What Is Balancer (BAL)?
BAL is the governance token of Balancer, which is an Ethereum-based automated market maker (AMM). The Balancer price chart above displays the current BAL price. An AMM essentially is an autonomous protocol that provides decentralized exchanges (DEXs) with liquidity pools. Therefore, primarily, Balancer is a liquidity provider. Users can create their own Balancer liquidity pools or contribute to the ones that already exist.
However, Balancer can also be employed to find the most competitive rates in order to make crypto trades at the best prices through the Smart Order Router (SOR). In addition to that, Balancer also allows users to create self-balancing index funds.
Getting back to the concept of liquidity pools, Balancer offers a variety of different pools including Weighted pools, Stable pools, MetaStable pools, Liquidity Bootstrapping pools, and Managed pools.
Though looking at bigger categories, there are three main types of pools offered by Balancer – private, smart, and shared. Private pools have an owner who is the only source of liquidity for that pool and who has full control over it. Smart pools are also like private pools, the only difference is that they are run by a smart contract. However, shared pools, unlike private or smart pools, have several liquidity providers.
There are a few features that make Balancer pools differ from the pools of other AMMs:
- Balancer pools are self-weighted, which means that they are able to modify themselves based on price changes.
- Liquidity providers can add up to eight assets to each liquidity pool.
- Balancer users can deposit as much of a supported asset as they want.
- Balancer users can profit from arbitrage and slippage reduction to produce high returns on low-demand assets.
- Some Balancer pools have oracle functionality. This allows them to act as price sensors for the pool tokens.
So, how exactly does a Balancer liquidity pool work? Every token in a liquidity pool has its own weight. Balancer modifies these weights if needed to keep the value of the pool stable. Whenever the prices of certain assets change, the proportions of the assets kept in the pool are rebalanced. Besides, with each trade that is made in a pool, a fee for the pool owner is generated.
The Founders of Balancer
The Balancer crypto project was founded by Balancer Labs in 2020. The founders of Balancer Labs are Fernando Martinelli and Mike McDonald.
Fernando Martinelli is an entrepreneur with a degree in robotics and image science as well as international management. Apart from founding Balancer, he also co-founded such projects as the Cybercafé game, PrepLounge, and Brasil Mate.
Mike McDonald is a security engineer. Besides Balancer, Mike also founded MKR.tools, which is a MakerDAO data analytics platform.
Even though Balancer was co-founded in 2020, the whole concept of Balancer was initiated in 2018 as a research program at BlockScience.
Use Cases of BAL Tokens
The primary purpose of BAL tokens is governance. This means that Balancer token holders are able to vote on various decisions considering the future development of the Balancer crypto project. Though besides that, BAL tokens are also used to reward Balancer liquidity providers. Don't forget to view the Balancer price chart above if you're interested in the live BAL price.
Tokenomics of BAL
Initially, 100 million BAL tokens were created. 65% of the tokens were dedicated to liquidity provider rewards with the plan to release 145 thousand tokens each week. The remaining portion was dedicated to the team, core developers, investors, advisors, the Balancer ecosystem fund, and the fundraising fund.
Be aware that the BAL price is subject to change if you're going to purchase Balancer tokens. This occurs because the volatility of the entire crypto market essentially impacts the Balancer price. In fact, it's just like it is the case with the pricing of other crypto assets.