Balancer Protocol
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Balancer Protocol

Balancer Leads the Yield Bearing Token Revolution

Learn how users can earn further yields on staked ETH, benefiting both projects and the Protocol.

  • The current Ethereum Mainnet will merge with the Beacon Chain proof-of-stake system.
  • The Merge will reduce Ethereum's energy consumption by ~99.95%
  • The upgrade sets the stage for future scaling upgrades, including sharding

Staking Post Merge

While lower costs to secure the network and lower energy consumptions are benefits of the awaited Merge, staking is one of the most anticipated features of the upgraded Ethereum network.

  • Ethereum fees
  • Percentage of fees burnt

Breaking Down WETH, stETH, wstETH

WETH

Ethereum's native token isn't ERC-20 compliant, so it needs to be made compatible. The process by which ETH is converted to an ERC-20 is called "wrapping." Note: WETH is tradable for ETH on a 1:1 basis at all times.

stETH

32 ETH is required to stake Ether. To mitigate such costs, staking pools like Lido Finance let users combine their ETH and stake it with a validator. When you stake ETH with Lido, you receive tokens representing your staked ETH position.

  • The Merge execution risk
  • Trading

wstETH

Wrapping stETH creates a DeFi-compatible version of the stETH token, which allows for easier integrations with DeFi protocols, including Balancer. Through Balancer, users can provide wstETH as liquidity to the respective Pool to earn trading fees and additional incentives.

Liquid Staked Eth Use Cases

Balancer wstETH/ WETH Pool

The wstETH/WETH Pool, with Lido Finance, allows users to stake their ETH — without locking assets or maintaining their own infrastructure. The wstETH/WETH Pool solves problems associated with initial ETH 2.0 staking: illiquidity, immovability, and accessibility. By making staked ETH liquid, users can stake ETH with any amount.

Balancer's rETH/WETH Stable Pool

ETH staking protocol, RocketPool lowers both the capital and hardware requirements for staking on ETH 2.0. Balancer's rETH/WETH Stable Pool TVL has grown considerably in the past few months. Mere speculation, this growth could be attributed to the pending September Merge date to PoS.

Protocol Fees

Balancer applies the Protocol fee, which currently sits around 50%, to the staking yield making Balancer the optimal destination for liquid staked ETH. A large part of Balancer's revenue is directly tied to the fees earned on ETH staking yields.

Closing Thoughts

As Ethereum switches from PoW to PoS, the amount of staked ETH will increase with a bullish consensus on ETH staking yields post Merge. The wstETH/wETH and rETH/WEST Pools already position Balancer as a top destination for liquid staked eth liquidity. Balancer plans to expand usage of wstETH beyond Pools, benefiting both projects and the Protocol. The future of liquidity providing is incorporating yield bearing tokens, and Balancer views staked ETH as the most natural first step in this evolution.

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Balancer Labs

Balancer Labs contributes to Balancer Protocol — the leading platform for programmable liquidity.