What is Balancer?

Balancer is an Ethereum-based automated market maker (AMM) protocol that enables users to trade and manage crypto. Balancer now supports multiple chains, including Polygon, Arbitrum, Avalanche, Optimism and other L2s, offering users broader access across DeFi ecosystems. Balancer pools can be thought of as automatically rebalancing portfolios, wherein anyone can create or join a decentralized index fund and fees go to liquidity providers instead of intermediary fund managers.

Main features

The most crucial feature of Balancer is its set of algorithms that control and stimulate interactions between traders, liquidity providers and pools according to two objectives: rebalancing pools and finding the best price across multiple platforms.

The Balancer Protocol can be used in these use cases:

• Decentralized exchanges. With no KYC or signups, anonymity and privacy are upheld.
• Liquidity pools that operate as an index fund or an ETF.
• Liquidity bootstrapping. The idea is to create deep liquidity and a more diverse distribution for newly launched projects. This solution provides a project’s team with more control and flexibility in terms of token distribution.
• Boosted pools. In 2024, Balancer introduced enhanced boosted pools, which optimize capital efficiency by using idle liquidity to generate yield, especially for stablecoins. This development aligns with its goal to continually offer advanced liquidity solutions.