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Get Paid For Having Your Portfolio Rebalanced with the Balancer Protocol

By 2sats | 2sats | 11 Aug 2021


*obligatory not financial advice*

What is Balancer?

Balancer is a decentralized exchange with an unique feature that allows you to automatically rebalance your portfolio while earning interest with it. The reason why this is awesome is because traditionally people would pay portfolio managers for rebalancing their funds, here you get paid for having your funds rebalanced.

It does that by providing special liquidity pools. Normally, DEXes like Uniswap and Pancakeswap, have liquidity pools with trading pairs of 2 coins that are weighted equally. If you have a pool with 10,000 USDC and 10 ETH, then 1 ETH can be bought there for 1,000 USDC. If you have 11,000 USDC and 9 ETH there, then 1 ETH can be bought for 1,222,22 USDC. Of course there is usually a lot more liquidity in pools and so the change isn't that drastic but If the supply for one token gets lower, then it will rise in price to incentivize traders to sell them this token. This is how prices are made at decentralized exchanges.

An example of the pools avaiable on Balancer

With Balancer you can create pools with up to 8 different coins and they can be weighted differently. You can have pool with 50% Wrapped BTC 40% ETH and 10% USDC. The price for trading the tokens in the pool with also be calculated by an automated market maker, but it takes in account that they are supposed to be weighted differently. If your pool has ETH weighted at 40% and the supply gets lower than that then it will make its price higher relative to the other coins in the pool, if its supply gets higher than then its will make its price lower relative to the other coins. This will keep your portfolio close to its desired allocation.

Like any other DEX, Balancer uses provided liquidity for trading and lets its liquidity providers earn the trading fees. So Balancer uses traders to rebalance your portfolio while letting you earn on their fees.

The BAL token

Just like Uniswap or Compound, Balancer has its own governance token. It gives its holders voting rights for proposed changes to the protocol. There is a max supply of 100M tokens, 35M were used for funding and their given to developers and investors, the remaining 65M will be paid out to liquidity providers as further incentive over the next few years. The paid out rewards are 145K per week, the amount you get depends on how much your funds are relative to all other providers.

The value of the BAL token depends on the success of the Balancer protocol. The more users Balancer has and the more cryptocurrencies are in its pools, the more desirable voting rights for the protocol become. Balancer is a DEX with a unique and useful feature, as such its token has a lot of potential.

 

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2sats
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I am just some bored guy that likes crypto


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I am just some bored guy that likes cryptocurrency

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