Balancer

Balancer is a decentralized finance (DeFi) protocol designed to offer open-access technology that simplifies the creation of automated market makers (AMMs) for developers. It also provides liquidity providers with an expansive array of decentralized exchange (DEX) products.

This capability is enabled by its unique 'Vault' system, which sets the formal requirements for custom pools and shifts core structural elements into a separate entity known as a 'singleton contract.' Balancer supports a variety of pool types created internally, such as Weighted Pools, Boosted Pools, and stable swaps that reduce loss from volatile prices. It also includes externally developed pools like Elliptical Concentrated Liquidity, CoW AMMs, and FxPools, making it a central hub for fungible, yield-generating, and MEV-reducing liquidity.

Unlike conventional AMMs with static pool configurations, Balancer's open framework permits unrestricted iteration and complete redesign of pool structures. This versatility allows teams like Gyroscope, CoW Swap, and Xave to innovate and launch new AMMs that gain recognition from aggregators and integrate effortlessly within the DeFi ecosystem.

With the continual introduction of novel custom pool types, including ve8020 governance tokenomics, boosted pools, LVR-reducing stable swaps, MEV-reducing CoW AMM pools, and passive elliptical concentrated liquidity pools, Balancer remains a dynamic force in the on-chain liquidity sphere.

Balancer's protocol architecture consists of three main elements: the Router, Vault, and Pool. Each component is strategically crafted to enhance adaptability and reduce the complexity of building custom pools. For more details on the Router, Vault, and Pool, click here.

Beyond the basic operations, pools can be enriched with standalone hooks contracts that can be employed at various stages of a pool's lifecycle. These hooks allow developers to tailor and augment pool functionalities, enabling the addition of features such as oracles or time-weighted average market-making capabilities. For more in-depth information, see the hooks article.

The Balancer Governance Token (BAL) is the primary token underpinning the Balancer protocol.

veBAL, or vote-escrowed BAL/ETH 8020 Pool, extends the use of BAL by enabling participation in decentralized governance, directing BAL emissions to specific pools, and representing a single position that benefits from the protocol's fee structures, along with external voting incentives through the bribe market.

By locking BAL/WETH 80/20 BPT, holders receive veBAL, granting them governance privileges and access to protocol fee sharing. The amount of veBAL a user holds is directly tied to the quantity of BAL/WETH 80/20 BPT locked and the remaining duration of the lock period. Essentially, a user securing 1 BPT for 52 weeks will obtain the same "vote-escrowed" power as someone who locks 2 BPT for 26 weeks.

For further reading on BAL and veBAL, please check here.