What is Balancer?
Balancer is a DeFi protocol that provides permissionless technology to streamline AMM development for developers and empower liquidity providers with an ever-expanding DEX product suite.
This is made possible by unique ‘Vault’ architecture that formally defines the requirements of a custom pool and shifts core design patterns out of the pool into a separate ‘singleton contract’. With both internally developed pool types such as Weighted Pools, Boosted Pools, and LVR mitigating stableswaps, and also externally developed pools such as Elliptical Concentrated Liquidity, CoW AMMs, and FxPools, Balancer has arisen to be a focal source of fungible, yield-bearing, and MEV-mitigated liquidity.
Why is Balancer useful?
Balancer, unlike other AMMs with fixed pool types, Balancer allows permissionless iteration and complete reconstruction of pool designs. This unique flexibility empowers teams like Gyroscope, CoW Swap, and Xave to develop and deploy novel AMMs that are recognized by aggregators and seamlessly integrated and adopted within the DeFi landscape.
With the continuous addition of new custom pool types, such as ve8020 governance tokenomics, boosted pools, LVR mitigating stableswaps, CoW AMM MEV-mitigating pools, and passive, elliptical concentrated liquidity pools Balancer continues to play an ongoing and evolving role in the onchain liquidity landscape.
How does Balancer work?
The Balancer protocol architecture comprises three primary components (Router, Vault and Pool), each strategically designed to enhance flexibility and minimize the intricacies involved in constructing custom pools. Read more about Router, Vault and Pool here.
On top of the basic workflow, pools can be extended with standalone hooks contracts that can be leveraged at different stages of the pool's lifecycle. By utilizing hooks, developers can customize and enhance the functionality of pools, enabling the integration of features like oracles or time-weighted average market maker capabilities. See hooks article for more detailed information.
What is BAL and veBAL?
Balancer Governance Token (BAL) is the core token behind the Balancer protocol.
veBAL (vote-escrowed BAL/ETH 8020 Pool) is an extension of BAL and is used for voting in decentralized governance, directing BAL emissions to pools, and represents a single position that benefits from the protocol's fee mechanisms, as well as external voting incentives via the bribe market.
By locking the BAL/WETH 80/20 BPT, holders are given veBAL, entitling them to governance rights and protocol fee collection. A user's veBAL balance is directly proportional to the amount of BAL/WETH 80/20 BPT locked and the duration of time left in the lock period. In short, if a user locks 1 BPT for 52 weeks, they will receive the same amount of “vote escrowed” strength as someone who locks 2 BPT for 26 weeks.
Read more about BAL and veBAL.