What is Balancer? In-depth Analysis of Balancer (BAL)

I. What is Balancer?

Balancer is an AMM that tries to build a liquidity pool where diverse assets may be exchanged. It does not rely on a third-party or centralized system to function. An AMM is a group of algorithms that determine trading rules such as facilitating orders and determining asset values.

Balancer is an Ethereum blockchain-based decentralized exchange. If a customer has a suitable wallet, such as MetaMask or Coinbase, it makes it easier for them to access the site and invest in pre-existing pools to receive transaction returns. Balancer has grown to be one of the most popular decentralized exchanges (DEXs) and the largest DeFi application in terms of trade volume since its launch.

It uses the AMM model instead of the conventional bidding and asking pricing used by most centralized systems. Balancer is a decentralized system capable of market control as a consequence of this combination of factors. Uniswap and Curve are two more platforms that operate on a similar premise.

Balancer is special in that its protocol may handle several assets, whereas Uniswap only allows two. It also has a predefined trade cost that pool creators have agreed upon.

II. History of Balancer

Balancer originated as a project incubated by Block Science, an engineering and research organization, before being spun out as a new company, Balancer Labs, in early 2018. It was created to provide liquidity on your own terms, by constructing automated market-making pools with a variety of assets and customizable weights. This results in a structure that mimics a continually rebalanced Exchange Traded Fund (ETF), except that you are compensated for giving capital rather than paying fees to acquire and retain it. Balancer is also a non-custodial exchange, so traders can swap assets for a charge, which is subsequently distributed to liquidity providers.

The Balancer protocol can be used for a variety of purposes. The most apparent use is a decentralized exchange, akin to Kyber and Uniswap, in which the liquidity provider gets fees for each swap conducted in the pool.

Second, the liquidity pools might act as index funds or exchange-traded funds (ETFs). In terms of Ethereum projects, this use case of collecting token baskets is equivalent to TokenSets. The distinction here is that TokenSets is more dependent on the author of the Sets or whether the Sets hit certain technical analysis indicators like RSI, Moving Averages, and so on. In comparison, Balancer uses a powerful multidimensional invariant function to continually determine prices between tokens in liquidity pools.

Finally, Balancer might serve as a venue for new enterprises to launch their coin, a practice known as Liquidity Bootstrapping. The goal of the Liquidity Bootstrapping Pool (LBP) is to launch with deep liquidity and a more varied distribution. For instance, an LBP comprised 80% project token $XYZ and 20% ETH. Over time, the pool weights are gradually modified until they eventually flip to 80% ETH and 20% XYZ, giving the pool deep liquidity and hence minimal slippage. This use case allows the team more control and flexibility over token distribution, which benefits both the community and the team.

• Liquidity Mining Begins: Started on June 1st, 2020, and those who provide liquidity to Balancer protocol will be eligible to receive BAL tokens. There are a total of 7.5M BAL released in the span of 8 years. Since BAL is a governance token, The idea is to create a really strong incentive for early adopters to grow liquidity and get involved in the governance process.
• Liquidity Staking Started: In August 2020, BAL token holders voted to incentivize liquidity that has BAL in the pool. Since there are 145,000 BAL enter circulation each week, 45,000 of those tokens are distributed to liquidity providers of key BAL pairs like BAL/ETH, BAL/USDC, and BAL/WBTC. This is done to incentivize BAL liquidity and to accelerate protocol decentralization.

III. Striking Features of Balancer (BAL)

Some of its key features include:

• Balancer seeks to help investors and traders who want to swap assets or provide liquidity without relying on centralized intermediaries as a decentralized exchange platform.
• It is comparable to platforms like Uniswap and Cosmos in terms of functionality, but it has a few unique characteristics that set it apart from the competition. The degree of flexibility and control it gives pool owners is one of the primary differentiators.
• When swaps are executed through pools for which Balancer liquidity providers (LPs) offer liquidity, they earn fees, which are dispersed proportionally to the LPs stake in the pool. Balancer, on the other hand, is unique in that pool administrators can establish their own fees, which can range from 0.0001% to 10%.
• Multi-asset pools are also supported, allowing pool owners to add up to eight different assets to their pool. Pool managers can design comprehensive portfolios that are automatically rebalanced by traders using these multi-asset pools. Trades do not need to be routed through Ether (ETH), unlike some other platforms, which helps traders reduce slippage.
• The BAL token, which can be used to vote on Balancer improvement proposals on the Balancer voting platform, is utilized by the community to control the platform. To tally votes, Balancer employs a simple message signing function, ensuring that users do not have to pay transaction costs to participate in governance.

IV. Core Technology of Balancer (BAL) 

Balancer pools are made up of up to eight different cryptocurrencies, similar to how an index fund might be made up of several equities.

The value of a Balancer pool is defined by the percentages of each token in it; a weight is established when the pool is created.

1. Self-balancing Index Fund

Balancer employs bespoke algorithms known as smart contracts to ensure that each pool preserves the appropriate amount of assets even when the values of individual currencies in the pools fluctuate.

A Balancer pool, for example, may begin with 25% ETH, 25% DAI, and 50% LEND. If the price of LEND doubles at some time, the pool automatically decreases the quantity of LEND it holds to keep 50% of the pool’s worth.

So, what happens to the LEND? Smart contracts from Balancer make them available to traders eager to buy LEND as prices rise.

In contrast to traditional index funds, where investors pay fees for rebalancing services, liquidity providers continue to earn fees while their index funds are rebalanced.

2. Balancer Pools 

Balancer provides both private and public pools to customers with varying risk tolerances.

Any user can supply liquidity by adding or removing assets from public pools. Before they open, the parameters of public pools are fixed and cannot be adjusted.

As a result, customers with lesser holdings who want to earn fees from the most popular – and liquid – pools may find them advantageous.

A private Balancer pool is one in which only the pool creator has the ability to add or withdraw assets. The user may also change all of the pool’s other settings, such as fees, weightings, and the sorts of assets it takes.

V. What is BAL?

1. Detailed Information about BAL

BAL is an ERC-20 standard and a native Balancer token based on the Ethereum network. BAL has the ability to oversee Balancer protocol and development, including voting on ideas and major fundamental modifications. This feature distinguishes Balancer from other DeFi protocols as a decentralized autonomous organization (DAO). Furthermore, the growth of balancers in the DeFi domain has necessitated the use of BAL in areas other than voting.

2. BAL Allocation

The initial token distribution is as follows:

• Liquidity Mining: 65%
• Team & Founder: 25%
• Ecosystem: 5%
• Token Sale (Pre-Seed & Seed Round): 5%

3. BAL Token Metrics

• Name: Balancer Governance Token
• Ticker: BAL
• Contract: 0xba100000625a3754423978a60c9317c58a424e3d
• Decimals: 18
• Blockchain: Ethereum
• Token Standard: ERC-20
• Token type: Governance Token
• Total Supply: 100,000,000 BAL
• Circulating Supply: 10,799,858 BAL

4. Use Cases of BAL

At the outset, 100 million BAL tokens were issued, with fewer than 10% of the tokens still in circulation as of October 2021. BAL tokens are now being issued at a pace of 145,000 per week, implying that the BAL coin will continue to be an inflationary currency for an anticipated 8 years.

The BAL token’s primary goal is to draw liquidity to the platform since Balancer users receive not only a transaction % of each asset they deposit in the pool, but also BAL tokens on top of that. In order to motivate users to stake their assets in Compound, this is identical to how the COMP token operates.

In addition, the BAL token, like many governance tokens, is intended to promote involvement in Balancer’s decentralized governance.

As a result, BAL token holders can vote on crucial choices affecting the platform’s future, including changes to protocol fees, the integration of other blockchains, and scaling solutions.

Balancer’s integration with Polygon and Arbitrum, two scaling solutions that are actively assisting many Ethereum-based dApps in having quicker and cheaper transactions, is a recent example.

VI. How to earn & own BAL?

Here are the top 6 exchanges that offer the ability to buy Balancer (BAL) with a credit card, debit card, or Bitcoin (BTC):

• Kraken
• Uphold
• Binance
• KuCoin
• Huobi Global
• WazirX

VII. Which Crypto Wallets are suitable for BAL?

Here is the list of popular and best Balancer (BAL) wallets:

1. Atomic
2. MyEtherWallet
3. Ledger 
4. Binance
5. Trezor 

VIII. BAL Recent Developments

Balancer version 2 was released in May of this year, with a colorful new rebrand, a shift toward improved gas efficiency for lower transaction costs, and a new ‘liquidity mining’ function that allows yield farmers to join other pools and farm bigger payouts.

A 5 million dollar funding round, in which venture capital funds Defiance Capital and Three Arrows acquired BAL tokens from the Balancer treasury, to support the transition to Balancer v2. Balancer has evolved into an important component of the DeFi Lego ecosystem by 2021.

DeFi blue chip Aave has for example launched a ‘backup pool’ on Balancer, where users stake a reserve supply of Aave and Wrapped Ethereum to be used in the case of a ‘black swan’ event, like the Maker DAO flash liquidation of March 2020.

Balancer has also collaborated with another DeFi staple, Gnosis, to build BGP, a decentralized exchange that leverages the finest elements of both protocols to provide the most accurate trade pricing while avoiding the high gas fees associated with bot bidding wars.

The Polkadot ecosystem has also approached, with the EVM-compatible Moonbeam project seeking to integrate the Balancer protocol with Polkadot later this year.

The more integrated the Balancer protocol becomes in the future blockchain multiverse, the more use cases for the BAL token will open up, and the project will be more successful.

IX. Funds & Partners of Balancer (BAL)

1. Investment Funds

2. Partners

X. Where is Balancer (BAL) information to be updated?

Currently, Crypto users can fully consult, research, and analyze information about Balancer (BAL) through famous media newspapers such as Nasdaq, BENZINGA, CryptoPotato, BeInCrypto, CoinTelegraph, Coindesk, Kraken…

These media are constantly updated with useful information, new activities, outstanding events of Balancer, and all the topics surrounding it. Accordingly, Meta Lion Ventures continuously updates the topic of outstanding projects in Blockchain and hot events organized between Meta Lion & partners.

XI. FAQs about Balancer (BAL)

• What is Balancer token?

Balancer token, abbreviated BAL, is the native utility token for the Balancer platform. This currency acts as a protocol for the Balancer network as well as a governance token, allowing users to vote on future network improvements. Users may earn the token by trading on the site or contributing liquidity to the pool.

• What is the Balancer protocol?

Balancer protocol is an open-source automated portfolio manager and liquidity supplier. It is designed to facilitate the trustless and permissionless trading of ERC-20 assets. Furthermore, it is built on the Ethereum blockchain and addresses some of the most pressing concerns that decentralized exchanges confront.

• What’s the difference between Balancer and Uniswap?

Balancer functions similarly to Uniswap, with the exception that up to eight tokens can be added to a single pool, as opposed to Uniswap’s two. Furthermore, ETH does not have to be one of the tokens in the pool, although all Uniswap currencies are matched against ETH.

Balancer pools are also not confined to “50/50” token weightings. LPs may, for example, create a pool with 60% Maker token, 20% Wrapped Ethereum and 20% USDC.

The word ‘Balancer’ is derived from the way the protocol automatically ‘rebalances’ the weighted percentage of tokens added to each pool.

This implies that Balancer may provide more unusual yield farming combinations to ERC-20 cryptocurrency holders.

• Is Balancer a good investment?

Potentially. Experts, on the whole, appear to believe the token is a sound investment, with Gov Capital estimating the token will reach $200 in the next five years.

Even with the latest increase, the token has lost 70% of its value since April 2021.

It is critical to remember that cryptocurrency is a very volatile asset, and analyst estimates are usually incorrect.

Conclusion

After reviewing all parts of the Balancer (BAL) project, it is evident that this is an AMM that allows investors to profit from idle digital assets and traders to swap assets without having to go through know-your-customer (KYC) verification processes.

However, whether or not this is a good investment will be determined by the investor’s risk tolerance. The project’s liquidity is always growing, which means it will continue to provide low-cost transactions and a great level of flexibility.

Balancer (BAL) is a strong project worth exploring for investors looking to diversify their portfolio, supply liquidity, and make passive income by employing tokens that would otherwise be sitting in their cryptocurrency wallets doing nothing.