Balancer is a multi-token automated market maker (AMM) that operates as a self-balancing weighted portfolio protocol, liquidity provider, and price sensor. Built on the Ethereum blockchain, Balancer allows users to create or add liquidity for multiple assets simultaneously to customizable pools. The users earn trading fees in form of Balancer’s native token Balancer token (BAL).

Balancer operates like an index fund – digital assets are regularly reallocated based on their prices and returns. Like an index fund, Balancer provides crypto traders with a tool to deploy risk diversification through a controlled risk exposure to their crypto portfolio.

Balancer Developers

Balancer was launched in March 2020 by Fernando Martinelli and Mike McDonald of Balancer Lab. The platform started as a research program at BlockScience, a software company, in 2018. The Balancer Lab Comprises a team of like-minded fellows with in-depth knowledge of the DeFi ecosystem. The team leaders are:

  • Fernando Martnelli: A highly experienced entrepreneur and member of the Maker community. Martinelli has worked on several projects before partnering with McDonald for Balancer.
  • Mike McDonald: Balancer co-founder and an experienced security engineer and creator of mkr.tools. McDonald currently serves as Balancer’s CTO.
  • Kristen Stone: Formerly product manager at Coinbase, Stone has over five years of experience working in the crypto industry. She currently serves as the COO at Balancer.
  • Timur Badretdinov: Balancer’s front-end developer and founder of Longcaller, a cryptocurrency review and educational content platform.

Operations

Balancer deploys a mathematical pricing algorithm to price assets, rendering the order book redundant. A liquidity provider deposits their assets into a liquidity pool known as a Balancer pool. Unlike in other AMMs, one Balancer pool can hold two to eight tokens. The pool creator can deposit the tokens partially or fully then proceed to set the ratio for each token and the trading fees applied for the Balancer pool.

After a trade, the AMM protocol readjusts the number of tokens to maintain the weighted value of tokens in the pool. Take a pool with four tokens.When a trade causes the price of one token to go up, the Balancer pool triggers a rebalancing that will deduct the number of tokens from the pool until the weighted value is reset.

With its AMM, Balancer users do not rely on any intermediary to facilitate trades. Balancer trades are directly between the self-custody transacting wallets. Anyone with a supported wallet can access Balancer, without special permissions.

Balancer’s other feature is the Smart Order Router (SOR). The SOR optimizes trading to ensure users get the best price based on the number of tokens traded, fees, and gas costs. The SOR will return a list of pools and the number of tokens you should trade in each pool to get the most tokens for any trade request.

Application

The Balancer platform has the following features:

  • Custom Pool Fees: Balancer’s transaction feesare as low as 0.0001%, incentivizing competitiveness for pools thereby significantly driving down transaction costs.
  • Multiple Token Support: Balancer pools hold up to eight tokens. However, pools with uneven weights have more negative slippage and consequently, lower trading volume.
  • Accessible Token Trading: There are no formal procedures for listing a token on Balancer. The platform allows users to trade tokens that do not appear on the exchange’s list via users’ wallet addresses.
  • Balancer Pools: Balancer supports three main types of pools; Public pools, private pools, and smart pools.

In a public or shared pool, any user can deposit or withdraw digital assets to the pool to provide liquidity. All parameters in a public pool are set before launching and remain immutable afterward.

A private pool is created by a single user and only they can provide liquidity to the balancer pool. The pool creator has to control over the fees, the weighted value of tokens, and the type of tokens that are traded in the pool.

Smart pools are private pools owned by smart contracts. The pools can be programmed to perform unique functions like changing token weights in the pool.

BAL token is also Balancer’s governance token, which holders can apply to set features such as issuance rewards and whitelisted pools for liquidity mining.

BAL Tokenomics

As of May 2021, Balancer is the 12th largest DeFi project with $1.76 billion in total value locked (TVL). Following the success of Compound’s governance token, COMP, Balancer launched BAL to decentralize the network further and incentivize liquidity providers.

BAL has a maximum supply of 100 million tokens with 6.9 million in circulating supply. The token ranks 145th with a market cap of $253 million.

Buying BAL

Users can earn BAL by providing liquidity to pools. Alternatively, you can buy BAL from any of the top exchanges that offer BAL trading pairs. Among the top exchanges are Coinbase Pro, Binance, Huobi Global, and Kraken.

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