A balancer is a software powered by Ethereum that seeks to stimulate a distributed network of computers into an exchange where users can buy and sell any cryptocurrency.
A new Decentralized Finance (DeFi) protocol, Balancer uses a combination of crypto assets to provide this service, allowing trading without a financial intermediary such as an exchange to make bal to trx exchange.
You can think of Balancer as a kind of index fund where users create funds based on cryptocurrencies in their portfolios.
Users who provide liquidity to the balancer pool then earn a portion of the trading commission paid to the network for using their funds and are rewarded in the form of a special cryptocurrency called BAL.
These deposits are essential to the network, providing the liquidity users need to buy and sell cryptocurrencies on the platform.
This means that the Balancer must stimulate both sizes of its market to work – cryptocurrency users who may wish to make some of their assets available for trading, and traders looking for the best possible price for an asset.
In this way, Balancer works in a similar way to other decentralized exchanges (DEX) such as Uniswap (UNI) and Curve (CRV). However, Balancer offers additional features, including the ability to pool up to eight tokens.
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Who created the balancer?
Balancer started as a research project at the software consulting firm BlockScience in 2018, founded by Fernando Martinelli and Mike MacDonald.
The project then raised $ 3 million on its own as Balancer Labs in 2020. During the round, about 5 million BAL tokens were sold to investors and 25 million tokens were issued to shareholders and employees (out of a total of 100 million tokens).
An additional 10 million BAL has been set aside, half of which is reserved for the fund used for members of the Balancer ecosystem, and half is reserved for sale to future investors.
How does the balancer work?
The cost of a balancer pool is determined by the percentage of each token in it, the weight selected when the pool was created.
Self-Balancing Index Fund
The balancer uses custom programs called smart contracts to ensure that each pool maintains the correct proportion of assets, even though the prices of individual coins in the pools may differ.
So where is LEND going? Balancer smart contracts make them available to traders looking to buy LEND as prices rise.
It should be noted that liquidity providers still receive commissions while their index funds are rebalanced, compared to traditional index funds where investors pay a commission for rebalancing services.
Balancer offers private and public pools targeting users with varying risk appetite:
- Public pools allow any user to provide liquidity by adding or withdrawing assets. The parameters of public pools are set and cannot be changed until they are started.
- A private balancer pool is a pool in which only the pool creator can add or remove assets. The user can also customize all the other parameters of the pool, such as fees, weights, and the types of assets that he accepts.
- Private pools are useful for large portfolio asset managers looking to receive commissions on their specific assets.
- Finally, smart pools are a type of private pool owned by smart contracts. This feature allows you to program pools to perform additional functions, such as changing weights or creating an index fund that tracks a real estate portfolio.
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