Balancer is a non-custodial automated market maker (AMM) protocol built on the Ethereum blockchain that purportedly aims to also operate as a decentralized exchange (DEX). It allows users to make liquidity pools with up to eight different tokens in any ratio.
Balancer Pools act like index funds, exposing users to a wide range of tokens. Unlike traditional index funds, however, they collect fees, thereby continually rebalancing the liquidity they contain.
These pools are reportedly aligned to trading strategies â for example, weighted pools are supposed to provide token versatility, enabling users to build pools with different weightage than the standard 50/50. This allows users to choose to expose certain assets while still providing liquidity, which Balancer says gives them more control over impermanent loss.
The Balancer vault separates the pools from token accounting and management, simplifying pool contracts and accommodating new pool designs in the process. This also eliminates the need for a protocol with an innovative trading system to build its own DEX by facilitating a direct connection to Balancer. #BAL $BAL
