Cryptocurrency Exchange Review
Making Crypto Simple
Balancer ($BAL) has carved quite a nice niche for itself on the crypto market by providing what traders crave most – making money in their sleep. As an automated market maker (AMM), the trading platform provides the absolute best quotes at minimal slippage. The trading exchange is decentralized by nature, which means that it does not rely on a mediator or a governing body on decision making, execution, and liquidity. Instead, it employs protocols that draw liquidity from a joint liquidity pool and places the control in the hands of its crypto users.
By taking advantage of Smart Order Routing (SOR), the platform’s algorithm knows exactly when to strike and draw liquidity from the Balancer pool.
About the Trading Platform
Balancer was founded under the name Balancer Finance in September of 2020, with co-founders Mike McDonald and Fernando Martinelli at the helm. The trading platform’s interface relies on N-dimensional invariant surfaces for its interface API, which comes directly from Uniswap and its dApp offering.
The Automated Market Makers (AMMs) used by Balancer are a series of artificial intelligence protocols that hold everything together. From managing fees, to balancing finances, to catapulting Balancer at the very top of the decentralized finance (DeFi) industry, it seems like the AMMs are well on route to nudging out any competition that has to rely on motivation in order to execute a task.
The platform also provides a native token called BAL, which stands as a Compound Protocol governance DeFi asset that can be deployed in a plethora of ways. Most notably, the token can assist in building DeFi projects but it can also be set against blockchain operations such as mining and yield farming.
Besides having a super popular liquidity protocol service, Balancer is still a decentralized exchange platform at heart. This means that users aren’t subjected to anything resembling a KYC or AMP test and get to retain their anonymity and sensitive data at all times.
In order to set up and execute a trade at Balancer, all that users have to do is connect their crypto wallet and they’re off to the races. Once plugged in, traders have a lot of avenues to go by. Namely, they can deal in some of the most relevant and coveted tokens around, such as ZRX, BAT, USDC, REP, SNX, KNC, COMP, WBTC, pBTC, sBTC, WETH, DAI, MKR, etc.
Balancer Liquidity Pools
The trading platform’s pools can hold more than $11 million USD in USDT, BAT or COMP pools. Once a crypto trader makes an order, their assets go against the funds of the pool, so the pool acts as the counter to the shift of the pendulum and absorbs the ripples.
The exchange platform also makes use of so-called controlled or private pools. These pools offer set liquidity that is directly provided by the trade executioners themselves. Talk about having total control, eh? This is how most centralized exchanges operate.
Of course not everyone can afford to employ their own personal pool, so most crypto traders have to rely on shared pools. If you’ve done a decentralized crypto trade, chances are you’ve probably come across a shared trading pool. Here, everyone contributes in order to keep the Merry-go-round going.
Even though these are the most widespread pools in the industry, they aren’t the only ways in which traders are able to liquidate a trade. For instance, Liquidity Bootstrapping Pools (LBPs) work in close relation with project tokens in order to build up liquidity. Users that want to dive a bit deeper into the different types of pools and learn how they can take advantage of them will have a blast setting up and exploring the training platform’s Pool Creator tool.
Balancer didn’t have its own native token when it was first made available to the public. The $BAL was introduced recently, in June of 2020, when it was set in motion to be distributed on a week per week basis. The governance $BAL token can only be redeemed by the trading platform’s liquidity providers.
Even though the $BAL tokens have no initial value, which means that they cannot be used to buy Bitcoin, they have particular value when it comes to voting with your dollars. The token is employed towards governing the exchange’s protocols and development. This way, token holders have a say in how the Balancer protocol is structured and how it moves forward in terms of fresh features, trading fees, and the employment of blockchain contracts.
With over 100 million tokens in print, Balancer’s asset is nothing to sneeze at. Most of the tokens are owned by the platform’s founders, developers, team advisers, as well as notable investors. However, Balancer users that add liquidity to the platform are welcome to engage in mining and stash some on their balance sheets.
Over 145,000 $BAL tokens, which comes at around 7.5M, are being distributed on an annual basis.
BAL Token Liquidity
Traders that are interested in BAL token liquidity mining have to understand that they are basically taking part in the platform’s liquidity supply. They are working on the DeFi protocols and are paid in governance tokens for their efforts. By staking their acquired crypto assets they are able to earn a passive income, while their funds are being utilized as a part of the platform’s shared liquidity pool.
BAL tokens are given out proportionally in regards to the volume of liquidity that every trader provides. Balancer has a clever infrastructure in place that incentivizes liquidity providers to lower their fees. The lower their fees are set, the more BAL tokens they get on transaction fees. The liquidity creators are provided with both short term and long term options.
The Balancer Governance token is under quality control via the Balance Coin Whitelisting feature, which makes sure that liquidity pools need to feature two whitelisted coins, at the very least, in order for the transaction to fall through.
The trading platform’s fee structure largely depends on where the pool owners have decided to lay their support the most. So, there are no set fees at Balancer. It all depends on the liquidity pool you employ and your digital asset of choice.
Once a trade is set in motion, the platform automatically finds the best offer on the market. From there on it’s up to the traders to check out the liquidity and the fee structure of the pool that will be employed for the execution of the trade. The numbers are still transparent, however, nothing is set in stone and can fluctuate from end to end. If traders want to browse pool fees before they automate an offer, they can always take a look at the pool management page that has all the fees and fee structures on all pools at all times.
Deposit and Withdrawal Methods
In order to deposit assets on Balancer, users will need to have a crypto wallet and handle the blockchain protocol gas fees that guide their deposit from their pocket to their balance sheet.
Withdrawals are straightforward as well. Users just need to zero in on an asset and transfer it to their Ethereum wallet, from where they can withdraw their digital currencies to the next destination or stack them and hold on to them.
Because Balancer functions as a decentralized platform, it has no funds or digital assets on its premises and servers. This by extension means that even if someone were to breach the platform, they won’t be able to get a hold of any user data or funds of any kind. You know when lower-ranking army officials aren’t briefed so that in the event of their capture, they can’t reveal the attack strategy even if they want to? Same principles.
However, this does not mean that DEX’s safety is bulletproof. Funds can still be traced to and from the platform. That’s why traders should always be wary of suspicious activities on fee processing and check their wallet balances.
Frequently Asked Questions
What is the Balancer protocol?
The Balancer protocol is a decentralized finance or DeFi protocol, which does not rely on a party or governing body in relation to its services and employment. This is done by amalgamating different liquidity pools and blockchain networks into one big connected protocol that can execute and track orders throughout/on all of them.
What is a Balancer swap?
Instead of relying on order books or horsepower to process fees, Balancer employs an AMM or automated market maker protocol that automatically swaps assets at certain preferences. The preferences are manually punched in, moulded and modified by the traders that employ the protocol.
What is the Balancer LBP?
The Balancer LBP or Liquidity Bootstrapping Pools are a type of smart pool that’s in charge, takes care and is employed on all actions that occur inside of the trading platform’s core liquidity pool.
What is Wrapped Ether?
Wrapped Ether or WETH is a form of ETH that functions as a two way street in the Balancer ecosystem. WETH is basically an ERC-20 token that is wrapped when it’s delivered by the smart contract so that it can be sent back to the same smart contract down the line if need be.
A Few Words Before You Go…
By now, you’ve probably realized that the Balancer exchange platform is not your typical DEX cryptocurrency provider that deals in BTC and ETH and provides support for the most popular ERC-20 tokens on the Ethereum blockchain. The platform’s balancer labs, support of smart contracts, open-source smart pools, stablecoin liquidity, impermanent loss protocols and more have set it apart from its competition. We, for one, can’t wait to see what the future has in store because, by all accounts, Balancer looks very promising from top to bottom.