Bancor Governance have proposed raising the insurance limits on the Ethereum and ChainLink Protocols.  This will permit more space for single-sided ETH and LINK deposits with impermanent loss insurance.

The flexibility insurance schedule will make it possible for liquidity pools which generate high amounts of trade revenue relative to their arbitrage activity to get a boost through additional protocol co-investment by an increase in minted BNT limits.

Also, the pools which have been underperforming can have restrictions imposed on the co-investment protocol. This provides the BancorDAO with the needed flexibility to manage the well-being of the system.

Commenting on the BNT Insurance regard, Sydney Ifergan, the crypto expert tweeted:  “It is always good to start small and increase slowly, new alternatives like the (BNT) Bancor Governance insurance flexibility are experiments which come with marginal risks.”

The BNT minting limits shall be increased on two pools like ETHBNT and LINKBNT.  The benefits of this flexibility will be an immediate increase in TVL, an increased rate of token burning, and migration of Uniswap LPs.

The purpose of the insurance limit increase, is that the community is facilitated with the ability to experiment with liquidity contributions to two key pools like the ETH and LINK based on the assumption that the increase in the pool liquidity will lead to a lowering of slippage and thus a lowering of leakage to arbitrageurs.  This in turn leads to an increase in volume and fee earned. Though this is a sensible strategy, there are risks, and when properly controlled will lead to increased fee levels. Thus will burn over and beyond the additional IL risk taken.

Bancor (BNT) Capturing Market Share

Some of the community members were scared by the arbitrary 20 million threshold.  However, the idea of the network is to increase incrementally.  High threshold provides the flexibility to do stuff.  There can be incremental increase by 1M or 2M at any point in time.  When detrimental effects are observed the increments can be discontinued.

Some of them were feeling that it would be wise to incrementally check on ETH first and them to move on to the rest. However, for meaningful test results developers who are versed feel that it is important to increase the limits on more than just ETH.

The Bancor Network have chosen Link because it produces greater fee than IL liability to date and far and therefore poses minimal risk.

The community are determined to capture the market share and they are sure that the BIP based on insurance limits on Ethereum is a way to do it.