Balancer is an asset management platform that acts as an automated portfolio manager, liquidity provider, and price sensor. As DeFi continues to expand on its composable nature, the need for liquidity in different use-cases grows.
Some of the key aspects of Balancer include:
- A native exchange that uses smart order routing to mitigate price slippage across different trading pairs.
- Swap fees earned from portfolio rebalances, DEX trading and arbitrage opportunities.
- The ability to create a Balancer Pool with asset makeup and fees of your choosing
- Pools that are automatically rebalanced and can be entered using one token.
- Pools that support up to 8 different tokens that can be weighted by percentage and rebalanced automatically.
Balancer recently launched a native governance token BAL – used to vote on protocol upgrades including supported collateral, fees, and incentives. BAL can be earned through the Liquidity Mining program which grants users token for providing liquidity to Balancer Pools.
This Dune Analytics Dashboard by Matteo Leibowitz is a great place to stay up on Balancer’s key metrics.
Balancer was incubated by an engineering company called BlockScience, and was later co-founded by Mike McDonald and Fernando Martinelli who publicly announced the project in September 2019. In March 2020, Balancer Labs held a seed round which raised $3M from notable investors like Accomplice and Placeholder. The project was fully audited by Trail of Bits and is currently live on mainnet.
Balance offers a novel approach to liquidity by allowing users to enter and maintain a portfolio without being forced into a position that may incur an impermanent loss. Using Uniswap as an example, users must deposit 50% of the desire asset and 50% in ETH. With Balancer, users can deposit any amount of a supported asset as they please.
With Balancer, users can adjust allocations to fit their needs, effectively allowing them to add liquidity without being exposed to the price of ETH if they do not want to be. This makes Balancer a great solution for DeFi users who want to earn passive income on Ethereum-based assets like ZRX or MKR while retaining exposure to the underlying asset(s).
Balancer allows users to earn interest off of the fees generated on the Balance Exchange. Seeing as most attractive returns in lending come from the high demand for a specific asset, Balancer is unique in that a user can see a high return on an asset that is typically in low demand thanks to arbitrage opportunities or a desire to mitigate slippage.
To get started with Balancer, visit balancer.finance and navigate to “Exchange”. Similarly, users can go directly to https://balancer.exchange/#/swap. Once on the exchange, users are prompted to connect a web3 wallet like MetaMask where they can then trade assets in a similar fashion to DEXs like Uniswap and KyberSwap.
For automated portfolio management, users can click “Pool Management” located at the top right of the home page. Alternatively, users can go directly to https://pools.balancer.exchange/. Right off the bat, users can see a list of all the available pools and the assets that are inside of them.
After researching which pool fits a given investment strategy, the next step is to add liquidity. To do this, simply click the pool and take note of the makeup. In this example, we’re looking at a pool with 75% MKR & 25% WETH allocation.
We recommend examining the pool for key aspects like balance, volume, and fees. If all checks out, proceed by clicking “Add Liquidity” at the top right of the interface.
Enter the desired amounts under the “Deposit Amount” field and unlock the listed assets so Balancer is able to access them. Lastly, submit the final transaction by clicking “Add Liquidity”. Once in a pool, users can remove liquidity at any time by clicking the “Remove Liquidity” button.
To get involved in the conversation, join their Discord.
For a more in-depth look at what’s going on behind the scenes, we recommend keeping tabs on their GitHub repositories.