It doesn’t take a software engineer to understand why the new version of Balancer marks a cool innovation in on-chain trading for Ethereum tokens.
Balancer, a non-custodial portfolio manager, is releasing version 2.0, which puts all the assets entrusted to it in one big vault. This should dramatically reduce gas fees for decentralized finance (DeFi) trades because users can swap as much as they want, only paying gas for going into and out of Balancer.
The team had considered building it this way from the start but decided initially to be conservative and separate out each pool for added security, CEO Fernando Martinelli told CoinDesk.
“We are today … comfortable enough with having a big vault that holds a lot of money. We put a lot of effort into making this as safe as if the assets were siloed,” he wrote in an email. “Many other protocols (not AMMs) already do this: lending protocols, collateral in MakerDAO, etc.”
Balancer works much like (and can serve the function of) an automated market maker (AMM) like Uniswap or Curve but it allows users to create pools of multiple tokens, weighted as they see fit. The pools automatically rebalance as needed in order to stay in line with the market.
This requires making a lot of transactions, which in turn