Balancer (BAL) Review: Challenging The Conventional Index Funds In A Nonconventional Way
The DeFi space is expanding exponentially and several promising projects have already taken a significant leap driving the DeFI market. In this article we will talk about a promising project which aims at becoming the go to source of liquidity for investors staking in the DeFi market. The project claims to challenge the entire premise of an index fund and offers an innovative or rather revolutionary concept of eliminating the project managers by bringing in traders balancing portfolios. The project also offers a scalable solution to the liquidity crunch facing ERC20-based stablecoins.
Solving The Liquidity Crisis
Apart from the USDT, the ERC20-based stablecoins have pertinent liquidity issues. For investors, trading from one stablecoin to another is a pain point. In order to gain liquidity they are left with only one option and that is to fully reshuffle their portfolio and purchase USDT. Moreover, when trading between two stablecoins incur training fees on exchanges and also the slippage makes a cut in the profitability. Balancer, claims to provide a scalable solution. With its “Balancer Pool,” it offers a unique opportunity to investors to get better returns by adding their stablecoins to the balancer pool.
Minimum Slippage, Favorable Rates
Balancer provides umpteen benefits to its users. It classifies its users in two broad categories viz, liquidity providers and traders who would purchase the pool assets in the open market. For traders willing to purchase underlying assets in the Balancer Pool, they will have a range of different opportunities to choose from. The Balancer protocol will allow them to benefit from low slippage and favorable rates. Moreover, the traders will benefit from the “permissionless” nature of the Balancer protocol which means that no trader can be prohibited or blacklisted or whitelisted for that matter. The smart contracts, once deployed, are non-upgradable and even the Balancer Lab will have no authority to make amends.
Not Just Any Automated Market Makers (AMM)
AMM stands for Automated Market Makers and with Ethereum the AMMs have gained popularity as it provides some interesting features made possible by clubbing trading algorithms along with allowing users to have control over the underlying assets. While Balancer, which claims to be a building block of the evolving DeFI market, is equipped with all the features of a conventional AMM, the Balancer pool stands ahead as it assigns a relative weight to each token. This in turn allows it to host pools of tokens that have different values. This feature provides an edge with enhanced utility be it in terms of providing liquidity or benefitting from staking.
The Balancer is a very detailed and defined project. It also has several products promised which are in the pipeline and will soon be released in phases. The technical aspect of how they are going to achieve what they have promised is already in the public domain and has been explained and is open to scrutiny. There is no doubt that balancer has some brilliant minds working to add a whole new dimension to the DeFi market.
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Balancer is a protocol for programmable liquidity Whitepaper Exchange Generalized AMM Customizable number of assets and…