Balance in the Midst of an Avalanche
The Balancer tech stack is coming to Avalanche.
Intro
While Ethereum nurtured the realm of Decentralised Finance into reality, alternative blockchains have snowballed into cryptographic existence that provide unique and powerful solutions for applications to build on. One of these promising blockchains is Avalanche.
Avalanche is a Layer 1 Blockchain that implements a truly unique consensus mechanism. This consensus allows the network to finalize optimally and scale with subnets and application-specific blockchains.
As a core building block of web3 infrastructure, Balancer is deploying to Avalanche to fuel Liquid Staked Token growth and offer participants a unique/flexible DeFi tech stack that has been out of reach… until now!
Unique Consensus
Unlike Ethereum or Bitcoin, Avalanche employs a hyper-efficient consensus mechanism called “Snow Consensus”. This consensus model differentiates itself from the notable Proof of Work (PoW) that Bitcoin implements and Proof Of Stake (PoS) that Ethereum harnesses in a few unique ways.
PoW consensus sees all miners competing to solve a simple, yet energy-intensive cryptographic puzzle to add a block to the chain. Once one miner finds the solution, the result is broadcast to the chain, with all other participants validating that the solution is correct. Alternatively, PoS consensus requires participants to stake collateral and select a specific node based on the weight of their collateral. This selected node then proposes a block, and all other validators validate the proposed block to ensure its correctness.
Rather than all nodes being selected to validate, or miners competing amongst themselves, Avalanche’s Snow Consensus implements sub-sampled voting. A node is selected to build the block and then a sub-sample is randomly selected to compare results. If the majority of the sampled validators respond with the same preferred transaction, that block is built. With this mechanism, when transactions have no conflicts, finalization happens very quickly. When conflicts exist, honest validators quickly cluster around conflicting transactions, entering a positive feedback loop until all correct validators prefer that transaction.
This unique mechanism allows the blockchain to achieve high throughput and fast finality while being incredibly energy efficient. In fact, Avalanche employs one of the fastest consensus mechanisms of any layer 1 blockchain with finality in less than 0.5 seconds (2 seconds on C-Chain) while consuming the same energy as only 46 US households each year.
Subnets
Scalability is a core tenant of any blockchain; ensuring applications and transactions continue to operate smoothly when activity rapidly increases is pivotal for every network. This has been evident with Ethereum Layer 2 scaling solutions, such as Optimism and Arbitrum, and has been highlighted further with application-specific implementations recently blossoming into light such as the OP stack and Polygon 2.0.
Avalanche has engineered a unique solution to solve the scalability dilemma. The network embodies the philosophy of being a “heterogeneous network of blockchains”. As opposed to all applications being limited to one chain, this network philosophy allows tailored and unique chains for specific applications. Alongside HyperSDK tooling and Avalanche Wrap Messaging that offers seamless construction and communication between chains, a pivotal piece of Avalanche’s unique infrastructure is something known as “Subnets”.
A Subnet is a sovereign network (not a blockchain) that defines its own rules regarding its membership and economics for a collection of blockchains. Put simply, it is its own ecosystem of rules and laws by which Blockchains must abide by. It is composed of a subset of validators working together to achieve consensus on the state of one or more blockchains. Currently, there are close to 60 Avalanche subnets on testnet and mainnet across a wide range of use cases, including DeFi, gaming, enterprise, etc.
In addition to subnets, Avalanche has 3 Primary Networks, secured by all 1,300+ validators.
The Contract chain (C-Chain) is Avalanche’s implementation of the Ethereum Virtual Machine (EVM) and is the chain in which Balancer will deploy to bootstrap growth.
Balancer LaunchPad
Whether symbiotic/interconnected boosted pools that bootstrap swap liquidity and lending markets simultaneously or efficient 8020 pools that unlock the next generation of protocol governance positions, Balancer is uniquely positioned to help facilitate network-wide liquidity growth for the Avalanche Blockchain.
Get ready for LST growth on Avalanche
Balancer technology is the most efficient DeFi infrastructure to host Liquid Staked Tokens (LSTs). Compared to a typical stable pool that most DEXs implement for LSTs, Composable Stable pools are programmatically tailored to ensure that the full power of Yield Bearing tokens flows to Liquidity Providers.
These unique pools harness an inbuilt rate provider that constantly queries the blockchain, updating the token to the correct ratio and feeding the yield accrual back to LPs. Without rate provider technology, the two assets trade at 1:1, with any appreciation in staking yield leached out to arbitrage traders. Integrated into a core pool mechanic and efficient liquidity flywheels, Composable Stable Pools offer users and protocols the most efficient technology to host and grow their appreciating tokens.
Until now, the Liquid Staked Token market has been fractionalized and inefficient on Avalanche. With the launch of Balancer and collaboration between 4 key LST protocols, the Liquid Staked Token market will unite under one hood. Balancer will host the liquidity of sAVAX by BenQi, ankrAVAX by Ankr, yyAVAX by Yield Yak, and ggAVAX by GoGoPool to supercharge the Avalanche LST market!
Governance Tokenomic Evolution
With Balancer technology, all Liquidity Pools are limitlessly flexible in proportions, allowing for pools with 8 tokens with any weightings. 8020 Pools have proven to be the ultimate sweet spot for governance positions with minimized Impermeneant Loss and asymmetric upside while unlocking an efficient means to build native token liquidity for protocols. With the launch of Balancer onto Avalanche, a whole new cohort of protocols can join the 8020 Initiative.
A Boosted Paradigm!
Boosted Pools intertwine the power of Liquidity Pools and single-sided yield markets into one powerful LP position. In a typical Liquidity Pool, less than 20% of the liquidity facilitates swaps. Boosted Pools wrap and route idle liquidity to external yield-generating protocols such as Aave, unlocking an additional source of sustainable Liquidity Mining incentives for users.
Outro
With its innovative Snow Consensus mechanism and subnets, Avalanche achieves high throughput, fast finality, and impressive energy efficiency. Balancer, as a core building block of web3 infrastructure, has recognized the potential of Avalanche and is deploying its technology to offer participants a truly unique and flexible DeFi tech stack. With the launch of Balancer on Avalanche, a new era of DeFi possibilities emerges, empowering participants with cutting-edge opportunities to optimally drive the growth of the Liquid Staked and flexible DeFi ecosystem.
