Balancer is an Ethereum-based Decentralized Finance (DeFi) protocol that enables automated market creation.
More broadly, market makers and traditional liquidity providers buy and sell financial instruments, providing liquidity to the market and profiting from the difference between the bid and ask prices. Thus, an Automatic Market Maker (AMM) is a “market maker controlled by algorithms that define the rules for trades”.
Combining Ethereum with AMM, the asset in the market, the algorithm that controls that market, and the ability to create a market becomes decentralized.
Balancer isn’t the first DeFi protocol to support automated market creation – there are others like Uniswap and Curve.
What makes Balancer unique is that the protocol supports up to 8 assets per market (weights of supported assets are arbitrary), along with custom transaction fees set by the creator of the pool. out.
Unlike centralized exchanges like Coinbase and Binance, which use order books to calculate prices, the price of tokens in a pool is based on their deviation from a set weight.
Balancer Labs believes that this liquidity sourcing system has the potential to increase liquidity, traders, transaction fees and profitability for liquidity providers.
Information about virtual currency BAL
BAL is a governance token of the Balancer. The team behind the DeFi protocol see this as a necessary step towards decentralized governance and diversification.
BAL holders will be able to help the protocol reach its full potential. Balancer specifically names protocol implementations on non-Ethereum blockchains, deploys secondary layer solutions, introduces protocol-level fees to generate revenue.
Automated market makers, or AMMs, have become a staple of the fast-growing DeFi industry.
Balancer, a leading automated market maker, has launched version 2 of the protocol, promising faster speeds, lower costs, and improved liquidity.
In addition to UI improvements, the Balancer backend will provide more efficient routing of transactions through the “Protocol Vault”. The platform claims that this upgrade will reduce gas costs and create a better pricing mechanism.
Expected gas costs are said to be 40% lower in version 2 – a figure that jumps to 53% with internal balances.
Balancer Labs, the development arm behind AMM, has also announced a partnership with the DeFi Gnosis protocol to provide an enhanced user experience for traders in terms of pricing, user experience, and transparency.
Automated market makers are essentially smart contracts that create a liquidity pool of tokens, which are automatically traded through a programmable algorithm instead of an order book. This allows the contents to be swapped automatically.
AMM is part of a rapidly growing DeFi industry that, according to industry estimates, has grown eightfold since the start of 2021. The DeFi space locked more than $160 billion in assets on Tuesday.
Balancer’s native BAL token has set multiple record highs this year thanks to aggressive protocol integration, gas fee refunds, and an increase in DeFi trading activity. The buzz around the possible Coinbase listing has also contributed to the massive growth of BAL.
BAL’s price was little changed at $67 on Tuesday with a total market cap of $722 million. BAL is the 31st largest DeFi protocol by market capitalization, according to Coingecko.