This was done in reference to the unfavorable conditions that were prevalent within the market at the time. In a blog post that was published on Monday, the DeFi protocol explained that the ILP halt is a precautionary measure that has been implemented for the short time to protect both the consumers and the protocol itself.
In addition, the blog post mentioned that a temporary measure had been implemented to disable IL protection in order to give the protocol an opportunity to recuperate. The message went on to say that while they are waiting for stability to take place in the markets, they are working as quickly as they can to reactivate the IL protection as soon as feasible. This phenomenon, known as impermanent loss, occurs whenever a liquidity pool gets liquidity from a consumer. As a result, the ratio of deposited assets shifts at some point in the future, potentially leaving investors with the majority of tokens that have a reduced value.
For ILP, Bancor's protocol-owned liquidity was used to raise the funds. In this regard, the BNT token was staked by the protocol in pools, and the fees collected were used to reimburse customers for their short-term losses, as explained. In cases where the trading fees collected were greater than the costs of an impermanent loss on a stake, this procedure burned additional BNT tokens efficiently.
To coincide with the release of Bancor 3 in this month's second week, an upgrade to the ILP operation was implemented with additional refinements. Although the recent market turbulence had a huge impact on the decentralized finance, which resulted in many substantial improvements to the DeFi protocols, the recent market upheaval had a significant impact on the decentralized finance as well.
Some members of the Bancor community were not thrilled with the decision to take an IRL sabbatical, despite Bancor's belief that the protocol would benefit from some fresh air to breathe. According to Cobie, host of Uponly Tv, Bancor's decision to stop IRL at this critical point in time is unacceptable.
With the assistance of Hasu (a Web3 investment-focused research partner), Bancor's claims of impermanent loss shield and the company's plan to move toward another twisting crash were examined in depth by Hasu. He claimed that the failure of the ILP program can be seen in the price movement of the platform's BNT token over the previous two weeks, paving the way for a 20% drop in Uniswap and SushiSwap's value while a 66% decay has taken place simultaneously due to the mounting inflation caused by ILP compensations.