What is a Balancer coin? What is the use? What does it do?
Wanna know about the Balancer coin? Don’t worry, we give you the acknowledgment from top to bottom.
In March Ethereum’s decentralized finance ecosystem got his new player: Balancer. But it wasn’t fully decentralized at the time of launch like others such as “DeFi” protocols. The direction of the Balancer was largely determined by a company. So, in this case, the Balancer Labs was raised $3 million in March 2020. The startup intentions were not bad. But at the time of start-up Ethereum addresses using the protocol were unable to assert change over the protocol. It was unfortunate that Balancer did not work precisely at that time.
Balancer: Ethereum-Based AMM protocol
As we know that Balancer is a decentralized protocol, which is based on Ethereum. Ethereum allows for AMM which stands for automatic market-making. In simple language, AMM is a market-making agent that is controlled by the algorithms which define trade rules.
Broadly we can say that a traditional market maker or liquidity provider buys or sells the financial instruments, which is providing liquidity to a market and profiting from the spread between the bid and ask prices.
Nowadays, combining Ethereum with AMM, the assets in a market, the ability to create a market, and the algorithm controlling the market is becoming decentralized. The Balancer isn’t the first DeFi protocol to support the AMM such as Uniswap, curve, etc. But the Balancer is unique.
Know what makes Balancer Unique?
The Balancer protocol supports up to 8 assets per market (Weighting supported assets is arbitrary) along with the custom trading fees set by the creator of the pool.
Let know what makes the difference between Uniswap and Balancer Labs:
- The supported assets of Uniswap and Balancer labs are the same. Both supported assets are ETH &ERC20.
- # Supported assets per LP makes a difference In Uniswap the digit is 2 and in Balancer Labs the digit is 8 the gap between them is 6 numbers.
- The Weighting of LP assets in Uniseap is 1:1 while in Balancer Labs it is Arbitrary.
- Both have the LP token but Uniswap has for bookkeeping and Balancer Labs have for functional ERC – 20 token.
- If we talk about price oracle features both are the same. Uniswap and Balancer Labs have asset price changes based on trades and Not having outside oracle.
- The trading fees of Balancer Lab were set by the liquidity pool creator on the other side Uniswap trading fees are 0.3%.
- Uniswap and Balancer Labs both don’t have protocol fees and native token features.
There are two ways to use these pools:
- Trading in a decentralized manner – The one who trades with a token in a decentralized manner through pools with the Balancer’s smart order routing system. Which ensures the exchange of cryptocurrency at a quick speed and low fees.
- providing liquidity – The users of this can deposit supported assets into the pools for providing liquidity into the pools. The one who deposits assets can earn a fee but sometimes liquidity providers can lose some of their assets too.
Centralized exchanges like coinbase which use order books to derive prices, the price of the tokens in a pool is based upon deviation from their set of weightings.
Exactly what is Balancer?
BAL is a native governance token of the Balancer. The team behind the DeFi protocol will see this is an important and necessary step to ‘Decentralized and the diversify governance’. Many of us think that BAL tokens are an investment but it doesn’t; The holders of BAL tokens are the people who interface with the protocol in some way, are committed for future development and who want to seat at the governance table.
The one who holds the BAL protocols will be able to help guide the protocol to its fullest potential. Balancer deploying the protocols except for Ethereum, implementing the layer of two solutions, and introducing fees at the protocol level so that revenue generate, etc are examples of the action which BAL holders can make.
- Balancers have flexible parameters, pools that can do much more than provide a place for cryptocurrency holders to exchange their assets.
- Balancer Labs has also released pool schematics. Such as one for Liquidity Bootstrapping Pools/one for the pools that attempt to remove the risk of LPs losing their assets.
Currently, there is not a formal governance structure in place, but Balancer may be similar to the great of the protocols. Know what are the other DeFi protocols governance structure have?
While using the protocol users narrow down the best ways to address the issue. Also, identify an issue and share observations online.
The one who uses the Balancer can create and present a technical specification for the issue solution, etc so on.
So, want to get the crypto? Know how to get the crypto?
The total supply of the BAL is around 100 million coins. And the supply of crypto is quite closer to 35 and half a million coins.
The recent breakdown of this is as follows:
- 25 million is for stakeholders: The team who had founded this will own stock options (For ex current employees that earn the privilege), investors, advisors, etc. 2.5 million of the 25 million is given to act as a stock option.
- This 5 million goes to Balancer Ecosystem Fund: The direction of the amount which goes to the Balancer Ecosystem fund will be controlled by the BAL holders. 5 million funds will be deployed to attract and incentivize strategic partners that will help the Balancer ecosystem grow and thrive.
- 5 million goes to the Fundraising fund: The 5 million which goes to the fundraising find will be given by Balancer Labs for more runway in the future to support operations, growth, etc.
- Liquidity mining: In June Balancer activates liquidity mining which will be distributed the 65 million coins. Every week 145,000 BALs or 7.5M approx per year was distributed through this process. Through this was going on it will take around 9 years to fully distribute altcoins.
People may think that receiving rewards paid out every week is easiest but earning cryptocurrency is easy and simple as providing liquidity to a pool.
Want to know what Problems Balancer can solve?
- Users of Balancer can earn fees on their Ethereum- based idle assets.
- Any Balancer user can deposit their entire portfolios into Balancer’s LPs & earn fees.
The work can be done but how?
- In this, a user can provide liquidity in 2 ways.
- Either creating an LP I.e. user assets and their weightings + trading fees set by the creator.
- Adding user assets to existing pools.
- Now anyone can create their self-balancing index fund or invest.
An example of a Balancer portfolio is with five different assets.
But how does the rebalancing work?
- In the portfolio, the LP creator defines the percent of the weight for each asset.
- A person who trades an asset from the pool (ETH for ZRX) → the % weight of ZRX goes down → price adjusts upwards so that ZRX maintains its % weight in the portfolio.
If the portfolio asset prices are different from market prices, arbitrators sweep in to eliminate price differences. Until anyone can make a trade, asset prices in Balancer’s LPs do not change because there is no outside price oracle which is already mentioned above.
To whom Balancer competes against & how does Balancer make $$$?
- In simple language, we can say that Balancer competes against Uniswap but in a narrow sense.
- But in a broader sense, all DeFi protocols allow users to earn fees against their idle crypto-assets.
- Now the thing is protocol does not charge a fee from traders a fee may be implemented later.
- The trading fee for traders is set by the LP creator and subsequent liquidity providers don’t change the fee level.
Who invested in Balancer?
- Placeholder.vc, coinFund etc.
- The token terminal provides the financial and business metrics on crypto protocols. Such as the P/E ratio.
New player brings new trend: Balancer
In the story of Ethereum wallets, we enter in the new chapter worldwide with the BAL. Meanwhile, if Balancer were grown by the same portion as compound growth then it could jump from 6 positions in DeFi to 3rd. But the future is uncertain so, what happens in the future is a mystery which can’t be solved?
Meanwhile, Balancer Labs ran a $3 million seed round in the past. The investors earn equity which can be converted into tokens. The token price was $0.60.
The thing is Balancer’s function also allowed the user to make the pools of tokens automatically rebalance, and tokenize those to pools. If the pool were built then the value of WBTC was 50% and the value of WETH and BAT were half of 50 that is 25%.
How was the token distribution done?
BAL provides for 100 million tokens with no inflation. But with a condition that is 100 million wouldn’t be minted from the beginning. The Balancer team has control of 5 million tokens for ecosystem fund, to promote growth, and another 5 million for future Fundraising.
Balancer coin stats!
Balancer (BAL) – $27.79 1.3% (0.06910917 ETH -1.7%)
Market Cap – $204,768,553
24 Hour Trading Vol – $50,197,168
24h Low / 24h High – $27.33 / $29.47
Circulating Supply – 7,378,831 / 36,740,000
Fully Diluted Valuation – $2,775,081,033
Max Supply – 100,000,000
Total Value Locked (TVL) – $1,087,712,007
Market Cap / TVL Ratio – 0.19