What is Balancer (BAL)?
Balancer is an automated market maker (AMM) that allows users to create liquidity pools with up to eight different tokens in any ratio. Balancer pools can be thought of as automatically rebalancing portfolios, where anyone can create or join a decentralized index fund. Fees go to liquidity providers (LPs) instead of intermediary fund managers. The Balancer protocol is governed by the Balancer (BAL) token, which can be earned via liquidity mining by depositing cryptocurrencies into Balancer’s liquidity pools.
Balancer pools function as weighted index funds for the DeFi ecosystem, and can maintain portfolios of up to eight different ERC-20 tokens. Instead of manually rebalancing liquidity pools like a traditional index fund, Balancer uses its constant mean market maker equation to automatically rebalance assets within pools via algorithm every time a trade is made — this occurs thousands of times per day. The state of constant rebalancing helps ensure an active market with trading opportunities, which benefits both LPs and traders. BAL token is an ERC-20 token based on Ethereum.
Real World Example:
Balancers' native token BAL is a governance token. BAL holders have voting rights on proposed changes to the protocol. Proposals are pieces of finished code that are implemented as soon as enough BAL holders vote for their implementation. Users of the Balancer protocol receive BAL tokens for providing liquidity on the network.
At the time of writing there is over $3 billion worth of cryptocurrencies locked in the Balancer protocol.
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