UNDERSTADING BALANCER || 10% beneficiary to tron-fan-club

INTRODUCTION

Hello friends, in today discussion, I am go to work you through what balancer is, how it works, what makes it better, features and it tokenomics. I hope you find this interesting to read and I hope you will learn something from it.

WHAT IS BALANCER?

Balancer work ethereum network and it decentralized exchange application that use automated market maker and what the algorithm does is allow traders swap there token in an efficient way. It this sound complex, I will explain it is a simple way.

LIQUIDITY AND HOW DOES IT WORK

As some of you would know that a decentralized application don't use order book model. For those who doesn't already, it is a buyer or seller write the price they wants to buy or sell, the trade might take a while before executing because you have to find another person who want to buy at your price. You can also choose an already written price to make your trade fast. With the disadvantage of having to wait awhile for another person to accept your price made developers come up with a special algorithm called automated market maker. It always have crypto to sell you.

How it works is that they we create a pool asset and it usually have two cryptocurrency that users deposited willingly so that other people can have asset to trade and liquidity providers earn from the transactions fees. All transactions are automated and it use a special formula of X×Y=K. In simple explanation of how this algorithm works is that it will keep charging you as you buy higher price. For instance, you can buy $1 dollar worth of ETH with your USDT at an average price of $2,000 per ETH and go back to the same pool to buy another $10 worth of ETH, you may buy it at an average price of $2,004 per ETH. This strategy in done for the pool not to run out of an asset because the more buy, the higher it charge you. Since you have use the platform multiple time to trade and raised the price a asset, other people could come to this platform and sell their ETH at higher price to that pool, given the liquidity pool more ETHand it also take USDT.

What makes Balancer better?

Balancer has multi asset pool which mean can deposit more than two crypto currencies. Decentralized finance like Pancakeswap, Sushiswap, Uniswap was only allow users to deposit two cryptocurrencies not until they figure out a way to allow users to trade from one pool to another and it is called routine. The strategy of balancer is even better because it allows you to deposit up to 8 cryptocurrencies into a pool.

The math that makes this strategy to work is X×Y=K and it is called weighted math. What the math does is to check whether an asset have price correlation.

FEATURES OF BALANCER

• Portfolio Manager

The pool let us create a synthetic index fund of crypto token, we don't have to worry about it because it will automatically manage and balance itself. Just as mention earlier, you will some little amount when other users use your liquidity to balance their price. Although, the amount be may be small but it will definitely add up over a year. You should also know that liquidity provides could experience impermanent loss.

• Different Ratio

Difference ratio mean is that balancer let you create a pool with customized weight. In other words. As some of you may know to that some decentralized finance like Sushiswap, Pancakeswap, and Uniswap are weighted 50/50. Like i said balance does a better job because you can customize your own pool with custom ratio. This balancer feature help to reduce impermanent loss because the traders have the advantage to of set their own ratio.

• Liquidity Bootstrapping pools

This is when assets in the liquidity pool rebalance automatically. Liquidity Bootstrapping pools are used for newly created token, it is because they don't newly created token or project. They can only start the pool with 10% trust token and 90% of new token so as to low the risk of impermanent loss. As the token start to gain more trust over a period of time, it will begin to drop lower and lower until reach 50/50.

Tokenomics

Balancer is not only on ethereum, it is also of other networks like Polygon, and Arbitrarum. Balancer token has maximum supply of 100 million of which 35 million of it was minted at launch and the remain 65 million will shared to to the liquidity providers.

CONCLUSION

The technology that balancer has brought to the world of DeFi is amazing. I has made investor to use the DeFi world even more with it useful features that would interest investors. Balancer features are better than other DeFi like Pancakeswap, Sushiswap, and Uniswap. I hope you have learn something about Balancer and how is works.

Regards:
@olatunde1 ❤