Launched in March 2020, Balancer is a decentralized exchange protocol built on Ethereum. It is based on an automated market maker. In simple words, this is an exchange for trading ERC20 tokens without using an order book. Balancer works on smart contracts and creates so-called liquidity pools, from which funds are taken for trading. At its initial launch, Balancer did not have its own token. However, the developers later introduced a token for their project. Balancer (BAL) is a governance token for this protocol. It can be used to determine the direction of a project by voting on various proposals. It is also used to reward liquidity providers.

What are BAL key features and how does it work?

The UniSwap exchange protocol served as an inspiration for Balancer developers. Accordingly, Balancer uses an auto market-making (AMM) blockchain protocol that has some similarities with UniSwap. Balancer uses an n-dimensional invariant model, which means that there may be several tokens in the pool and not just two like in UniSwap. The Balancer protocol functions as a self-balancing weighted portfolio, price sensor, and liquidity provider. It allows users to profit with the BAL token by contributing to customizable liquidity pools and receiving trading fees in return. Balancer distributes BAL tokens to whitelisted creators of the liquidity pool. To receive rewards, at least two coins from the pool should be on this list. It is updated on a weekly basis as the coins are being added to it. This system also makes it more advantageous to set lower fees because the lower they are the more BAL is given in return. BAL tokens are also issued relative to the proportion of the amount invested into the liquidity pool to the total liquidity. The established maximum supply of these tokens is one hundred million.

What makes Balancer noteworthy?

AMMs are part of the rapidly growing DeFi industry, which has an effect on the market price of Balancer (BAL). The Balancer is also a decentralized exchange. Moreover, it allows ordinary crypto market participants to join pools and add liquidity by depositing assets into smart contracts. This pool protocol can be used to swap ERC20 tokens without relying on centralized organizations. Any ERC20 token holder can leverage Balancer and earn fees on it. 

What can BAL be used for?

The Balancer project is considered to be a powerful tool for automating market-making and driving down the fees users pay during a transaction, no matter which currency they are transferring. When it comes to the liquidity pool market, this project ranks at the top thanks to the ability of creating liquidity pools with several tokens at once. Balancer developers were one of the first to do this. 

Balancer smart contracts have been audited by a third-party company, Trail of Bits, so they are completely safe for investment.