Balancer (BAL) is an automated portfolio manager and trading platform built to turn the concept of an index fund on its head.
To explain, a traditional index fund charges investors fees to pay portfolio managers’ salaries. In contrast, they claim Balancer’s portfolios pay fees to investors. To elaborate, Balancer makes money by charging fees to traders who rebalance the portfolio by charging arbitrage fees.
The builders think traders will participate in Balancer because it offers decentralized trades at what they call optimal prices. They claim a feature called the Smart Order Router finds traders who will pay the best price. Users can exchange any combination of ERC-20 (Ethereum Request for Comment) tokens on Balancer.
The Balancer Protocol
The Balancer Protocol is a core building block of Balancer’s (BAL) decentralized finance DeFi infrastructure. They call the Balancer protocol the most flexible Automated Market Maker on the market.
Balancer is a community-driven protocol that functions as an automated portfolio manager and a price sensor. The Balancer Protocol powers a decentralized exchange (DEX) and automated portfolio management of tokens on the Ethereum blockchain and other Ethereum Virtual Machine (EVM) compatible systems.
Balancer will create Weighted Pools with high-token counts that function like index funds. Users will can own several tokens in a balancer pool. For example, Ethereum (ETH), Tether (USDT), Wrapped Bitcoin (WBTC), Avalanche (AVAX), Binance (BNB), and Bancor (BNT).
Some Weighted Pools will have Oracle functionality. That means the pools can provide on-chain price data. Balancer will also offer Stable Pools for pegged tokens (Stablecoins), and MetaStable Pools for non-pegged tokens. Additionally, there will be Liquidity Bootstrapping Pools for shifting liquidity between tokens and Managed Pools to offer extreme flexibility.
Additionally, Balancer offers Liquidity Mining through the MerkleOrchard Contract. A Merkle is a data structure that checks data validity. Balancer uses the MerkleOracle contract to verify token balances. They call the MerkleOrchard a more gas-efficient contract that allows users to claim multiple weeks of rewards.
The Balancer CoW Partnership (BCP) is a default trade interface in Balancer’s DeFi infrastructure. They claim the BCP enables gasless trades, MEV protection, best-on chain prices, no-gas fees on failed transactions, and professional third-party transaction management.
To elaborate, CoW stands for Coincidence of Wants, an economic phenomenon that allows for peer-to-peer trades without an automatic market maker (AMM). Maximal extractable value (MEV) is the maximum value you can extract from a block after you have paid gas and reward fees. The fear is that gas and rewards fees will eat up all of a trader’s profits.
They hope MEV Protection will stop the destruction of a traders’ profits by gas and rewards fees.
What Value does Balancer (BAL) offer?
On 28 June 2022, they claim Balancer (BAL) offered a seven-day trade volume of $716 million, $72.3 million in fees in total fees earned, and $3.4 billion in total liquidity. Additionally, they claim Balancer had 17,500 liquidity providers on 28 June 2022.
CoinMarketCap named Balancer the 131st largest cryptocurrency, with a $4.89 Coin Price on 28 June 2022. CoinMarketCap gave Balancer a $199.1565 million Market Capitalization, a $469.926 million Fully Diluted Market Capitalization, a Total Value Locked (TVL) of $1.310 billion, and a 24-Hour Market Volume of $28.759million on 28 June 2022. They based those numbers on a Circulating Supply of 40.749 million BAL, a Maximum Supply of 96.151 million BAL, and a Total Supply of 50.505 million BAL.
Conversely, CoinBase gave Balancer (BAL) a $4.88 Coin Price, a $198.4 million Market Capitalization, and a $28.8 million 24-Hour Market Volume on 28 June 2022. They based those numbers on a Circulating Supply of 40.7 million BAL. I consider Balancer an extremely unstable cryptocurrency because CoinBase gave it a $74.77 all-time high Coin Price.
I consider Balancer an excellent DeFi cryptocurrency and a decentralized autonomous organization (DAO) because it is generating fees and liquidity from a $716 million seven day trading volume. If you want a DeFi protocol that makes money, I think Balancer is worth examining.
Originally published at https://marketmadhouse.com on June 28, 2022.