What Is Balancer?
Also known as: BAL, Balancer Protocol, Balancer Finance
In short
Balancer is an automated market maker (AMM) and decentralized exchange protocol running on Ethereum and other EVM-compatible networks, known for liquidity pools that can hold more than two tokens and have customizable token weights. Its governance token is BAL.
In classic AMM pools, two tokens are generally held at an equal value ratio. Balancer, by contrast, allows pools that can contain up to eight tokens and have different weights, such as 80/20 percent. This structure lets the pool work like a self-balancing index fund: as prices change, arbitrageurs trade with the pool and the ratios return to the target weights. Liquidity providers earn trading fees instead of paying a management fee.
Later versions of the protocol moved to an architecture that holds the assets of all pools in a single Vault; this reduced the cost of trades that pass through multiple pools. Balancer also offers pools optimized for similarly priced assets such as stablecoins and liquid staking tokens, and liquidity bootstrapping pools (LBPs) with weights that change over time, used in token sales.
BAL holders can lock their tokens (the veBAL model) to gain voting power and a share of protocol revenue. Balancer has suffered losses in the past because of smart contract vulnerabilities in some of its pools; this shows the importance of code risk in DeFi protocols.
Last updated: · This content is for information purposes only and is not investment advice.