Liquidity

How do I invest/provide liquidity?

First time here? Check out this tutorial for a walkthrough on how to add/withdraw liquidity.

In short, you'll need:

  • ETH to pay for gas fees

  • ERC20 tokens (or ETH)

  • An Ethereum address you can use with one of the following compatible wallets

    • MetaMask

    • Coinbase Wallet

    • A WalletConnect compatible wallet

    • Portis

    • Fortmatic

How do Liquidity Providers earn yield?

Balancer LPs can earn yield in a few ways:

  • Trading Fees

  • Returns from Asset Managers

In addition, some pools in V2 are eligible for Governance Distributions through the Liquidity Mining program.

To read more about fees, click here.

How does a pool determine the price of tokens?

In general the AMM logic determines the prices that traders pay. In weighted pools, prices are determined by the constant product formula. In stable pools, prices are determined by the StableSwap formula.

What does the customizable AMM logic mean for me?

Balancer V2 pioneers customizable AMM logic by creating a launchpad for teams to innovate with different AMM strategies without having to worry about low-level token transfers, balance accounting, security checks and smart order routing. With Balancer V2, this all comes out of the box.

V2 launched with Weighted Pools (similar to V1 shared pools), then released a version of Weighted Pools with support for price oracles. Several new pool types - with different AMM logic - are in development, from Balancer and other teams.

How does the self-balancing index fund work?

Balancer allows anyone to create a self-balancing index fund. Instead of paying a portfolio manager to continuously rebalance the fund, as investors do with an ETF, liquidity providers collect fees as traders rebalance the trading pools. This works because market actors are incentivized to rebalance the portfolio to take advantage of arbitrage opportunities.