What is Balancer (BAL)? — All about Token & Liquidity Mining

The balancer is one of the top DeFi Coins this year. The governance token BAL was able to rocket shortly after Compound and attracted quite a bit of attention. Unlike Compound or Aave, Balancer is not a lending protocol but a kind of decentralized exchange (DEX), an automated market maker (AMM).

But what does that mean exactly? Where are the advantages compared to normal exchanges? How can one use the DEX? What are liquidity pools, and how can I earn from them?

What is Balancer (BAL)?

Balancer Labs is the company behind the protocol of the same name. The company was launched in 2019 by Mike McDonald and Fernando Martinelli and raised $3 million in its seed round. Today, we know Balancer mostly for the automated market maker protocol (AMM) or decentralized exchange they offer. We’ll get to the detailed explanations in a moment. Let’s start a bit lighter.

Balancer provides a decentralized replacement for market makers, which are those who provide liquidity to traded assets. To trade on an exchange, there needs to be supply as well as demand. Market makers ensure that both are available on the market, thus ensuring the tradability of an asset.

Balancer automates and decentralizes this process, eliminating middlemen. As a result…