What Is Balancer?
Balancer is an automated market maker and non-custodial portfolio manager available on Ethereum, Polygon, and Arbitrum. It expands on the standard liquidity pool model by allowing users to deposit up to 8 tokens with customized weights. This enables liquidity providers to build token indexes, control exposure, and earn trading fees.
Background
Mike McDonald and Fernando Martinelli founded Balancer in March 2020. Balancer’s liquidity pools deviate from the traditional model by supporting multiple tokens and customizable weights.
How It Works
Users can deposit multiple tokens into Balancer’s liquidity pools, assigning each token a specific weight. These pools allow for up to 8 tokens and customizable weight distributions. Liquidity providers earn trading fees based on the pool’s activity. Balancer’s smart order router ensures optimal trading paths and price discovery across all pools on the protocol. This flexibility empowers users to create diverse portfolios and manage their token exposure effectively. Balancer token holders can participate in governance and receive rewards by vote-locking tokens in an 80-20 BAL/ETH liquidity pool.
Key Takeaways
- Balancer is an automated market maker and non-custodial portfolio manager available on Ethereum, Polygon, and Arbitrum.
- It allows users to deposit up to 8 tokens with customized weights, enabling liquidity providers to build token indexes and control exposure.
- Balancer’s smart order router finds the best prices and trading paths across all Balancer pools.
- Balancer’s liquidity pools support multiple tokens and customizable weights, allowing users to create diverse portfolios.
- Liquidity providers earn trading fees based on the pool’s activity.
