Protocol Overview
Balancer is a decentralized protocol that provides DeFi liquidity infrastructure.
Balancer’s mission is to accelerate innovation in DeFi by providing access to secure infrastructure for liquidity applications. Projects build on Balancer to create new, innovative types of pools and financial dApps.
Balancer Pools contain two or more tokens that traders can swap between. Liquidity Providers put their tokens in the pools in order to collect swap fees.
Balancer adopts powerful features to slash gas costs, super-charge capital efficiency, unlock arbitrage with zero-token starting capital, and open the door to custom AMMs.
Pools with high token counts are conceptually similar to Index Funds in traditional finance. They allow users to have access to broad exposure to a variety of tokens. Where Balancer differs from the traditional notion of an index fund, however, is in the fees.
Instead of paying fees to have a broker rebalance the pool, the pools collect fees as they're continuously rebalanced by traders making swaps. Furthermore, high token-count pools have the advantage of having many token pairs, creating additional opportunities to collect trading fees.
Balancer's WeightedPools are based on an N-dimensional invariant surface, a generalization of the constant product formula described by Vitalik Buterin.
With this mechanism, the needs of both Liquidity Providers and Traders are served:
- Liquidity Providers collect trading fees, while their portfolio is continuously rebalanced
- Traders gain access to an open, decentralized exchange that never closes, allowing them to swap what and when they like for low fees
Last modified 3d ago