Overview

Balancer is an ecosystem of independent software components, tools, and contributors. 

The Balancer protocol is a set of smart contracts that feature a decentralized AMM (Automated Market Maker) optimized for a flexible and programmable liquidity provisioning experience. By separating the AMM curve logic and math from the core swapping functionality, Balance becomes an extensible AMM that can incorporate a variety of trading curves and pool types. This includes traditional 50/50 x*y=k weighted pools, custom weight pools for controlled exposure, stableswap curves, nested pools, liquidity bootstrapping pools, concentrated liquidity pools…

The balancer dApp is an open-source frontend application that users can use to interact with the underlying protocol smart contracts. 

Balancer Vault

The Balancer Vault is the core of the Balancer protocol. It is a smart contract that holds and manages all tokens in each Balancer pool. Because of this, the Vault is the main interface through which joins, exists, and swaps take place.

The Vault architecture separates the token accounting functions from the pool logic. This way, the protocol does not have to actively manage its pool assets. Also, this enables the Vault to be agnostic when it comes to managing the underlying pools, which simplifies accounting and makes it possible to accommodate new pool designs. 

Since the Vault is agnostic to the pool’s mathematical functions, it will keep pool balances independent from one another. This is critical for a permissionless system since this allows anyone to create their own tokens and pools. At the same time, this independence also protects against malicious actors or negligently designed tokens or custom pools that might attempt to drain funds from any other pool. 

Even though the Vault may hold consolidated liquidity for a certain token, the depth of that combined liquidity does not change the price impact in individual pools.

balancer 1.2

Thanks to the modular architecture of the Vault, anyone can come in with a trading system and create a custom pool that can be plugged into Balancer’s existing liquidity instead of having to build a new decentralized exchange from scratch.

Swaps

The Vault architecture was designed with two primary value propositions in mind:

  • Extremely low gas costs
  • Flexibility 

balancer 2.2

The Vault supports two core types of swaps: 

  • Single swaps: when only 2 tokens are traded against a liquidity pool
  • Batch swaps: when multiple hops, paths, and pools are involved in the execution of a swap. 

Gas-efficient batch swaps

In other AMMs where the pool’s pricing logic is tightly coupled with the management and accounting of the underlying assets, it is very expensive to perform multi-step operations such as multi-hop trading (A -> B -> C). The reason for that is that there is a transfer of ERC20 tokens in each hop. 

balancer 2.3

Balancer improves its swap efficiency by having all tokens stored in the same contract, the Vault. This way, instead of transferring ERC20 tokens multiple times, the Vault is able to keep track of net balance changes and only make a final transaction to consolidate the final state. This reduction in the number of transfers that are required saves a considerable amount of gas.

Internal balances

Balancer’s Vault makes it possible to execute swaps with no transfers whatsoever. Similar to how the Vault keeps track of asset balances for its pools, it can also maintain an internal balance accounting for arbitrary Ethereum addresses. As a result, users can hold internal balances in the vault and execute swaps to/from these balances.

Flash loans

While the consolidated liquidity of Balancer’s Vault does not change the price impact on a per-pool basis, it does enable the protocol to leverage that combined liquidity by offering flash loans. 

Flash loans are uncollateralized loans that must be repaid (with interest) in the same transaction as it is borrowed. Since everything must be completed in one transaction, it is impossible for borrowers to run away with the assets they borrowed.

Anyone who identifies an arbitrage opportunity or price discrepancy across Balancer pools can execute a Flash swap. When this is the case, the arbitrageur who executes the trade does not need to hold any of the input tokens. Instead, the trader could detect the imbalance, tell the Vault to execute the swap, and be rewarded with the final profit.

Balancer Pools

Balancer can support customizable pools with custom curves, logic, or parameters. This flexibility and composability allow for unique use cases that prevent liquidity fragmentation for any given asset. 

For example, most tokens are usually paired against stablecoins or native assets like ETH. Historically, any given token ends up with AMM pools such as XYZ/ABC, XYZ/USDC… This leads to a lot of duplicated and isolated liquidity where multiple hops are needed to connect swap transactions (e.g. go from ABC to XYZ then from XYZ to USDC). Thanks to the Vault’s unique design, Balancer makes it possible to pair ABC and XYZ with a bb-a-usd shared pool in order to achieve more capital efficiency. This would create direct routes between ABC/USDC, ABC/USDT, and ABC/DAI.

Choosing what type of pool to use depends on a series of factors, the primary being the expected price variations between the tokens in the pool. 

 

  • For assets that keep a stable exchange rate, like stablecoins, composable stable pools are the right choice
  • For most volatile assets, weighted pools are the right choice

Weighted pools

Weighted pools are an extension of the original constant product AMM introduced by Uniswap (x * y = k). Balancer’s weighted math is an extension that allows for a swap of uncorrelated assets given pool balances, pool weights, and the number of assets being traded.

Invariant

The core functionality of Balancer is derived from its value function V. This is a function of the pool’s weights and balances and whose surface implies a spot price at each point such that, no matter what swaps are carried out, the share of the value of each token in the pool remains constant.

By using Weighted Math, Balancer enables the creation of pools with more than two tokens and custom weightings (80/20, 60/40…). This is a big improvement compared to the original Uniswap design, which only supports two tokens in a 50/50 pool.

balancer 2.4

Weighted pools allow users to choose their desired levels of exposure to certain assets while still maintaining the ability to provide liquidity.

For example, if a user wants to provide liquidity to the WBTC/WETH pair, they can choose whatever pool weighting they are most comfortable with. A pool heavier towards WBTC would imply that the strategy expects bigger gains for WBTC, while a pool heavy towards WETH would imply that the strategy expects WETH outperformance.

An evenly balanced pool would suggest that the liquidity provider expects the value of the assets to remain proportional in the long run.

The higher a token’s weight in a pool, the less impermanent loss it will experience in the event of a price surge. For pools that heavily weigh one token over another, there is far less impermanent loss. However, asymmetric pools come at the expense of higher slippage when making swaps, due to the fact that one side has much less liquidity. 

Impermanent loss is the difference in the realized value between holding a set of assets and providing liquidity for those same assets.

Impermanent loss occurs when the prices of two assets experience a divergence in price action. For example, if two assets increase by 20%, then no impermanent loss is noticed. However, if one asset increases in value by 20%, then a divergence has taken place and some form of impermanent loss would be noticed in the position. This can be reversed if the other token in the pool also increases by 20% or both tokens end up converging on the same price movement relative to the original investment. 

Impermanent loss = (Pool Value/Hodl Value) -1;

balancer 2.5

Impermanent loss calculator for Balancer Pools: https://baller.netlify.app/ 

Composable stable pools

Composable stable pools are a superset of all previous Stable-type pools (Stable Pools, MetaStable Pools, StablePhantom Pools, and StablePools V2) and therefore obsolete all previous pool designs.

Composable stable pools are designed for tightly correlated assets that are expected to trade at near parity. These pools use Stable Math, a concept popularized by Curve’s stableswap AMM. This allows for trades of significant size to occur without encountering substantial price impacts, which increases the capital efficiency for correlated-asset swaps. 

Composable stable pools are ideal for: 

  • Pegged tokens that trade near 1:1, such as stablecoins (DAI, USDC, USDT…), or synthetic assets (renBTC, sBTC, WBTC…)
  • Correlated tokens that trade close to parity with a slightly dynamic exchange rate of 1:R, like yield-bearing assets or derivative tokens that accumulate staking returns (wstETH, rETH, WETH…)

These pools are composable, which means that they allow swaps to and from their own LP token. For example, putting the LP token of a stableswap pool into other pools (“nesting”) enables batch swaps from nested pool tokens to tokens in the outer destination pool.

For example, with a composable stable pool consisting of stablecoins (DAI, USDC, USDT), it is possible to pair the LP token of that pool against WETH. By doing this, the protocol can consolidate its liquidity into some of the most common groupings. This results in deeper liquidity and better pricing. Besides, this also saves the trouble of making 3 weighted pools (DAI/WETH, USDC/WETH, USDT/WETH).

Boosted pools

Boosted pools offer LPs the opportunity to simultaneously earn from both trading fees and interest, for any ERC-4626 compatible wrapped token. This is a unique value proposition for Balancer since it will allow the protocol to offer higher yields for LPs and align the incentives of liquidity providers with protocol revenue.

Boosted pools are a subset of composable stable pools and weighted pools. They are meant to find an optimal balance between the capital efficiency for liquidity providers and traders. Traders can get access to deep liquidity with minimal price impact, and liquidity providers can use their LP position on external protocols, such as Aave.

The motivation for liquidity pools is that swap prices are determined by asset balances in a pool. For example, a large pool is beneficial for traders, since they will be able to swap assets with minimal price impact. The downside is that large pools have negative effects on liquidity providers since only a small fraction of the total assets in the pool are being actively traded back and forth. As a result, most of the liquidity of the pool is left sitting idle, which is not capital efficient. 

By making changes to the pool structure, it becomes possible to generate value out of idle liquidity. This is achieved by deploying that liquidity in external protocols to generate yield. Furthermore, since the pool will become more appealing for LPs (due to the yield accrued from external protocols, like lending on Aave), the liquidity will grow even larger, offering better pricing to traders. Overall, this gives liquidity providers the benefits of protocols like Aave on top of the swap fees they collect from asset swaps.

balancer 2.6

As illustrated in the figure above, only a tiny amount of the pool would be touched by swaps. The remaining capital would help to alleviate the price impact from trading, but these assets are idle and not generating yield or fees directly. With boosted pools, those idle tokens can be turned into yield-bearing assets. 

balancer 2.7

This is achieved with nested linear pools, a specific type of Balancer pools that facilitate the exchange of an asset and its wrapped yield-bearing counterpart, like DAI and aDAI from Aave.

One example of this functionality is the Balancer Boosted Aave USD pool, bb-a-USD, which facilitates trades between the 3 USD stablecoins (DAI, USDC, and USDT) while sending idle liquidity to Aave. The underlying linear pools are:

  • bb-a-USDC: consisting of USDC and aUSDC
  • bb-a-USDT: consisting of USDT and aUSDT
  • bb-a-DAI: consisting of DAI and wrapped aDAI

balancer 2.8

Since aTokens are rebasing tokens as they accrue interest from borrowers’ payments, the underlying Aave aTokens are wrapped and turned into a static token that the Balancer Vault can use for its internal accounting.

balancer 2.9

One of the benefits of this model is its composability. For instance, bb-a-USD is a preminted BPT (Balancer Pool Token – analogous to an LP token) that can be nested within higher-level pools. When creating a pool, using bb-a-USD as a constituent brings in multiple benefits, such as:

  • Easy access to swap paths for multiple USD tokens while avoiding liquidity fragmentations.
  • Benefit LPs with an additional boost from Aave.

For instance, this allows protocols that launch a new stablecoin to avoid having to set an independent pool for each stablecoin pairing. Instead, the protocol can pair the new token with bb-a-USD. 

balancer 2.10

In November 2022, Aave passed a proposal to enable some BPTs to be allowed as collateral on Aave. The proposal also approved a direct integration with Balancer as a tool to bootstrap Aave’s stablecoin, GHO.

Aave will create a liquidity pool on Balance for its GHO stablecoin with other stablecoins. Using BAL in the treasury from swaps, Aave will create a veBAL position and vote to incentivize liquidity in the newly created pool. At the same time, Aave will accept BPTs as collateral for borrowing GHO and other stablecoins

Liquidity bootstrapping pools

Liquidity bootstrapping pools (LBPs) are pools that can dynamically adjust the token weighting. This is achieved by using Weighted Math with time-dependent weights. There is a start and an end date which are selected by the pool owner, who also has the power to pause swaps.

balancer 2.11

Liquidity bootstrapping pools are frequently used for token sales. The pool creator can set a ceiling price at the start of the sale and, over time, the pool will change the weights of the assets in the pool until a market equilibrium is reached. Whenever there is a weight shift, the price of one of the tokens experiences sell pressure, while the other experiences buy pressure. When mixed with a decent amount of trading volume, the price approaches the generally agreed-upon market price.

Liquidity bootstrapping pools often start with an excessively high price. This disincentivizes whales and bots from buying most of the liquidity at the beginning. When applied to early-stage tokens, this also helps to increase the widespread distribution of tokens among the sale participants. 

Contrary to other sale models, since the price of the token gradually decreases, users are disincentivized to buy early and can benefit from waiting for the price to decrease until it reaches a price they are comfortable buying at.

There have been some notable integrations and use cases for liquidity bootstrapping pools:

  • Fjord Foundry: enables Fair Launch Auctions – a crowdfunding mechanism that allows projects to raise money and distribute their tokens to the community. 
  • Gitcoin’s AKITA/ETH LBP: Gitcoin’s LBP is composed of AKITA and WETH, and is meant to slowly transfer the Akita held by Gitcoin back to the community. This is achieved using an LBP that performs a gradual sale. Gitcoin relies on these sales to raise more ETH and help fund public goods.

Linear pools

Linear pools facilitate the exchange of an asset and its wrapped yield-bearing counterpart at a known exchange rate. For example, they allow for swaps between DAI and aDAI from Aave. 

Linear pools have target ranges to incentivize how much of the native token should be kept available for swaps vs the yield-bearing counterpart. This is achieved using a fee/reward mechanism that incentivizes arbitrageurs to intervene in order to maintain a desired ratio between the two tokens:

  • Pay fees for leaving the target range
  • Receive rewards for returning to the target range

Among the most popular Balancer linear pools, we find: 

Managed pools

Managed pools unlock sophisticated portfolio management strategies and fine-grained control over asset management allocations. These are multi-token liquidity pools that can be used by external protocols to manage their own sources of liquidity. 

This model provides a framework for fund managers to track a wider crypto sector and support time-based shifting mechanisms similar to those of liquidity bootstrapping pools.

  • Management fees
  • Liquidity providers allow lists
  • Up to 50 tokens
  • Active token management (add, remove, change token weights)
  • Circuit breakers to protect from malicious/compromised tokens

Examples of managed pools liquidity controllers include:

  • The Olympus DAO Range Bound Stability (RBS) system, is used to help Olympus emissions with respect to price movements. This is achieved by maintaining a spread of deep liquidity in the market to enforce a price range for the OHM token. The goal of this mechanism is to dampen market volatility and stabilize the OHM price within a predetermined range.
  • The Aera Treasury Vault Controller is a vault designed to be used by DAO in order to manage their treasury balance sheets. Aera allows DAOs to deposit various ERC20 tokens into its treasure management vault and it will optimize its strategy to meet its portfolio obligations.
  • Valory’s Smart Managed Pool (SMP) Off-chain Controller manages multi-agent off-chain services that extend the functionality of smart contracts in order to allow for complex operations to be executed in a trust-minimized and transparent manner. 

balancer 2.12

  • Orb’s Managed Pool On-chain Controller has developed the MP Controller, which features the ability to add/remove tokens, reweight its portfolio of assets, transfer management rights, or update internal circuit breakers. 
  • Canonical Bonding Curves are used to determine the exchange rate between any given two assets. This concept was popularized by Bancor,’s constant reserve ratio (CRR), which is used to calculate the price of a bonding curve swap. 

balancer 2.13

Protocol pools

Protocol pools represent entire DeFi protocols built on top of Balancer infrastructure. This is possible because Balancer provides the infrastructure for custom AMMs by separating the pool logic from the accounting logic. As a result, any AMM logic can be implemented as a custom pool that sits on top of the Balancer Vault.

Why the Project was Created

Since the beginning of DeFi and the origin of AMMs, there have been many experiments across the industry to create a healthy trading ecosystem. Due to the different incentives of market participants, there is no straightforward solution to find a common ground between retail traders, dex aggregators, arbitrageurs, and liquidity providers. At the same time, if any of those actors does not participate in the AMM, then the protocol would be at risk of suffering from diminishing trading volume and lower returns on liquidity deposits.

Balancer was born in 2018 as a project incubated by Block Science, an engineering and research firm that later on spun out a separate corporate entity, Balancer Labs. The main objective of the protocol was to allow liquidity providers to deposit assets with customizable ratios. This would create an automated market-making structure that resembles an ETF (Exchange Traded Fund) and that is continuously rebalanced as traders swap one asset for another. Liquidity providers would earn revenue from the fees paid out by traders.

Liquidity mining incentives for the BAL tokens started on June 1, 2020, in order to incentivize users to provide liquidity and earn BAL tokens in return. Since BAL is the de-facto governance token of the protocol, this initiative sought to diversify its supply among the users who are early supporters and helped to bootstrap the liquidity in the early stages of the protocol.

Roadmap

The v3 development was introduced on December 5, 2023.

V3 is geared to introduce brand-new features, pool types, and tooling meticulously tailored to meet the unique demands of the ever-evolving market, and aims to create a flexible but opinionated base layer for AMMs. It aims to innovate through close collaboration with leading projects in the field and to set a new standard for building in DeFi.

Sector Outlook

Contrary to traditional finance, where regulatory and competitive barriers prevent individuals and smaller shops from engaging in market-making activities, AMMs are the default way to operate decentralized exchanges. 

The launch of Uniswap’s constant-product AMM was a pivotal moment for the industry that kicked off a new wave of DeFi innovation. Balancer took this model one step further by implementing a constant mean market that allowed for more than two assets and facilitated liquidity weights outside of the usual 50/50 liquidity split. Next, in 2020, Curve launched its protocol with a new formula for a stableswap AMM that combined the constant-product and the constant-sum models.

balancer 2.14

 

Decentralized Exchange

balancer 2.15

DefiLlama reports $84.31 billion of volume done across all tracked DEXes on February 2023, with an up-trend since December 2022.

balancer 2.16

Out of all the volume made by Dexes, Balancer has done around $1.773 billion combining the Ethereum, Polygon, and Arbitrum networks, with its largest volume taking place on the Ethereum network.  

Competitive landscape

Balancer ranks number 4 in TVL across all Dexes on all chains, with $1.11B in TVL and a 0.25 Mcap/TVL ratio as of March 2023

balancer 2.17

The TVL dropped by 57% in 2022, which is significantly less than its main competitors. This is likely due to its unique product offering and incentive rewards. For reference, Uniswap’s TVL fell by 61%, Sushiswap’s by 90%, and Curve’s by 84%.

TVL Competitive Landscape

While Balancer is a DEX, it has an edge over the other standard DEX with its technological offerings, such as its weighted, boosted, and composable pools. This technology is also implemented by Beethoven, which is a friendly fork of Balancer and both parties have enjoyed a collaborative relationship. This is one of the reasons why Balancer has not been deployed on Optimism yet.

Balancer’s top competitor and market leader, Uniswap, generates around $10.4 million in fees per week.

Chains

Balancer is currently live on the following chains:

  • Ethereum
  • Gnosis CHain
  • Polygon PoS
  • Polygon zkEVM
  • Base
  • Arbitrum
  • Avalanche

For Users

Balancer’s aggregate liquidity is accessible for traders, aggregators, and arbitrageurs, while still allowing for flexible liquidity provisioning setups. This makes Balancer the ideal protocol to suit the needs of a diverse set of actors and protocols. 

  • Arbitrageurs can swap against pools using batch swaps or flash loans
  • Liquidity providers can add liquidity to pools to earn swap fees, liquidity incentives, and other forms of yields. 
  • Passive LPs can utilize boosted pools to earn extra rewards on top of their already compounding tokens
  • BAL token holders can lock their BAL tokens into veBAL in order to participate in protocol governance.

Use cases

Balancer has integrations across the DeFi space. This includes money markets supporting BPTs (Balancer Pool Tokens) as collateral, wallets that support BPT pricing, block explorers showing swap actions…

DEX aggregators

Balancer has full integration with major dex aggregators such as 1inch, Paraswap, 0x, and Gnosis solvers. Whether it is through the Smart Order Router or via custom implementation logic, new pool types and logic can be accessed and supported by any dex aggregator in a matter of days after going live. 

A successful example of a DeFi protocol  built on top of Balancer is Gyroscope, a protocol that features concentrated liquidity pools and saw a significant increase in volume after the 1inch integration on Polygon

balancer 2.22

Arbitrageurs

Arbitrageurs are market participants that profit from price anomalies across multiple dexes or liquidity pools. They are a necessary component in the development of a successful dex. Like aggregators, arbitrageurs carefully select the AMMs they allocate resources to.

 

SCP, Wintermute, and other top trading firms are trading Balancer liquidity

Liquidity 

Once deployed, Balancer protocol pools are immediately hooked into one of the deepest and most diverse sources of liquidity on any given chain. Because of this, the assets in the new pool can be easily swapped with other base assets like stablecoins, WBTC, or WETH simply by adding those specific swap routes. 

Unlike other AMMs, the additional hops within a swap route do not incur additional costs associated with token transfers and gas fees. This unlocks all sorts of swap combinations and routes between the various pool types in the Balancer ecosystem. 

Other features that new protocols can access include flash swaps, batch swaps, flash loans, and internal balances.

Economics

DAO Financial Report

balancer 2.24

balancer 2.25

[BIP-197] Balancer OpCo completed an OTC deal selling 250,000 BAL for 1.6M USDC, which can secure funding for the next two years.

DAO treasury

balancer 2.23

Treasury wallet with non-BAL funds: 0x0EFcCBb9E2C09Ea29551879bd9Da32362b32fc89 

balancer 2.26

Protocol TVL

As of March 2023, 85% of the TVL is on Ethereum mainnet. TVL likely benefited from boosted pools, which managed to attract liquidity on stablecoins from BAL inflationary incentives. 

balancer 2.27

Historical volume

balancer 2.28

Fee Breakdown

balancer 2.29

Users paid $33.5M in trading fees on Balancer in 2022.

In Q4 2022, LPs earned an average of $27,779 in trading fees, veBAL lockers earned an average of $16,232, and the DAO received $5,411.

The primary drivers for revenue are token prices and DEX trading activity, both of which fell during 2022, going from over $108,000 in daily fees in Q1 to $49,000 in Q4.

Liquidity providers fees

Fee settings are part of the configuration process for setting up new pools on Balancer. The deployer of a pool can make the following decisions:

  • Permanent or variable fees
  • If an entity should control the updates (like Balancer Governance or an external smart contract)
  • The fee amount

balancer 2.30

Governable protocol fees

Governable protocol fees are collected by the Balancer protocol, not liquidity providers.

  • Trading fees are denominated in the input token (the asset you are selling) when executing a trade. Since Balancer traders already pay fees to liquidity providers, there is no price increase from a trader’s perspective. Instead, protocol fees are collected as a percentage of the trade fees. 
    • In Balancer v2, protocol fees are turned off by default. They can be turned on by a governance vote.
    • As of BIP-163, which passed in January 2023, the protocol takes 50% of the trading fees
    • 100% of all BAL fees collected are emitted as fee-sharing revenue for veBAL holders (see governance proposal)
    • All other tokens are sold for USDC, of which 35% are paid to the DAO, and 65% are emitted to BAL holders in the form of bb-a-USD (a  boosted USD balancer pool)
  • Core pool fees. Balancer applies the protocol fee of 50% not only to swaps but also to any yield earned. 
    • BIP-19 introduced core pools, which typically have about 50% in a yield-bearing asset
    • All fees earned except for BAL are sold for USDC
  • 35% of the BAL and USDC collected from fees go to the DAO
    • The remaining BAL and USDC are used to place bribes for votes on the pools that generated those fees
  • Flash loan fees are currently disabled in order to encourage developers to build on Balancer

Distribution of protocol fees

The distribution of protocol fees can be adjusted by governance. As of Q1 2023, protocol fees are distributed as follows:

  • 35% of all collected protocol fees go to the DAO treasury, where they are used primarily to fund DAO operations and allocate funds to Balancer DAOs service providers
  • 65% of all collected protocol fees are paid out to veBAL holders, either in the form of passive fees, or bribes that can be earned on vote markets for directing their votes towards the pools which generate revenue for the DAO through fees on their underlying staked assets.

Possible additional use cases of Balancer protocol fees

  • Deposit fee revenue into Balancer pools
  • Fund Gitcoin grants for protocol improvements
  • Fund advertising campaigns
  • Fund grants to attract strategic partnerships
  • Buy a decentralized insurance policy
  • Lend them on an external protocol
  • Pay them directly to Balancer Governors
  • User them to incentivize deposits through vote markets. See BIP-19

Operating Expenses

balancer 2.31

balancer 2.32

balancer 2.33

Data in the dashboard below represents approved snapshot votes only. Any potential savings or adjustments after snapshot approval are not considered.

Note that forecasts only take into account approved SP proposals. Proposals from Balancer maxis come in right before the next quarter.

Top 20 pools by weekly emissions

balancer 2.34

Tokens

BAL

Balancer Governance Token (BAL) is the core and native token of the Balancer protocol. Its utility comes from aligning the incentives of token holders to come up with governance decisions that are beneficial for the decentralization of the protocol. 

veBAL is an extension of the BAL token and is used for voting in decentralized governance.

BAL token supply

The maximum total supply of BAL tokens enforced at the smart contract level is 100M; however, this does not necessarily mean that this cap will ever be reached. BAL token holders have the authority to decide if the distribution should end before hitting the cap.

At the beginning, there was a weekly inflation of 145,000 BAL tokens. Since the introduction of veBAL in Q1 2022, this is no longer the case. veBAL includes an annual reduction in emissions rates such that the program should run until around 2050. This would leave a total supply of around 94M tokens upon completion (assuming no other governance decision is enacted to mint part of the unallocated supply).

Inflation rate= 0.239 BAL/second = 145,000 BAL/week

Rate reduction coefficient = 1.18920712= 2^0.25

The rate reduction coefficient is applied to the inflation rate every year in order to achieve the desired emission schedule:

balancer 2.35
There is a halving of the token inflation rate every 4 years

 

BAL token distribution

BAL recipient Original allocation State as of Feb 2023
Community 65M 6M remaining
Liquidity providers (veBAL) – allocated by community N/A 4.75M from community fund allocated to veBAL
Founders/investors/advisors 25M No information available
Ecosystem fund 5M Merged into Community Fund
Fundraising fund 5M Merged into Community Fund

balancer 2.36

    • Emissions to liquidity providers as token incentives are decided by a combination of the emissions schedule and veBAL governance voting. This determines the rewards that are directed to each authorized pool.
    • 25M was allocated to the founders, the team, advisors, and investors, all subject to vesting periods

veBAL 

veBAL overview

veBAL (vote-escrow BAL) is a vesting and yield system inspired by Curve’s veCRV mechanism. The system works by locking 80/20 BAL/WETH BPTs for a maximum of 1 year. There is a gauge system built on top that will promote the incentives alignment of long-term holders and facilitate a fair distribution of protocol revenue. This is achieved by voting on those pools that will receive the token incentives.

veBAL is a non-standard ERC20 token and cannot be transferred.

When users lock 80/20 BAL/WETH BPTs they are given veBAL that they can use for governance and implied financial purposes and benefits. The longer the length of the time lock, the higher the multiplier the user gets on their voting power. 

The first step for getting veBAL requires ownership of BAL or WETH tokens to invest in the BAL/WETH 80/20 pool. You can deposit a single asset, which will incur some price impact, or you can deposit both assets in the correct weights. Next, you will time-lock your BPTs and receive veBAL.

Voting power is a function of the amount of pool tokens locked multiplied by the length of the lock period.

A user who locks 1 BPT for 52 weeks will receive the same amount of “vote-escrowed” voting power as someone who locks 2 BPT for 26 weeks.

  • veBAL holders are entitled to receive liquidity mining rewards for all incentivized pools.
    • The APR takes into account the share of the pool and the lock multiplier (or boost).
  • veBAL holders receive 65% of protocol fees (as of BIP-161), including:
    • 50% of swap fees
    • 50% of the yields on yield-bearing tokens in Core Pools
  • veBAL is the governance token used for gauge voting in order to decide which pools receive liquidity mining incentives. veBAL is also used in snapshot voting to authorize changes to the DAO including the management (adding/removing) of gauges and funding of service providers
    • veBAL holders have a gauge to direct rewards to themselves. This option is capped at 10% of total BAL emissions at a given time in the inflation schedule. The overflow, if a vote goes over 10%, will go to the DAO treasury, where governance will have ownership of it.

Despite the revenue for veBAL holders going down in Q4 2022, this did not lead to a decrease in the amount of BAL tokens being locked as veBAL. As of December 31, 2022 96% of all 80/20 BAL/WETH BTPs were locked as veBAL, which accounted for 48% of all outstanding BAL tokens. 

Higher portions of BAL locked as veBAL make BAL price more sensitive to price changes in yield. At the same levels of yield, more BAL locked as veBAL leads to higher appreciation in BAL’s price.

Numerous vote markets allow projects to provide veBAL holders a compensation or incentive to vote in favor of their protocol pools. Examples of these markets are Hiddenhand, Warden, and Votemarket

Cross-chain veBAL

Cross-chain $veBAL boosts were first introduced on May 17, 2023, in collaboration with LayerZero Labs, allowing users to seamlessly sync their $veBAL position and take advantage of $BAL Boosts on Layer 2s. The layer 2 gauge migration was enabled on May 25, 2023.

However, getting and using $veBAL to vest and vote must still be performed on the Ethereum mainnet.

Governance

There are multiple components involved in Balancer’s governance process: the BAL token, veBAL, governable protocol fees, the governance process, snapshot and voting proposals, the protocol multi-sig, and the emergency subDAO.

BAL token

The BAL is the primary mechanism involved in Balancer’s governance. In order to access the voting power of veBAL, users must lock BAL tokens. 

veBAL

veBAL is a time-locked and non-transferable derivative of the 80/20 BAL/ETH BPT on Ethereum mainnet. veBAL holders are called Balancer Governors and can vote on proposals relevant to the protocol, such as what pools to incentivize, how the treasury funds are allocated… 

The longer the asset is locked, the more voting power is delegated by the system.

veBAL voting function

balancer 2.37 e1678355999443

 

veBAL holdings remain relatively concentrated in top holders, with Aura, a protocol that offers a liquid wrapper for veBAL, being the largest holder.

In November 2022, Aura passed a proposal that would increase Aura’s voting power in governance votes (but not gauge votes) by making it a voting block instead of individual voters. Prior to this change, holders of vlAURA could participate in governance with their share of the voting power. After the change, all Aura voting power will be used to vote on whatever decision is reached by vlAURA holders.

One of the known issues of veTokenomics is that it is difficult to align the incentives of token lockers, which control the allocation of rewards, with protocol revenue. Balancer has attempted to keep lockers aligned and limit their ability to manipulate small pools. However, the control of voting power and centralization risk due to some wallets having the majority of the voting power still remains an issue.

A large holder of veBAL, “the Humpy whale”, used the veBAL system to direct $1.8M of cumulative BAL emissions to the CREAM/WETH gauge. This left Balancer with only $17,000 of protocol revenue.

The standoff against “the Humpy Whale” concluded with a Peace Treaty in which the whale agreed not to increase its veBAL position and would vote for the pools that are most beneficial for the long-term success of Balancer.

Governable protocol fees

Balancer Governors have the power to enable and modify Governable protocol fees. These can be collected from trading fees and flash loan fees stored in the Balancer Vault. veBAL holders can also make decisions about how to allocate or spend the revenue from these fees in order to support the health and growth of the protocol.

Governance process

All updates to the core protocol and allocations of community funds follow a governance process that involves: a proposal, a prepaid transaction payload for on-chain execution via gnosis-safe, and a snapshot vote validating the proposal with a quorum that currently stands at least 2M veBAL voting.

 

​balancer 2.38

  1. Post a Request for Comment in the Balancer governance forum
  2. Have a preliminary discussion with community members. Considering contacting Balancer delegates to obtain their support
  3. Update and improve the initial Request for Comment to become a Proposal. A pull request must be submitted to the Multisig Ops Repo (with technical help from Balancer contributors). The pull request will post a transaction to a Gnosis Safe multi-sig that executes the changes specified by the BIP (Balancer Improvement Proposal) on-chain.
  4. The Snapshot vote must be started by an address that holds at least 200,000 veBAL. Even if there is a majority of votes in favor, a proposal cannot go through unless it meets the requirements below
    1. A link to the discussion forum is required
    2. The BIP is titled like BIP-[XXX] Title from forum, where XXX is the next number in the BIP sequence
    3. Runs for 96 hours (starts on Thursday GMT)
    4. Has a quorum of 2M veBAL
  5. Execute results if successful or reject the proposal
    1. If the vote fails, it is recommended for the original proposer to wait at least 30 days before posting another vote.
    2. If the vote succeeds, the governance proposal will be enacted on-chain

Snapshot

Snapshot is an off-chain gasless governance client that makes it easy for the DAO to vote and verify governance polls results

Multi-Sig

The multi-sig is required to enact the off-chain votes on Snapshot. 

Balancer’s multi-sig signers are a diverse set of respected community members.

The Balancer multisig does not have decision-making power and its role is solely to enact on-chain the decisions made by governance off-chain.

Emergency subDAO

The Emergency subDAO protects veBAL holders from bad actors by having the ability to kill gauges and pool factories. 

The governance vote only attributed the following specifications:

  • Kill gauges to stop the BAL distribution to a gauge
  • Add tokens to a deny list. This instructs the smart contracts to stop collecting fees for a specific token

BIP-139 allows the Emergency subDAO multi-sig to make the following calls to protocol contracts:

  • Enable recovery mode for pools, in order to provide a simple way to exit pools proportionally at the cost of disabling protocol fees (swaps, joins… still work.
  • Disable pool factory contracts, in order to shut down pool factories. This prevents new pools from being created (existing pools remain unaffected)

The Emergency subDAO is a 4-of-7 multi-sig with the following members appointed by governance
.

Person Address
Solarcurve 0x512fce9B07Ce64590849115EE6B32fd40eC0f5F3
Mike B 0xF01Cc7154e255D20489E091a5aEA10Bc136696a8
Zekraken 0xafFC70b81D54F229A5F50ec07e2c76D2AAAD07Ae
Zen Dragon 0x7c2eA10D3e5922ba3bBBafa39Dc0677353D2AF17
Markus 0x6bB4720473d4D7133f944785e5EE1A650C07f34e
Fernando 0xbbF0Ae5195444264364CA7eb7E3BB1971B4c3eCb
Nico 0x815d654E930E840D0E0Ee1B18FFc8Fb4ddA4c6B3

 

Security

One of the most important decisions that protocols must make when deciding between building a standalone AMM vs building on top of Balancer is security. Even assuming secure code at the smart contract level is not enough to achieve a robust user base and sticky liquidity for large sources of capital. 

Balancer v2 has been live for almost 2 years and has one of the largest bug bounties. Its codebase has also been extensively audited by top smart contract auditing firms such as Trail of Bits or Certora.

Audit

Balancer has undergone multiple audits by Certora, OpenZeppelin, Trail of Bits, and ABKD.

Balancer also has a bug bounty program in partnership with Immunefi (a Web3 bug bounty platform), since May 12, 2022.

Rewards are distributed according to the impact of the vulnerability based on the Immunefi Vulnerability Severity Classification System V2.2, which has a simplified 5-level scale, with separate scales for websites/apps, smart contracts, and blockchains/DLTs, focusing on the impact of the vulnerability reported. The system is classified into the following:

  • Critical:
    • Up to 1k ETH.
    • PoC (Proof of Concept) is required.
  • High:
    • Up to 250 ETH.
    • PoC required.
  • Medium
    • 25 ETH
    • No PoC is required.

Known payouts:

  • Issue with stable and managed pools disclosed by white hat hackers. User funds were not at risk and the exploit could only have been executed by pool owners or Balancer Governance itself.
    • Some pool parameters can be dynamically set by the owner of the pool, such as swap fees, amplification factor in stable pools, token weights in managed pools…
    • Since the pool owner is set when the pool is created and cannot be modified afterward, the parameters of pools owned by the null address are immutable
    • Balancer Labs engineered a fix for the vulnerability. New versions of the affected stable pools would be deployed within the next couple of weeks and liquidity providers would be advised to migrate their funds at that time.
    • High severity; the white hat hackers were paid a cumulative 100k USD.
  • Issue related to a potential Denial of Service (DoS) scenario that involved double entry-point ERC20 tokens, including but not limited to Synthetix tokens (e.g. SNX, sBTC) and Balancer Flash Loans.
    • The Balancer Labs team created a contract to move the affected funds and restore normal operation.
    • Medium severity; hacker paid 50k USD. 

Balancer also launched the Balancer Certora Security Accelerator in partnership with Certora, on October 10, 2022. 

The Security Accelerator helps projects building on Balancer to increase their code security by providing code reviews and grants access to Certora’s formal verification Prover. The benefits offered are:

  • Two weeks of manual code review by Certora engineers familiar with Balancer’s codebase.
  • Introduction of Certora’s formal verification Prover.
  • $10.000 USD worth of credits for Certora’s formal verification Prover.
  • Integration assistance by Balancer on code functionality and business logic.

Economic Attack Vectors

The Balancer Vault keeps pool balances independent from one another while inheriting the benefits of a single contract vault model.

Dependencies and Access Controls

Balancer governance has no control over any given pool parameters unless explicitly authorized. The core of Balance smart contracts is immutable and does not use proxies or any other upgrade mechanisms. 

Balancer’s multi-sig does not have custody of, nor control over, funds from liquidity providers that like inside Balancer smart contracts. Even if Balancer’s multi-sig goes rogue, all the liquidity is safe and can be withdrawn by its rightful owner.

Before the release of Balancer v2, Balancer v1 contracts were fully immutable and there was no need to change and vote on core protocol parameters, hence the governance focus on reaching a fair token distribution

Balancer v2 allows for parameter changes, such as turning on protocol fees. As a placeholder for a future on-chain DAO, limited admin powers have been granted to the Balancer multi-sig.

Balancer governance is managed by a collection of multi-sigs that are activated by 2 different signer sets. These multi-sigs have no decision-making power and simply serve the role of enacting and operating on-chain the decisions that have been voted by BAL holders.

All Balancer multi-sigs are deployed using Gnosis Safe, the most battle-tested multi-sig contract on Ethereum. 

  • The DAO and treasury multi-sigs that can change protocol parameters or access treasury funds require 6-of-11 signers. 
  • Balancer multi-sig signers are widely respected community members
  • The DAO Multisig Signer Set and associated multi-sigs are reserved for major changes to protocol operations and management of treasury funds.

DAO multi-sig signer set

Signer Association  Address
Alexander Lange Inflection 0x3ABDc84Dd15b0058B281D7e26CCc3932cfb268aA
0xMaki LayerZero, AURA, DCV 0x285b7EEa81a5B66B62e7276a24c1e0F83F7409c1
Solarcurve Balancer Maxis 0x512fce9B07Ce64590849115EE6B32fd40eC0f5F3
Evan Fjord 0x59693BA1A5764e087CE166ac0E0085Fc071B9ea7
Ernesto BGD 0xA39a62304d8d43B35114ad7bd1258B0E50e139b3
Mounir  Paraswap 0x0951FF0835302929d6c0162b3d2495A85e38ec3A
Trent McConaghy Ocean Protocol 0x478eC43c6867c2884f87B21c164f1fD1308bD9a3
Stefan  Gnosis 0x9F7dfAb2222A473284205cdDF08a677726d786A0
Bonustrack87  Snapshot 0x9BE6ff2A1D5139Eda96339E2644dC1F05d803600
Nanexcoool Ethereum OG 0x823DF0278e4998cD0D06FB857fBD51e85b18A250
David Gerai  Nostra Finance 0xAc1aA53108712d7f38093A67d380aD54B562a650

 

Beyond the current signers, BIP-16 laid out a group of backup signers who could replace the current signers without further governance.

DAO multi-sigs always require 6/11 signers to execute a transaction.

Signer duties:

All signers are expected to sign an Ethereum transaction ratifying each governance decision made by BAL holders through off-chain Snapshot votes. 

All signatures are expected to have been collected within two weeks after the snapshot vote was concluded. 

Signers are encouraged to sign open requests even if the quorum has been reached.

Signers can lose their role (by the action of the other multi-sig signers) in cases where:

  • The signer acts against the decisions made by BAL token holders.
  • The signer goes through 3 months or 2 votes (whichever takes longer) without performing any of their signer duties.

Multisig powers

  • Set a share of swap fees to be diverted to the protocol (hard-capped at 50% of the swap fee
  • Set a flash loan fee
  • Transfer the fees or excess balances collected from the Vault (e.g. airdrops) to any given address
  • Set the address of the Oracle implementation
  • Set relayer addresses; relayers are contracts that can make calls to the Vault
  • Set dynamic fee controllers (initially assigned to Gauntlet)
  • Add  and remove veBAL gauges

Composability Vulnerability

August 27th, 2023 Incident 

Balancer relies on composability in order to customize its various pools, building and leveraging multiple products together.

This is a vulnerability due to how a simple bug can affect multiple products due to the same strength.

The following series of events shows how Balancer was affected by composability.

On June 23rd, Balancer Labs received a report through Immunefi from GothicShanon89238, indicating that some types of rate providers could be manipulated, with consequences for certain Balancer pools. This was fully mitigated mainly by releasing a new version of the Composable Stable Pool in July. The white hat was awarded a bounty of $130k USD for this disclosure.

On August 11, the same white hat filed another related rate manipulation report. This issue was entirely different and, unfortunately, more fundamental. The problem this time was not the Stable Pool itself, but rather its constituents: the nested Linear Pools that transformed regular Stable Pools into capital-efficient Boosted Pools. Essentially all Boosted Pools were vulnerable, representing north of 20% of Balancer’s $1 Billion TVL at the time.

Fortunately, pools representing over 80% of that TVL could be mitigated, and much of the remaining 20% was held by close partners or known LPs (e.g., DAOs), and would likely be withdrawn quickly after public disclosure. Unfortunately, it would not be easy. The specific mitigation measures required were complex and required very precise coordination.

In light of this, a team of ecosystem contributors carefully considered conducting their own white hat rescue and prepared some contracts and scripts for this purpose. However, it quickly became apparent that this was entirely infeasible.

The attack comprised dozens of steps and needed to be very precisely tailored to each pool. The sheer number of pools and networks made such an effort untenable. Even worse, since these were “constituent” pools, emptying them would unbalance the containers, and arb bots might drain value as fast as we could save it. Not to mention that a white hack would directly expose the attack vector, and we would not have time to warn partners.

Since Balancer was confident that virtually all of the liquidity at risk could either be directly mitigated or would be quickly withdrawn after disclosure, that is the path they pursued. GothicShanon89238 earned the maximum $1 million bounty for responsible disclosure and assistance with evaluating the mitigation plan.

On August 22nd, the Emergency SubDAO and other trusted parties performed all possible mitigation measures, disclosed the vulnerability, and provided a UI for streamlined withdrawals, including handling staking and nested pools. This effort succeeded beyond all expectations. The vast majority of funds at risk were withdrawn within 48 hours, leaving only a tiny sliver of the original frightening fraction of the Vault still at risk.

However, on August 27, the first exploit happened.  The mainnet USD-boosted pools were attacked, involving rate manipulation but with a very different mechanism. Balancer promptly disclosed the exploit and urged any remaining LPs to exit. This was Balancer’s first loss of user funds in history. The total Mainnet loss stands at around $980,000, with another $215,000 on Optimism. (When the issue was first disclosed immediately after mitigation, over $40 million remained at risk.)

Screenshot 2023 10 19 155943

Team

Balancer Labs is the team behind the Balancer Protocol. They started the research and development of Balancer back in 2018. Since its inception, the code has been open-source and under GPL 3.0 license.

Orb Collective is also a key organization whose mission is to scale the global utilization of the Balancer Protocol. Orb Collective is made up of the former Balancer Labs marketing, integrations, business development, people operations, and UX/design teams. 

Some team members include：

  • Fernando Martinelli, Co-Founder, and CEO.
    • Has a Degree in engineering, Control, and Automation from the Federal University of Santa Catarina.
    • Has multiple Masters in Robotics and Image Processing, from Heriot-Watt University, University of Burgundy, and University of Girona. 
    • Has an Executive MBA in International Management from the University of Paris.
    • Previously Co-Founded Brasil Mate, a beverage manufacturer.
    • Previously Co-Founded PrepLounge, a case interview community platform.
    • Previous experience includes Bain & Company, Honda Research Institute Europe, Areva, and NEO Empresarial.
  • Late Nicolai Mushegian – Co-Founder.
  • Markus Buhatem Koch – Head of Product
    • Has a Degree in Mechanical and Industrial Engineering from Arts et Métiers ParisTech and a Degree in Industrial Automation from the Federal University of Santa Catarina.
    • Previously Founded and worked as Product Manager for Mobwave.
    • Previous experience includes a Research role at BlockScience, Director of Planning, Chief Data Scientist, and Auditor at Tribunal de Contas da União.
  • Nicolas Venturo – Blockchain Engineer at Balancer Labs
    • Engineer’s degree as Electronic Engineer, focus on mechatronics and control.
    • Bachelor’s degree in Electrical and Electronics Engineering.
    • Previous experience at OpenZeppelin, the most widely adopted library for Solidity smart contracts.
    • Former firmware engineer at Bluesmart.
    • Former firmware engineer at SURIX SRL.
    • Former embedded software engineer at Cran.io
  • Bruno Eidam Guerios – Software engineer
  • John Grant – software engineer
  • Giles De Weerdt – Copywriter
  • Jeremy Musighi – CEO of Orb Collective
    • Former Balancer Labs Head of Growth.
    • Former Chief Investment Officer at Immutable Capital.
    • Former Board Member at Mastery Coding – an education technology company building career-ready skills in fields such as Blockchain, VR/AR, and cybersecurity.
  • Meghan Gardler – Director of Marketing & Communications at Orb Collective
    • Has a Degree in English Language and Literature from the University of Connecticut.
    • Previous experience includes being Head of Marketing at Stockpile, being Senior Director of Marketing at another blockchain-related company, and being a freelance Crypto Marketing & Communications Consultant.
  • Joao Bruno About Hatem de Liz – Integrations engineer at Orb Collective
  • Bailey Spraggins – Software engineer at Orb Collective
  • Megan Moran – Marketing and Communications manager at Orb Collective
    • Journalism and Public Relations at California State University. Minor in Marketing and applied communication.
    • Former Marketing and Communications manager at Balancer Labs
    • Former digital marketing coordinator at OpenInvest.
  • Elissa Greenfield – Ecosystem and People operations at Orb Collective
    • Former people and operations partner at Balancer Labs
    • Previous experience at Homebound and Thumbtack

Project Investors

Balancer has raised a total of $39.25M in funding over 3 rounds:

The Venture Round in May 2021 raised $24.25 led by Blockchain Capital, Continue Capital, Fenbushi Capital, FinTech Collective, Kain Warwick, and LongHash Ventures.

Series A in February 2021 raised $12M by Alameda Research, Pantera Capital, DeFiance Capital, and Three Arrows Capital. 

The Seed Round in March 2020 raised $3M led by Accomplice and Placeholder and followed by CoinFund and Inflection.

Additional Information

Partnerships

Balancer has had multiple partners and integrations, mostly via the Balancer’s Ecosystem Grant funds. They include:

  • DEX.AG – DEX aggregator.
  • 1inch – DEX aggregator,
  • Zapper Finance – Front-end interface that facilitates transactions directly through multiple DeFi protocols.
  • Hummmingbot – Open source software that helps build high-frequency crypto trading bots that specialize in market-making and arbitrage strategies
  • AAVE – Decentralized non-custodial liquidity market protocol where users can participate as suppliers or borrowers.
  • UMA – Optimistic Oracle built for Web3.
  • ElementFi – Open source protocol for fixed and variable yield markets.
  • PieDAO – A decentralized autonomous organization, or DAO, that develops, governs, and grows DeFi products.
  • PrimeDAO – Tools that turn DeFi into a cooperative ecosystem.
  • Catnip Exchange – OnChain prediction markets.
  • Gauntlet – A financial modeling platform that uses battle-tested techniques from the algorithmic trading industry to inform on-chain protocol management.
  • TokenEngineering Academy – A spin-off of the TokenEngineering Community, offers education and training programs for a new generation of engineers.
  • WallStreetBets App – Blockchain-based trading platform connected to the iconic WallStreetBets grassroots movement.
  • HaloDAO – Democratize access in DeFi and begins with supporting liquidity growth for a wider variety of local stablecoins.
  • Indexed – Exposure to a passively managed, zero management fee crypto index portfolio with a single token. Indexed products offer a hassle-free, battle-tested way of getting into DeFi and niche market sectors such as oracles or the metaverse.
  • dHEDGE – Social asset management.
  • Tempus Finance – Builds DeFi products through organic collaboration between the Tempus Labs team and our community.
  • Rabbithole – The platform allows users to get familiar with the most important skills and protocols in DeFi while earning some of the protocol tokens in the process.
  • mStable – A decentralized stablecoin ecosystem. The protocol offers swap, save, and protection for stable assets with their flagship asset being mUSD.
  • Cow Protocol – Finds the lowest prices across all exchanges and aggregators.
  • Merit Circle – Investing, gaming, building, and trading in web3.
  • Fei DAO – Highly scalable, fully decentralized stablecoin.
  • Copper – Permissionless token launch platform.
  • Olympus DAO – Olympus is building OHM, a community-owned, decentralized, and censorship-resistant reserve currency that is asset-backed, deeply liquid and used widely across Web3.
  • Beethoven X –  Official friendly fork built on top of Balancer.
  • Certora – Cetora uses its automated Prover technology to routinely audit codes and check for smart contract bugs. This technology reduces the margin for error found in manual audits.
  • Tranchess – A yield-enhancing asset tracker protocol with liquid staking and structured products.
  • HoldrFi – Next-generation AMM built on Balancer, pushing the capabilities of the Balancer’s technology to its full extent.
  • GammaSwap – Oracle free volatility DEX enabling LPs to earn better risk-adjusted returns and traders to buy options on any token without liquidation risk if the price moves against them.
  • Yearn Finance – A decentralized suite of products helping individuals, DAOs, and other protocols earn a yield on their digital assets.
  • Notional Finance – Fixed rate lending protocol.
  • Kassandra Finance – A marketplace for tokenized index funds, bringing a new and simplified approach to decentralized asset management.
  • Dynamo – A yield generation platform that aims to serve liquidity providers by turning their previously idle liquidity into an active resource through the use of lending markets.
  • Boot Finance – Bootstrapping liquidity by giving projects monetary policy tools.
  • Sturdy Finance – By offering interest-bearing tokens as collateral, Sturdy enables DeFi’s best-yield farmers to farm with up to 10x leverage on projects like Convex and Aura.
  • MEV Blocker – An RPC endpoint protecting users from MEV attacks, including frontrunning and sandwich attacks, for all types of dApps and Ethereum transactions.

Ecosystem participants

  • Balancer Labs is the original entity and core contributor that developed the protocol. Currently, Balancer Labs is focused entirely on fostering the open-source development and open governance processes that nurture the protocol.
  • Orb Collective is an independent entity created by former Balanceer Labs employees and Balancer DAO contributors. The mission of the Orb collective is to scale the global utilization of the Balancer protocol.
  • Balancer Foundation provides the DAO with an additional mechanism to build resilience around the main objective to reach full decentralization of the protocol
  • Balancer OpCo is a fully-owned subsidiary of the Balancer Foundation. As part of its corporate structure, its goal is to help on the Administrative and Operational functions of the Balancer Foundation as well as to support the Development and Engineering workstreams
  • Balancer DAO is the decentralized autonomous organization that encompasses the global Balancer community. Its architecture features multiple sub-DAOs specialized on different domains. All decisions are made through a governance voting process. This allows the community to make decisions related to appointments or removals of contributors in any of the sub-DAOs.
  • The emergency subDAO involves a 4-of-7 multi-sig that can “kill” pools and gauges in the event of malicious activity or potential loss of funds.

Balancer Grants

The Balancer Grants program provides grants between $1,000 – $100,000 to projects committed to supporting Balancer Protocol in achieving its mission to become the top platform for programmable liquidity in DeFi. 

Grant applications are reviewed by the Grants Committee, which consists of 5 Balancer Community Contributors. Applications are reviewed based on the reasonable viability of a grant plan, its alignment with Balancer’s vision, and the capability of the Grants team to execute the project.

Approved grants:

Wave 1: 

Wave 2:

Wave 3:

Wave 4:

Wave 5:

Wave 6: 

Wave 7:

FAQ

  • What do I need to be eligible to vote?
    • Locking BAL into veBAL.
    • Holding BPT in your wallet for a liquidity pool with BAL in it.
    • Getting voting power delegated to you by another wallet.
  • When do votes happen?
    • Votes happen when there is a proposal to vote on; they are not regularly scheduled.
    • When there are active votes, they usually happen over the weekend; they are announced on forums, Discord, and Twitter.
  • Why does a single-asset liquidity contribution cause slippage?
    • Because they change the balance for one asset in the pool while the balance of the other assets remains constant. This is because the prices for those assets are directly affected by token balances.
    • For example, if you enter a 50/50 USDC/DAI pool that has 1,000 units of each asset, then if you enter with 100 USDC and 100 DAI, the price stays the same(since the ratios are matched; 1,100/1,100 = 1,000/1,000). But if you enter with 200 DAI, the pool will be unbalanced at 1,200 DAI and 1,000 USDC, which shifts the spot price of the pool to 1.2 DAI for 1 USDC (a 20% price impact).
  • How is veBAL different from veCRV?
    • Instead of locking BAL, users obtain veBAL by locking 80/20 BAL/WETH BPTs. This ensures that even if a large portion of BAL tokens are locked, there is deep trading liquidity.
    • veBAL’s maximum locking period is 1 year, compared to the 4 years of veCRV. The minimum period is 1 week. 
  • How do veBAL holders vote on the emissions that should go to each network?
    • Voters determine the amount of emission going to gauge listed pools on each chain (Ethereum, Polygon, and Arbitrum), but the actual voting happens on Ethereum mainnet (because the contracts to read veBAL balances are only deployed on Ethereum mainnet).
  • If I have veBAL on Ethereum mainnet, does it boost my farming on Arbitrum and Polygon?
    • No. Only gauges on Ethereum mainnet receive incentive boosts because the contracts that read veBAL balances are only deployed on Ethereum.
    • The boost that you get depends on your share of the staked liquidity and the fraction of veBAL you hold.
  • Are governance decisions made on-chain? What about gas costs?
    • Gauge votes are done on-chain and cost a fee. 
    • If the same pools are selected each week, there is no need to cast an additional vote and, therefore, no need to execute transactions.
    • Other governance decisions are done by Snapshot and there are no associated gas costs.
  • Can veBAL voting power be delegated?
  • How much BAL/WETH BPT do I stake to maximize my voting power?  What amount of tokens should I stake and lock for 1 year to hit the 2.5x multiplier for liquidity incentives?
    • Voting power is determined by assigning 1 veBAL for a 52-week lock of 1 BPT, where a 1-week lock gives 1/52 veBAL.
    • LM boosts are related to your share of the pool as well as to your share of veBAL, with the range multiplier being from 1x to 2.5x.

Community Links