Overview By  Artem Khomenko
Normal 140 25 May 2023
Normal

Balancer Blockchain Project Overview: Prospects and Drawbacks

By  Artem Khomenko 140 25 May 2023
Photo - Balancer Blockchain Project Overview: Prospects and Drawbacks

Balancer is a DeFi platform built on the Ethereum blockchain and several other EVM networks, specializing in liquidity farming and automated asset portfolio management.

Balancer enables users to create customized portfolios with any supported cryptocurrencies on the platform and adjust the weight for each asset in the portfolio. The platform also functions as a decentralized asset exchange where various tokens can be staked and farmed.

We have compiled a comprehensive review of the project and its applications within the DeFi sector.

Creation History

Balancer was co-founded by developers Fernando Martinez and Michael Shule. Their extensive experience in developing cryptocurrency projects and financial products allowed them to introduce an innovative platform featuring a unique automatic portfolio balancing algorithm.

Balancer employs "weighted linear pool" technology, which lets users automatically balance their portfolios, optimize risk, and generate returns. This algorithm was specifically designed for cryptocurrency products.

The Balancer platform was officially launched in June 2020.

Platform Funding

In May 2019, Balancer Labs secured $3 million in funding from investors such as Placeholder, Accomplice, CoinFund, and Inflection. In October 2020, an additional investment round of $5 million was closed, with contributions from Blockchain Capital and GSR Ventures.

In February 2021, Balancer Labs raised $24.25 million in a Series A funding round, which included investors like Accomplice, Placeholder, Blockchain Capital, Fenbushi Capital, LongHash Ventures, Gauntlet Networks, Kain Warwick, and FTX.
According to Crunchbase data, Balancer's total investment amounts to $32.3 million.

Details of Balancer Labs' investment activity (Crunchbase)

Details of Balancer Labs' investment activity (Crunchbase)

User Guide: "Pool" Section

The homepage displays information about the volume of cryptocurrencies in various pools and the estimated return on investment for each coin. Users can invest funds in a flexible manner, not limited to a 50/50 ratio, as Balancer liquidity pools can adapt due to the embedded algorithm.

The platform operates on four networks: Ethereum, Gnosis Chain, Polygon, and Arbitrum. It is most convenient to use a Metamask wallet when working with Balancer.

Platform homepage

Platform homepage

Clicking on any trading pair allows users to add liquidity to the pool and begin earning passive income. This page also showcases trading pair statistics, trading volume, and locked liquidity dynamics (TVL – Total Value Locked).

At the time of writing, the majority of funds on the Balancer platform are locked in the wstETH/WETH coin pair, with a TVL exceeding $300 million.

Liquidity investment and trading pair statistics

Liquidity investment and trading pair statistics

"Swap" Section

Similar to many DeFi projects, Balancer features a dedicated section for decentralized token exchange. Users can execute trading operations with ETH, BTC, USDT, USDC, and more.

Token exchange section on Balancer

Token exchange section on Balancer

Portfolio Management

Tools for managing and balancing one's own investment portfolio become available in the "Portfolio" section after the user adds liquidity to any trading pair. In this menu, users can modify the volume of invested assets, execute transfers between pools, and contribute additional liquidity. To claim rewards from the Balancer platform, there is a "Claim" section where users can claim income generated from providing liquidity or staking the BAL token.

"Claim" section for receiving rewards from Balancer

"Claim" section for receiving rewards from Balancer

BAL Token

BAL is the internal token of the Balancer platform and plays a crucial role in its ecosystem. The primary functions of the BAL token include:

  • voting. Possessing BAL tokens grants users the ability to vote on protocol changes and important decisions associated with the platform's development;

  • commission distribution. A portion of transaction fees on the platform is paid in BAL tokens, ensuring demand for the token and its usage within the system;

  • staking rewards. Users can stake their BAL tokens within Balancer and earn rewards;

  • token distribution. Balancer also utilizes BAL tokens to distribute tokens to other crypto projects as part of a token issuance program.

Regarding the BAL coin's market data, the following details are available:

■ market capitalization — $278 million;
■ maximum supply — 96.15 million coins;
■ total in circulation — 40.5 million coins;
■ average daily trading volume – $4 million;
■ highest price — $67.73;
■ lowest price — $0.05.

To participate in most activities, users must convert BAL coins to veBAL in the corresponding section. This process allows the platform to record the number of circulating coins for various operations, rendering the converted tokens unusable for regular circulation.

BAL can be purchased on cryptocurrency exchanges such as WhiteBIT, KuCoin, GATE, Mexc, and several other platforms. A comprehensive list of centralized and decentralized exchanges can be found on CoinGecko and CoinMarketCap websites in the "Markets" section.

BAL token price dynamics (CoinMarketCap)

BAL token price dynamics (CoinMarketCap)

Advantages and Disadvantages of Balancer

Balancer advantages:

  • decentralization through DAO management of the platform;
  • automated portfolio creation;
  • flexibility in configuring liquidity pools;
  • high transaction speed.

Conversely, the platform has some drawbacks:

  • high fees during heavy network congestion;
  • security risks due to a large and complex smart contract of the platform;
  • lack of regulatory protection;
  • difficulty in use for beginners.