Relatively similar to Uniswap, the Balancer protocol is a Automated Market Makers (AMM). This is why Balancer is fundamentally an open source decentralized exchange protocol.
Like many other DeFi protocols, Balancer allows everyone to become a liquidity provider and obtain commission fees on transactions.
The big difference between Balancer and other protocols is that you can create liquidity pools of up to 8 tokens while paying commission fees for each asset, in an automated manner.
This makes Balancer a leading protocol in this field.
Who are the founders of Balancer?
The draft version of Balancer was designed in 2018 and initially it was called BlockScience and we can say that it was really experimental at that time. The two founders behind this project are Fernando Martinelli and Mike McDonald.
In 2020, when they discovered the potential of the project, the two founders raised $3 million in funding to precisely set up Balancer Labs. During this fundraising, 5 million BAL tokens were distributed and 25 million tokens were allocated to shareholders.
The BAL token has a limited supply of 100 million BAL. This is certainly why many users hold this token.
65 million BAL has been planned to be distributed to people who provide liquidity on the protocol.
Likewise, Balancer will distribute 145 tokens per week to people who use the protocol to swap tokens.
Basically, the total supply of 100 million BAL will be final by 2028. We can largely imagine that the closer we get to this date, the more expensive the token will be.(?)
How it works Swing? (BALL)
On the one hand, we can exchange tokens in a simple way on the Ethereum network. Moreover, by doing this and exchanging certain tokens, you can earn BAL as a reward.
This is an incentive that also explains why many people choose Balancer to swap between Ethereum tokens.
We can certainly use the protocol like this but we can also become a liquidity provider. Here again, the great advantage is that you can define transaction fees yourself for each operation.
Typically, protocols don't let us set our own amount.
Finally, as mentioned above, we can group up to 8 tokens per pool. This helps increase pool volume and provide more choice to traders.
The value of a balancing pool is determined by the percentages of each token it contains, a weight chosen when the pool is created.
If you still didn't understand why the protocol is called "balancer", you will quickly understand now.
In fact, pool percentages can be set by the liquidity provider. Generally, one must deposit into a 50/50 pool of a token pair.
There, you can choose according to your wishes and create 60/40 pools for example. The important thing is that there is 100% balance in total. A balance…measured like on a pendulum…
Capishi?
The Balancer protocol is well thought out because even with 8 tokens, and the prices of the tokens, the pool will automatically reduce the amounts given in order to be able to maintain the value of the total pool.
Balancer offers different types of pools
On Balancer, there are different types of pools that correspond to different temperaments and taste for risk.
It exists private pools where only the pool creator has the right to add or remove tokens from the pool. Likewise, the user can also adjust the pool criteria and modify the fees and the types of assets they want.
Private pools, by definition, are then more suitable for people who have a large portfolio and who want to earn commissions on assets of their choice.
At the same time, there is so-called “smart” pools which are private pools managed by smart contracts. Thus, the pools are programmed automatically and will modify the percentages of the pool's assets, for example.
Final words: Should you invest and use BAL?
At Zonebitcoin, you have to appreciate the BAL protocol from the start. The founding team thought out its protocol well, it seems to us, and we invested in BAL.
Now it's up to you to continue your research to find out if this is a protocol that's right for you or not. Indeed, there are enough protocols today to allow us to choose the protocols that suit us best.
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