Bancor, a decentralized finance (DeFi) protocol often credited as the pioneer of the DeFi space, paused its impairment loss protection (ILP) function on Sunday, citing “hostile” market conditions.
In a blog post on Monday, the DeFi protocol noted that the ILP pause is a temporary measure to protect the protocol and the users. The blog post read:
“The temporary measure to pause IL protection should give the protocol some room to breathe and recover. While we wait for markets to stabilize, we are working to get IL protection reactivated as soon as possible.”
When a user gives liquidity to a liquidity pool, the ratio of their deposited assets changes at a later moment, potentially leaving investors with more of the lower value token, this is known as impermanent loss.