Bancor Halts Impermanent Loss Safeguard To Fight Off ‘Hostile Antagonist’

Bancor’s claim to be “the only DeFi staking protocol with single-sided liquidity and 100% impermanent loss protection” appears shaken

article-image

Blockworks exclusive art by axel rangel

share

key takeaways

  • “Manipulative behavior” from a “hostile antagonist” is causing headaches for the Bancor protocol
  • Bancor has now paused an important feature designed to shield against impermanent loss

Decentralized automated market maker (AMM) and exchange protocol Bancor has temporarily paused its impermanent loss protection feature, citing “hostile market conditions” and “manipulative behavior.”

There is no ongoing attack and funds on the protocol are secure, Bancor said in a blog post on Saturday. Trading is still active across all of Bancor’s liquidity pools.

The decision to shield the protocol from “potentially manipulative actors” was undertaken to give the protocol some “room to breathe and recover,” Bancor said in its post.

It comes as digital asset ecosystems continue to falter amid a liquidity crisis and market contagion following crypto lender Celsius’ decision to halt withdrawals and transfers from its platform.

Impermanent loss (IL) is a unique phenomenon in decentralized finance. It occurs when the value of liquidity providers’ staked assets deviate from AMM pools’ dual asset pairs, relative to pricing on external markets.

Changes to external pricing outside of a protocol’s pool aren’t automatically adjusted, leaving open opportunities to take advantage of price differentials via arbitrage. An IL is calculated by taking into account the current value of a liquidity provider’s staked asset against what the asset would be worth had it been left in a wallet or an exchange.

Bancor’s protection feature, designed to withstand IL by distributing its native token BNT to those affected, will be reactivated on the protocol once the market stabilizes, Bancor said.

Mark Richardson, Bancor’s product architect and head of research said during a Twitter Spaces discussion on Sunday evening his team had discovered “another Celsius wallet” intending to withdraw $10 million from the protocol.

It came amid a “wave of additional panic” stemming from a high number of withdrawals piling up, akin to a bank run event, according to Richardson.

“It would be difficult to imagine the protocol withstanding such a large flight of liquidity all at once,” Richarson said. The architect also pointed toward a “hostile antagonist” as attempting to profit off of Bancor’s woes by opening short positions against the platform’s BNT token.

“The ethical thing is to protect the protocol and its users against this type of antagonistic behavior,” Richardson said who pointed toward letting the situation play out or “do something about it.”

Richardson also said Bancor had activated its emergency powers to respond to its ongoing crisis, where the decision was reached to pause protections on IL as an immediate response.

The protocol’s team will now seek ratification for its decision via a proposal within Bancor’s decentralized autonomous organization, Richardson said.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Featured.png

Research

Helium stands at a pivotal moment in its evolution as a decentralized wireless network, balancing rapid growth, economic restructuring, and global expansion. With accelerated growth in domestic DAUs and Hotspots supporting its network, Helium is leveraging strategic partnerships and innovative proposals to scale internationally. The recent implementation of HIP 138, “Return to HNT,” has unified its token economy under HNT, simplifying participation and strengthening liquidity, while HIP 139’s phase-out of CBRS refocuses efforts on scalable Wi-Fi offload. Meanwhile, governance shifts under HIP 141 raise questions about centralization as Nova Labs consolidates control over the roadmap.

article-image

In 2011, WikiLeaks faced a financial blockade imposed by the US government. It was Bitcoin’s first major test.

article-image

Kado’s founder Emery Andrew spoke to Blockworks about the acquisition and what’s next for the team

article-image

LayerZero’s Bryan Pellegrino chatted with Blockworks about the firm’s next steps and its 10-year runway

article-image

Colosseum co-founder Matty Taylor is seeing “high-performance [Solana] founders showing a lot of interest in private trading technology”

article-image

Executives weigh the growth potential they see in the public stock and private credit/equities arenas

article-image

Players can stake ME, trade tokens and link wallets to climb the leaderboard