive the highest swap fees across all DEXs.

Per transaction:
Bancor: 8bps
Sushiswap: 5bps
Uniswap: 5 bps (incl fee switch)

This effectively results in higher net margins for BNT holders
10/ Traction

As a result of these new innovations, Bancor has found its growing niche within the market. Comparing TVL and Volume from Oct 2020:

TVL: $15m ➡️ $1,050m (70x growth)
Daily Volume: $1.3m ➡️ $71.5m (55x growth)
13/ Valuation

Despite the parabolic growth, $BNT is still trading relatively cheaply vs other DEXs. Based on common metrics, $BNT and $SUSHI seem to be the most undervalued.
14/ Valuation

This comparison is material because it severely underprices both Bancor's past & future growth opportunities. Seen below, Bancor and Dodo have most aggressively captured DEX market share in recent weeks.

I suspect it will not stop here for Bancor either.
15/ The Road Ahead

After 2 years, Bancor v2.1 has achieved superior PMF. With its flagship IL Insurance, Bancor is just beginning to unlock the synergies arising from their unique BNT model. Further improvements to Bancor Vortex will allow for greater capital efficiency as well
16/ Conclusion

The way Bancor is designed, $1bn TVL is just the beginning. Its possible we see billions of dollars of liquidity inflows seeking IL free yields in the near future.

2021 may just be the year for Bancor to become the dark horse DEX contender.
17/ Disclaimer
Author currently holds positions in $BNT. Please DYOR. Feel free to DM to learn more about the $BNT token system!

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More from @Wangarian1

13 Jan
1/ Observations of a dHedge fund manager

Whilst it has its drawbacks, I find myself interacting with the dHedge platform frequently.

For the uninitiated, @dHedgeOrg is a non-custodial copy trading protocol built on top of the @synthetix_io ecosystem.

2/ dHedge's value proposition is simple. It provides a platform for active fund managers to showcase their trading prowess, with a transparent scoreboard for all to see.

Managers can also interact with their investors via public and private posts
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1/ Thoughts on investing and missing winners:
A case study on $COVER.

You can't catch every winner. That said, there's always something to take away from the one that got away.
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I know many others shared my view. However, we all missed something.

We underestimated the team's ability to learn from their mistakes.
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15 Nov 20
1/ Some of you are wondering why $SUSHI has been pumping.

Sushiswap? Wasn't that the dead $UNI fork that got hacked by the founder 2 months ago?

Surprisingly, $SUSHI never left. Instead - it has silently been building in the background.

Let me break it down for you
2/ $SUSHI's dark horse narrative comprises of 3 main elements:

1. Market proven product yielding stable cashflows
2. Product releases with strong USP factor
3. Near term catalyst

Together, they construct a powerful narrative for Sushiswap's recovery - and why its far from over
3/ Background
After the initial Sushi hype faded (when 10x rewards expired in mid Sep), TVL and Daily traded volume on Sushiswap collapsed.

Nobody thought a fork with no USP could last.

Throw in a $15m ETH scandal by the founder it looked like the end.

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11 Nov 20
1/ On 17th Nov, $UNI farming will end.

Right now ~$2.3bn funds are deployed farming UNI, with $ETH being the reference token.

This means that there is currently ~$1.1bn ETH locked up, about to be released into the wild.

Where do you think that ETH will go?
2/ Whilst a large portion of current TVL will stay in the same pools (fees generated are juicy), I posit a reasonable amount of ETH will leave the Uniswap system in search of higher yields.

Nobody knows numbers at this point but 50% of TVL leaving may be within reason.
3/ If this holds true, ~$500mm ETH will be on the market. They can:

A): Stake elsewhere ($SUSHI/$ALPHA/ETH 2.0 etc)
B): Remain in holder wallets (unlikely)
C): Be sold for stables / altcoins

I believe a large chunk of it will be sold. Why?
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31 Oct 20

6 months ago, I didn't have the simplest idea of what a blockchain was.

This week, I've officially taken the plunge to work full time @DeFianceCapital.

Here are a few thoughts from a newcomer to the wild wild land of crypto.
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I fell down the classic crypto rabbithole and for the first time in my life, discovered a fire ignite within me.
3/ Frontier tech + Liquid Small Cap Pseudo Equities = Potential for reasonably sized house(s?)

Reflecting on my experiences so far, there are several takeaways on intrinsic motivation, game selection and DeFi that may be of interest to you.
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