Balancer as one of the largest decentralized exchanges built on Ethereum will come to Algorand. It’s another example of a massive DeFi project extending beyond Ethereum to one of the biggest blockchain competitors.
According to a press release, Balancer “will be the first auto market maker (AMM) available to the Algorand community for use”. In doing so, it beat out its bigger AMM rivals Uniswap and SushiSwap.
Like Ethereum, Algorand runs smart contracts – computer code that automates transactions and eliminates the need for third parties – and decentralized applications, meaning it can host a variety of service. Includes a suite of lending, borrowing and transaction without intermediaries collectively known as decentralized finance (DeFi).
The Balancer is an important gear in Ethereum’s DeFi ecosystem. According to DeFi Pulse, it is the 4th largest decentralized exchange in terms of total locked value, referring to the value of cryptocurrencies in US dollars that everyone has stored in the network.
Decentralized exchanges (DEXs) are places where people trade cryptocurrencies and participate in DeFi without having to trust their money to a third party. As an automated market maker (AMM), Balancer uses a liquidity pool so that buyers don’t need to match sellers directly. Smart contracts do this heavy lifting.
However, as long as it is on the Ethereum blockchain, Balancer protocol can only do swaps for ERC-20 tokens, a specific asset class built on top of Ethereum. Later, the expansion to Algorand allowed it to access an entirely new set of assets built on top of that blockchain, known as the Algorand Standard Asset.
“By leveraging Balancer services on Algorand, exchanges will have the ability to create trading pairs with any of the Algorand Standard Assets (ASA),” the DEX wrote in a press release. “As the number of assets issued on the Algorand high performance blockchain accelerates, this presents a great opportunity for mass adoption.”
Balancer is not alone in doing so. Last year, Circle’s USDC stablecoin announced it was expanding into Algorand, adding an easier way for traders to get started on that blockchain.
Of course, the move above does not mean that Balancer is giving up on Ethereum. But it really puts additional pressure on the network as rivals like Algorand, Cardano and Solana exploit Ethereum’s weakness: congestion and high fees.
That congestion is partly due to Ethereum’s first advantage as the original network that captures smart contracts and the applications they create workable. But that’s also because Ethereum hasn’t transitioned from PoW to a PoS algorithm, which is more scalable.
The transition to Ethereum 2.0 is in progress. Phase 0 launched late last year, and Ethereum developers recently hinted that the PoS blockchain might be ready sooner than expected.