Balancer Launches Boosted Pools to Increase LP Yields
First iteration of product launch is in collaboration with top lending protocol Aave
We are thrilled to share the official launch of Boosted Pools. Boosted Pools have been in the works for months by Balancer Labs and aim to optimize capital efficiency of tokens deposited into Balancer Pools. The first iteration of this groundbreaking product is with Balancer’s close collaborator, lending protocol Aave.
“The collaboration with Aave as the first iteration of the Boosted Pools launch is a natural fit and solidifies their place in the Balancer ecosystem. There are various levels of Boosted Pool innovations that lead to deeper liquidity, more efficient integrations for liquidity, and higher yields.”
- Boosted Pools are designed to allow for greater capital efficiency, deeper liquidity, and increased yield for Liquidity Providers.
- For traders, Boosted Pools are a cheaper entry/exit into lending protocols like Aave.
- Boosted Pools will enable access to other lending protocols beyond Aave, increasing the opportunity for LPs to gain exposure to a wide variety of yield increases.
Increased Yield on Liquidity
Typically, only 10% or less of the liquidity deposited into an AMM pool is being utilized by traders because the trade sizes are much smaller than the available liquidity. Boosted Pools allow the remaining portion of liquidity to be deposited into lending protocols where the liquidity can earn additional yield.
Historically, in order to provide higher capital efficiency, AMM Pools hold wrapped tokens of yield-bearing assets aDAI instead of DAI, improving the overall pool yield. The problem is that wrapping and unwrapping tokens not only needs to be done with a relayer but also costs too much to be done during every single swap. Aave Boosted Pools solve the costly effort of wrapping/unwrapping tokens during a swap, and leave those expensive tasks to arbitrageurs, who are adequately incentivized to do it.
Lending protocols can be very expensive to join or exit, and Boosted Pools can be a game-changer for both traders and liquidity providers. Boosted Pools allow LPs to deploy a given percentage of the liquidity in a pool to money markets like Aave and keep a smaller percentage inside the pool for traders to use as liquidity. The portion that is deployed on Aave accrue interest from the Aave platform and any incentives that the Aave pools have.
“The collaboration with Balancer for the launch of Aave Boosted Pools is a prime example of incredible innovation happening in DeFi. I have been following Balancer’s V2 launch closely and Boosted Pools offer users deeper liquidity and more access to Aave. With the help of Balancer, we look forward to providing users a seamless earning experience.” — Stani Kulechov, Aave Founder & CEO.
Aave Boosted Pools allow for the unused liquidity in the pools to be directed to Aave as a first iteration, but the tech allows them to be diverted anywhere (Compound, Yearn, Badger, Fuse, etc.). This innovation gives LPs the opportunity to maximize yields since they will have access to Aave interest rates and Liquidity Mining Incentives+ Balancer swap fees and Liquidity Mining Incentives.
Boosted Pools’ Innovations
Boosted Pools are different because they focus stablecoins all in one place, preventing fractured liquidity between DAI/USDC/USDT. This innovation leads to deeper liquidity and greater capital efficiency.
The current stable pool has had an unbelievable Volume/TVL ratio with liquidity utilization staying consistently above or around 20% since October 2021.
Boosted Pools build on top of MetaStable Pools and solidify their place in the Balancer ecosystem. The innovation of Boosted Pools concentrating stablecoin liquidity in one place is designed to allow other tokens to achieve much more efficient liquidity against these stablecoins.
How Are Boosted Pools Different?
Curve has pools where all of the pool tokens (DAI/USDC/USDT, etc.) remain in Curve and the aTokens (aDAI/aUSDC/aUSDT) trade in the pool. That pool deposits all of the tokens in Aave, and each swap must go through wrapping/unwrapping which adds to the gas cost of trades with that pool. Boosted Pools are innovative in that they keep a small percentage of the tokens in the pool so not every swap needs wrapping/unwrapping, making Balancer liquidity much more gas efficient while still being capital efficient.
Given Balancer’s architecture, Boosted Pools are a series of nested pools where each parent pool holds the BPT of the child pools. Pre-minted BPT combined with Balancer’s architecture of multi-pool hops allow for a very gas efficient system for swaps, deposits, and withdraws.
The current launch of Aave Boosted Pools is only the first iteration of the Boosted Pools product. Given the design of Balancer V2, the BPT of the Aave Boosted Pools can be used as a pairing token in other pools and to connect other tokens to stablecoin liquidity.
If you are a lending protocol interested in launching your own iteration of Boosted Pools, get in touch with the Balancer Labs business development team.
Boosted Pools was ideated by Balancer Labs’ blockchain engineer Daniel Fernandez. Dani played a crucial role in bringing Boosted Pools to fruition and pre-minted BPT for the pools. We want to thank Dani for leading the effort and creating the initial idea for such an important project for Balancer Protocol.
Disclaimer: Communications from Balancer Labs OU are intended solely for informational purposes, and should not be construed as investment or trading advice and are not meant to be a solicitation or recommendation to buy, sell, or hold any digital assets mentioned. All figures are estimated and unaudited unless otherwise noted. Past performance is not necessarily indicative of future results. As a technology company, Balancer Labs OU provides access to software.