This recent stretch of low Ethereum gas prices has been a huge chance to do all the things that I had been putting off for quite some time. Uniswap V3 migration, ENS registration, Kleros courts, staking and airdrop claims are all the things that are now worthwhile to do!

Bancor (BNT) is one of the OG DeFi protocols, in fact, it hails from the times of Compound and MakerDAO, so it definitely is one of the grandaddys... and probably most of the recent newcomers to the DeFi space haven't even heard of it. I think it was one of the first AMMs, predating even Uniswap! Anyway, as one of the old hands in the DeFi space built by financial and programming professionals... it is built in a completely functional way, no cartoon mascots, no 200000000000059559033% APRs.... and most importantly, no rugpulls (yet...). This is finance at its most boring... very appealing to me!

Anyway, this week, I finally staked my BNT tokens for liquidity pool protection and governance rights. This is something that I've been planning to do for quite some time, but I needed to read up on how the liquidity protection actually worked before I was happy to stake for the added risk, and earnings.

As a point of interest, Bancor takes its name from the post World War 2 proposed world reserve currency... a basket of national currencies which was collectively known as Bancor. However, in the years that followed the devastation of the World War, the United States was the only industrialised country that wasn't face down in the dirt... and they took the chance to exercise their power and veto the Bancor in favour of using the USD as the world reserve currency, cementing their world-wide financial dominance for the century to come. Serious hard ball gameplay there....

Anyway, the main function of the Bancor dApp is the familiar two sided liquidity pools which allow users to swap between the two balanced assets. This is the format that was borrowed and tweaked by Uniswap and then copy-pasted by any number of other copycats. Interestingly, I recently saw a audit group say that the code that they receive from these old protocols (like Compound, Uniswap and Bancor) to be the best written and commented for ease of audit.... something that many of the new protocols throw out the window in order to focus on splash and hype. I prefer the solid and slow method... less rug-pull and accidental holes in code.

Now, you can stake BNT in a single sided way to any existing double sided pool that you are providing liquidity to. This is known as liquidity protection, and it is the only way to stake your loose BNT tokens in order to put it to work earning fees.

Many people will be familiar with the concept of Impermanent Loss in liquidity pool provision, it is basically the lost asset price that you incur by providing to the the liquidity pool as opposed to just holding the two assets. What people might not realise is the fact that impermanent loss is pretty much guaranteed (unless you are providing to a stablecoin pair) and it is only the degree of loss that you will incur that is in question. The only way to "escape" loss is for the pool fees to exceed the loss... and for constant product AMMs (most of them), this is a steep slope to keep ahead of!

Anyway, providing a single BNT side to the liquidity pool (via staking) stops the leakage of of impermanent loss, up to the value of your staked BNT. In return for this insurance and acceptance of the additional risk, you are paid out quite handsomely in fees... and I have to say that the fees are pretty good! I am kicking myself that I didn't do it a year ago.... sigh...

Staking BNT gives you vBNT on a 1:1 basis to represent your stake. This is also used to unlock your stake when you want to do that... however, in the meantime, your vBNT can be staked again in order to give your governance rights... namely, the ability to vote in the Snapshot governance calls. Although I'm comparatively small, it is always a good idea to take part and show interest in the governance calls.... even if you end up just delegating your vote. Snapshot is one of my preferred methods, as it is an off-chain signing rather than an on-chain vote that requires additional gas fees!

I saw that there was a governance proposal that was up for vote... so, I took part in my first Bancor vote. I really need to go through the rest of the projects that have listed their governance votes on Snapshot... I've been falling behind on voting!

So, another thing that I've managed to tick off the list of things to do whilst the Ethereum gas prices are low! I'm not entirely sure what is contributing to this drop in gas fees, but I'm pretty happy that they are down again. Perhaps it is the drop in cryptocurrency prices, or perhaps a general migration to other smart chains... or the explanation that I prefer, a jump to L2 for the bulk of traffic? Anyway, whatever it is... it is a good time to do those things that need to be done!

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