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Balancer Review 2023
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Sinead Burgess
Cryptocurrency services have evolved since the early stages of trading crypto. Trading platforms have grown abundant, as have the choices for purchasing crypto.
In recent years, decentralized cryptocurrency exchanges (DEXs) have been among the most popular choices when it comes to trading crypto. Decentralized exchanges are peer-to-peer (P2P) markets where crypto users make direct crypto transactions without third-party asset management or any other type of intermediary. The transactions on DEXs are conducted via self-executing trader agreements or smart contracts, as they are known in the crypto world.
The platform which we will review today is the decentralized exchange Balancer. To start things off, we can say that Balancer is an automated market maker, or AMM protocol, that replaces traditional market makers by eliminating the higher fees and crypto slippage that occur with them.
So take out your balancing rope and dust off the balancing poles as we’re stretching out the crypto tightrope that is the Balancer platform.
About the Balancer Exchange
Balancer is a decentralized crypto exchange that operates on the Ethereum blockchain and utilises an AMM protocol along with liquidity pools. Users on the platform can swap different cryptocurrencies and earn interest rates on idle portfolios.
By utilising crypto liquidity pools, traders on the exchange can swap every ERC-20 token without the use of any kind of centralized authority. Users can be liquidity providers themselves and collect a percentage reward of any trading fees on the platform. The thing that makes Balancer stand out from the crowd of DEXs is the ability it gives to users to construct custom liquidity pools or pools with two or more different cryptocurrencies.
Balancer Labs is the company behind the Balancer Liquidity protocol. Balancer Labs is a technology development firm that’s in the market for blockchain-based crypto products. Balancer Labs’ co-founders, Mike McDonald and Fernando Martinelli, are experienced developers and carved a name for themselves by working with well-known members from the blockchain industry.
The development of the Balancer protocol began in 2018, and the first phase version went online two years later as 2020 rolled by. The launch of the platform was followed by a fundraiser that raised $3 million USD in March of the same year. Shortly after, Balancer rose as one of the leading exchanges, DeFi apps, and portfolio managers on the Ethereum network in terms of TVL (total value locked).
As with many of the decentralized exchanges, Balancer hosts its own native crypto token named BAL or Balancer Token. BAL is the platform’s governance token and gives its holders the right to participate through votes in the protocol’s further development.
Balancer Features
Balancer Pools
The Balancer pools consist of collected user funds that provide liquidity to the platform. The pools can collect up to $11 million in crypto (e.g. USDT, BAT, etc.). There are two types of pools on the Balancer exchange: private pools and public pools.
Private pools are liquidity pools where only the creator of the pool can add or withdraw assets to and from the pool. They can also adjust any parameters and features, including the acceptable assets, the trading fee amount, and the pool weight in value. These types of pools are best suited for asset managers with large trading portfolios who are looking to earn fees on designated digital assets.
Public pools allow any user to provide liquidity to the Balancer platform by adding their crypto to the pool. The parameters of the public pools are set before the initial pool launch and cannot be altered, not even by their original creator. Public pools are best utilised by small-scale investors who want to earn a fee from their holdings in the pools.
Additionally, there are more specific smart pools alongside the two main categories. A fine example would be the Liquidity Bootstrapping Pools or LBPs. These LBP pools give crypto teams an opportunity to create and release a project token and build deep liquidity at the same time. Other examples include stablecoin pools with zero impermanent loss.
BAL Governance Token
Balance or BAL is the native governance token for the Balance protocol, which has a broad spectrum of use cases. BAL holders can participate in votes on the weekly rate of token distribution, the protocol fees, and any future events such as launching Balance on blockchains other than Ethereum.
Users can earn rewards in BAL by adding liquidity to certain crypto pools. The total supply of BAL is limited to 100 million, but currently, only 11 million BAL tokens are in circulation. Another 25 million tokens will go to the stakeholders in the Balancer Labs company, 5 million tokens to the Balancer Ecosystem fund, and another 5 million to the Fundraising fund. The remaining 65 million tokens will be issued through liquidity mining with a weekly mining rate of 145,000 tokens.
BAL tokens can be bought or sold on centralized exchanges like Poloniex, Binance, and FTX, as well as on decentralized exchanges like Uniswap.
Liquidity Mining
As we mentioned before, Balancer users can add liquidity to the platform or the pools and earn BAL as a reward, proportional to the amount they’ve deposited to the pool. There’s an option to create a pool for every token that’s whitelisted in the Balancer community. Users can also opt out to create and customise their own liquidity pool for a token that’s not yet whitelisted.
Smart Order Routing
The Smart Order Routing (SOR) is an off-chain routing order optimisation tool that optimises the routing order among the different pools to procure the best pricing when conducting a transaction. When an order is placed on the platform, the same order is calculated and SOR provides users with a summary of the different pools and amounts that are optimal for that trade. Basically, it acts as a mechanism with assistance functionality in collecting the liquidity among the pools. In the future, SOR will be updated to operate on-chain.
Ease of Use
The Balancer platform is available on desktop devices and is designed to be accessed via a web-based interface by way of online Trade and Invest apps. If you’re dealing with the Ethereum blockchain for the first time, you should know that in order to participate on Balancer, they would need to open an Ethereum wallet in order to store your assets, view your account balance and transaction history, conduct transactions, and connect to some of the dApps.
As Balancer is an Etehreum based decentralized exchange, anyone can utilise the protocol without creating an account. This eliminates centralized features like KYC requirements and account authentication.
The Ethereum blockchain allows for many different wallet devices, but the ones that make the most use of it are MetaMask, Coinbase wallet, WalletConnect, and Portis wallet. Users will need only an Ethereum wallet, preferably loaded with ETH, to deposit tokens and conduct transactions as the Balancer platform doesn’t support fiat deposits.
The platform interface allows users to select their preferred trading tools, withdrawal methods, and the slippage tolerance (the maximum price difference they would be willing to accept between the order submittal and the time of the order execution.
Users who are utilizing a DEX exchange for the first time could freshen up their trading skills by watching tutorials, as the exchange itself doesn’t provide much insight into the ins and outs of decentralized crypto trading.
Bitcoin and Other Supported Currencies
Balancer doesn’t support dealing in Bitcoin (BTC). The same goes for fiat deposits, as the exchange focuses on anonymity and allows for no account, bank credentials, or user assets to be stored on its databases.
The Balancer exchange supports a wide range of ETH tokens, including Ethereum (ETH), MKR, DAI, REP, USDC, BTC++, WBTC, BAT, WETH, ZRX, SNX, DZAR, LINK, LRC, and UMA, among hundreds more.
Trading Fees and Limits
Centralized exchanges are known for their tiered fee system that distinguishes between takers, or users that take away from the liquidity and makers, users who contribute to the liquidity by making orders. When it comes to decentralized exchanges, their popularity is on the rise as they don’t charge any types of trading fees.
Similarly, Balancer doesn’t charge any withdrawal or transfer fees. The only fee charged by Balancer is the network/blockchain fee. These fees are paid out to the miners validating transactions on the blockchain, and the fees vary based on the cryptocurrency in question and the current network congestion.
The downside to DEXs is that they don’t support any type of fiat deposits and withdrawals. First-time users who wish to participate on the network will have to purchase their crypto with fiat on a centralized cryptocurrency exchange of their choice before joining Balancer.
Is Balancer Safe to Use?
The decentralized exchanges’ servers are usually located in many different parts of the world and when compared to centralized exchanges, whose servers are concentrated in a single location, the whole DEX experience is much safer. Having their servers dispersed worldwide makes DEXs pretty much impervious to hackers and remote attacks because even if one server is cut off, the network as a whole will continue to operate.
Platforms like Balancer also don’t have access to user funds as the crypto is stored in the users’ personal crypto wallets. There are no identification requirements or bank accounts mentioned on the platform, and basically, the only one who is responsible for the assets’ safety is the user.
Balancer Customer Support
Inside the Trade and Invest apps on the Balancer platform there is a separate chat box that users can use to contact the customer support team via a direct message. The team is quick to respond to the live chat questions, and any issues will be resolved as soon as possible.
Alternatively, users can contact the support team via Twitter and Linkedin. Their official email address for direct contact is [email protected].
A Few Words Before You Go...
To wrap things up, we’ll say that Balancer is one of the more promising DEX projects on the Ethereum network and provides users with features like an AMM that reduces transaction fees for different cryptos. Moreover, the platform is one of the leading exchanges on the liquidity pool market. Their operating formula greatly discourages large crypto trading fees and when you consider all of their features, the platform could one day easily become a self-sufficient exchange with an emphasis on the growing Balancer community.
frequently asked questions
Unfortunately, no. Currently, the Balancer platform is available through a desktop client and a web-based platform that’s accessed via an internet browser.
Balancer is accepted in most countries in the world, including Australia, the United States, the United Kingdom, Singapore, India, France, Italy, Sweden, Norway, Saudi Arabia, Kuwait, and many other places in the world.