Balancer Unveils Generalized AMM in Upgrade

Balancer unveiled its V2 protocol upgrade, offering a generalized AMM solution for DeFi liquidity.

Balancer allows users to create token pools with flexible constituents, weights and trading fees. With V2, Balancer will aggregate all its liquidity in one vault, while users will maintain an internal balance of the tokens they hold. The change is meant to optimize on gas costs and increase capital efficiency.

Source: Introducing Balancer V2: Generalized AMMs

“Balancer V2 achieves major gas cost savings and brings capital efficiency to AMMs in a new way.” CEO Fernando Martinelli told The Defiant. “Balancer will serve as a launchpad for AMM innovation where teams will be able to focus on the logic itself and let Balancer do all the low level work”

The new mechanism, which separates liquidity from each pool’s logic, allows creators to design custom strategies such as stable pools for soft-pegged assets like Curve. Projects looking to offer custom liquidity solutions, can get familiar with the specs prior to the March upgrade with Balancer’s launch partner program.

All assets held via the protocol vault can now be used in the wider DeFi ecosystem as Asset Managers, or pool owners, can find additional ways to earn yield on idle assets.

Balancer v2 allows idle pool funds to be lent out to earn additional yield. pic.twitter.com/ccfW91NIMf

— banteg (@bantg) February 2, 2021

Baked into the upgrade are levers for protocol fees, giving BAL token holders a way to turn on trading and withdrawal fees through governance. V2 will also include a flash loan fee, set at 25 bps at launch.

Balancer is also running a gas reimbursement trial to reduce gas costs and encourage trading leading up to V2.

Beyond V2, Balancer is experimenting with governance incentives to community members. Liquidity providers can earn a boost on rewards by voting in governance, and active contributors can earn BAL from participating in forum and Discord discussions using SourceCred.

Disclaimer: The author is actively working with the Balancer team as a protocol politician and holds BAL tokens.