Total value locked (TVL) in Bancor, one of DeFi’s first decentralized exchanges, has plummeted 30.2% since the protocol paused impermanent loss protection on June 19, according to data from The Defiant’s newly released chart feature.
In contrast, each of the top four Ethereum DEXs in terms of TVL has seen the value of assets stored in their smart contracts rise by between 11.4% and 24.9% in the 33 days since Bancor paused impermanent loss (IL) protection.
Bancor’s dropping TVL could be partially attributed to falling asset prices, but of the top five tokens deposited in the protocol’s smart contracts, none are down more than a percent in the last month.
As those five tokens, which include Bancor’s native BNT token, make up roughly 84.7% of Bancor’s total TVL of $154.2M, it appears very likely that the decrease in TVL is due to users actually withdrawing assets from the protocol.
This indicates that Bancor’s IL protection was a key feature that attracted depositors who have since withdrawn assets.
Despite the setback, Bancor may return to providing protection for IL. “The goal is to eventually reactivate the IL protection mechanism with modifications that are currently under investigation,” Nate Hindman, head of growth at Bancor, told The Defiant over Telegram.
Plans to revamp the protocol are ongoing on Bancor’s governance forum.
Despite the turmoil, Bancor’s BNT token hasn’t fallen nearly as much as its TVL — as of July 22, BNT is down just 3.9% to $0.50 compared with $0.52 on June 19, according to The Defiant’s charting tool.
Hindman also said that pausing IL protection has galvanized the broader Bancor community. “While we wish we could have prevented this risk and foreseen the economic flaw, we are encouraged by the surge in DAO participation and the decentralized brainstorming going on that has united the Bancor community,” he said.
With $2.9M in 24-hour volume, Bancor V2 ranks 45th among DEXs, according to CoinGecko. Uniswap V3 leads with over $1B in the past day. Bancor V3 sits behind its predecessor at $1.1M in 24-hour volume.