The Balancer Report: Understanding Smart Contracts
Smart contracts are the backbone of DeFi. The industry arguably wouldn’t exist in its current form if it weren’t for these onchain gears quietly powering protocols in the background.
Not all smart contracts are made equal though. Much like any programmable entity, smart contracts harbor the potential for both benevolent and malicious uses. Some smart contracts are even designed to protect you from others trying to steal your holdings!
This week we are exploring the smart contract land to try and make sense of how it all works and how you can use them in a safe and effective manner.
Let’s kick things off with the fundamentals. Unlike traditional contracts that rely on centralized authorities like courts or regulatory bodies to enforce terms, smart contracts live on a blockchain.
This dichotomy results in two major distinctions: smart contracts are a) (often) permissionless and b) automated. The former implies that transactions are automatically validated once the conditions of a contract are fulfilled, while the latter is somewhat more nuanced.
The permissionless nature of smart contracts is not a given as they can be upgradeable, but it is an option that many developers and protocols choose. Permissionlessness means that once a contract is deployed, it cannot be altered or taken down.
Beyond being permissionless, smart contracts are trustless. This means that they don’t have to rely on a centralized party to work. This eliminates a lot of tradfi roadblocks and allows DeFi to offer unmatched settlement speed and transaction sequencing.
Ultimately all these factors contribute to DeFi’s openness and 24/7 global availability. This means that protocols can deploy smart contracts with little to no constraints and users can access them without having to go through tedious approval processes or face any significant roadblocks. This also means that users can access smart contracts (and by extension protocols) without having to rely on a UI.
Smart contracts are the bedrock that ensures the industry’s decentralization and their continuous operation bootstraps the globally accessible financial system that’s built on this ethos.
Balancer is a fantastic example of this. The protocol utilizes a variety of smart contracts for a diverse range of purposes. These include deploying pool factories, powering up gauges and governance, ensuring uninterrupted fee distribution and more.
Moreover, anyone can deploy a Balancer pool without needing to rely on external approval or a counterparty’s help.
Let’s zoom into one of these contracts — the Vault.
It is a cornerstone for Balancer’s operations, managing all tokens across the protocol’s liquidity pools and acting as the conduit for key operations such as swaps, pool joins, and exits.
The Vault’s existence makes optimized trade routing possible which means better efficiency for end users. It also paves the way for custom AMM logic, enabling the implementation of tailored fee structures
DeFi runs on smart contracts. Grasping the fundamentals of how they work and what kind of use cases they cover will help you get a better idea of how the space functions and what is going on behind the scenes when you hit that “Confirm” button.
The Balancer ecosystem keeps pushing the space forward, here’s this week’s recap:
Balancer’s STIP application has been approved by Arbitrum DAO.
This means that Balancer will receive 1.2 million ARB, which will go towards pool incentives. The STIP runs until the end of January 2024 which means that Balancer will be distributing 150.000 ARB each week. Pools will be incentivized based on metrics such as efficiency, novelty, and ecosystem importance. Each pool will then get “its share of the 63,750 weekly ARB directly added as secondary incentives on the gauge…”
The STIP illustrates the importance of ecosystem support which helps foster liquidity growth and additional efficiency.
Gyroscope launches highly-anticipated Arbitrum E-CLPs. They represent a novel pool type which harnesses concentrated liquidity to improve efficiency and liquidity management. The first Arbitrum E-CLP features USDT and USDC and offers a tailored liquidity profile that matches the tokens “historical trading pattern”.
The protocol has so far seen over $17M in TVL and Gyroscope is planning to launch their GYD stablecoin later this month.
Aura Finance publishes a new AIP covering a potential deployment on Base.
If successful, the proposal will make Base the latest L2 that the protocol is deployed on. One of the main value propositions of the proposal is “seamless bridging of AURA tokens from Ethereum Mainnet to Base Chain, further enhancing accessibility and flexibility…”.
The vote is open until October 16 with single-choice voting determining the final result.
Beethoven X rolls out a new Optimism pool featuring the recently deployed native USDC.
The pool also features USDC.e, USDT and DAI and it is eligible for boosted rewards hosted by Aura. The current pool TVL is $118.000.
The latest Staking Update is out. The total ratio of all staked ETH has reached 22.92%. Balancer continues to offer highly efficient liquidity for Rocket Pool, Frax and Lido pools. The protocol is also a leader in LST liquidity on Optimism and Arbitrum.
HiddenHand incentives can as always be explored here, the current round ends on October 19, 2023.
Balancer: TVL and Stats — Defilytica
Balancer’s Total TVL across all networks is sitting at $625m.
The Total Mainnet TVL is $420,9m with a dominance of 64,2%.
As for our liquid wrappers, they are under the following parity to veBAL:
This section will list the top three expected pools to receive most of the next period’s emissions. Voting is open for four more days, and the next period is scheduled to start on Thursday at 00:00 am UTC.
- Polygon — 20WETH-80BAL / tetuBAL — currently at 15.33%
- Base — GOLD / WETH / USDC — currently at 9.79%
- Mainnet — rETH / WETH — currently at 6.82%.
You can find an overview of the current LM incentives on the Balancer Mainnet below:
This voting round is ending with 7 new Snapshot votes including the following:
- [BIP-450] Fund Balancer Grants Q4 2023
- [BIP-453] Deposit 160k BAL into Aave v3
Stay tuned for this week’s Governance Recap and Gauge Update to learn about the results.
This week Dubstard shares another set of security tips that will help you stay safe:
- Do not open any links sent to you in DMs from any one pretending to be a “mod”, “admin” “staff member” and etc.
- Do not message anybody offering help if you DMs them first, those are scammers.
- Remember, Balancer operates primarily under the following domain: https://balancer.fi/
- Never share private keys, seed phases with anyone.
- Remember, there is NO AIRDROP!
- There is no compensatory $BAL distribution and any website or user promising otherwise is trying to scam you.
Balancer has a flourishing ecosystem. You’re welcome to contribute to it whether you’re a dev, a community person, or a graphic designer! We strive toward onboarding every new member in a smooth and personalized way.
Join the Ballers and start your Balancer journey now: http://discord.balancer.fi/
Are you looking for a grant? Learn more here.
This article is for informational and educational purposes only. It should not be construed as investment or trading advice or a solicitation or recommendation to buy, sell, or hold any digital assets. Transactions on the blockchain are speculative. Carefully consider and accept all risks before taking action.
