Even though it’s not as well known as some of the other digital assets available on Coinberry, it’s still important to know about Balancer. Why? Read on, and we’ll tell you as we answer some of the more commonly asked questions about this intriguing project.
What is Balancer?
Balancer is a decentralized exchange operating on the Ethereum blockchain with an automated market maker (AMM) and liquidity pools. It allows users to trade cryptocurrencies and earn interest on their cryptocurrency portfolios.
Essentially, it is a decentralized alternative to traditional market makers, which provide liquidity to traded assets by ensuring adequate supply and demand are available on the market.
The Balancer protocol is a core Decentralized Finance (Defi) infrastructure, a novel financial mechanism, and an open-source development platform. As one of the most adaptable and versatile Automated Market Makers in the industry, Balancer allows developers to customize features based on their needs.
Led by Fernando Martinelli and Mike McDonald of Balancer Labs, the Balancer protocol was founded in 2018. Balancer Labs also developed a mechanism to improve decentralization and security by deleting previously generated inventory when an asset’s liquidity drops below a specific threshold.
The Maker project was the inspiration behind Balancer. Maker is a Decentralized Autonomous Organization (DAO) on the Ethereum blockchain that maintains target parameters for its two assets: Dai and Makercoin. The main difference is that while Maker’s assets are explicitly chosen to track others, Balancer can support any asset by maintaining a proportional amount to trade with other assets.
What is the Native Token of Balancer?
The BAL token is Balancer’s native currency, designed primarily for platform governance and management so that no central authority can interfere with how the platform operates.
BAL token holders can vote on the weekly rate of BAL distribution, Balancer protocol costs, and even future expansion of the network to other blockchains.
How Do The Tokenomics of Balancer Work?
The number of BAL tokens available is limited. Like most other currencies, only 100 million BAL will ever be produced. While 15 million BAL have been locked since the inception of Balancer, approximately 65 million tokens are set aside for distribution to Balancer users, who provide liquidity to the protocol.
Balancer will distribute 145,000 tokens to users each week, so the total supply should be exhausted by 2028.
You can choose between either Balancer’s private or public pools based on your risk tolerance. Here’s the difference:
Any user can add or remove assets from public pools, which allows them to provide liquidity. Public pools are predetermined before launch and cannot be changed. However, only the pool creator can add or withdraw assets from a private pool.
Smart Pool is a private pool variant powered by an Ethereum smart contract. Pools can be programmed to perform additional functions, such as establishing a portfolio index fund, bootstrapping liquidity, or quickly starting or stopping trading.
Balancer Decentralized Exchange (DEX) is built on the Ethereum blockchain and includes an AMM and liquidity pools. Users can use it to exchange cryptocurrencies and earn interest on their idle cryptocurrency portfolios.
Additionally, users can trade ERC-20 assets without needing to use a centralized entity by utilizing liquidity pools. When providing liquidity, investors also earn a portion of trading fees.
One feature that distinguishes Balancer from other platforms is the ability for users to create their private liquidity pools or pools with more than two cryptocurrency assets. In addition, there are numerous other incentives available to increase liquidity on the Balancer Protocol.
Why is Balancer Protocol appealing?
The protocol is different from other AMM options because of its bespoke algorithm; it differs in pools created by traditional AMMs that can only have two tokens on hand at any given time. In contrast, Balancer’s smart contracts allow more than two assets to enter into the pool without being limited at 50/50 ratios or having limits imposed upon them.
Furthermore, the concept of Balancer pools makes it possible to adapt fees in a way that is not against market forces. As such, their smart pool can manage volatility and change when other Defi companies cannot.
How Many Balancer Tokens are in Circulation?
As of the third quarter of 2021, there were approximately 7 million BAL tokens in circulation, according to CoinMarketCap. Balancer has a market cap of over CAD $2.67 billion at the current price of CAD $27 and a maximum supply of 100 million tokens.
Click here to check out the most recent Balancer prices.
What Wallets Support Balancer?
BAL is an ERC-20 token, which means you can keep it in any wallet that supports this token type. For example, hardware wallets like Trezor and Ledger are excellent examples of storage devices that protect your Balancer tokens. These physical devices do an excellent job of keeping your funds safe with their top-notch security features.
While hardware wallets are great if you plan on holding your coins long-term, software and mobile wallets are ideal if you plan to trade actively. There are plenty of desktop and mobile wallets you can use to store your Balancer tokens, including popular options like Atomic wallet and Exodus.
You may also hold the Balancer you buy on Coinberry, with us. Learn more about our custody here.
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Where Can I Buy Balancer?
You can buy Balancer on Coinberry by signing up for an account here.
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