Balancer Partners with Gauntlet To Make Dynamic-Fee Pools A Reality
Partnership aims to maximize returns for Balancer V2 Liquidity Providers
Following the recent announcement of Balancer V2, we’re proud to announce our partnership with Gauntlet to maximize returns for Balancer V2 Liquidity Providers. This partnership will make available long-awaited dynamic-fee AMM pools to Balancer liquidity providers (LPs). This will come at no extra cost and with no strings attached for LPs. All funds will remain fully non-custodial and Gauntlet will not be able to access or move them in any way.
Gauntlet is a simulation platform for on-chain risk management. Gauntlet uses battle-tested techniques from the algorithmic trading industry to help protocols manage risk, capital efficiency, and rewards. For Balancer V2 pools, Gauntlet will make protocol parameter optimizations, starting with trading fees. The simulation model used will be continuously improved and stress-tested. Gauntlet will be a core component of Balancer V2, which will launch with a few dozen “Gauntlet-powered” pools.
It’s a privilege for Balancer Protocol and its liquidity providers to be able to tap on the galaxy brains of the Gauntlet team to maximize pool returns. The idea of dynamic-fee pools has been top of mind for Balancer for a long time. I believe fixed-fee pools won’t be able to compete with dynamic-fee pools just like taxis can’t compete with ride-sharing apps. It is better for all stakeholders for fees to constantly adapt to the market conditions.
Attracting pool liquidity is hyper-competitive. Static protocol parameters risk diminishing returns for liquidity providers followed by that same liquidity moving to another protocol. Different academic articles on AMMs have already demonstrated that optimal trading fees are related to the price volatility of assets in a pool. Besides volatility, the Gauntlet team will take into account many other inputs for deciding on the optimal trading fee for each pool, in real-time.
“Balancer’s vision for their v2 pools is perfectly suited for our simulation platform. Dynamic fees allow Balancer to leverage our off-chain automation to improve on-chain LP returns. We’re looking forward to launch, but we’re even more excited for what comes after — our optimization platform gets smarter as we incorporate more live data” — John Morrow (COO, Gauntlet)
To tackle this challenge, Gauntlet has built an optimization model for the real-time fee choice of Balancer V2 pools. The model will provide parameter recommendations for trading fees and has integrated live data feeds to ensure updated recommendations can be made in lockstep with market conditions.
As completely new types of AMM logic get built on top of Balancer V2, we see a big opportunity for other teams and protocols to explore real-time optimization of pool parameters on Balancer. Updating trading fees is only just the beginning.
If you are part of the Gauntlet or Balancer communities and are interested in participating in this project or being a V2 launch partner with early access to the Balancer V2 codebase, please reach out on our social media channels below.
Balancer V2 is just around the corner and we couldn’t be more excited to show the world what we’ve been working on for so long.