What is Balancer?
Balancer is a decentralized exchange (DEX) built on Ethereum. It allows anyone to trade at prices determined automatically by the market. Users can also earn governance token rewards (BAL) for providing liquidity to Balancer.
Argent's integration allows you to add liquidity to Balancer. You can also benefit from Balancer by using our in-app exchange, as that aggregates the best rates across 10 decentralized exchanges, of which Balancer is one.
How does Balancer work?
Balancer is an Automated Market Maker (AMM), a smart contract which uses liquidity pools to trade by an algorithm, instead of the traditional order-book model like an exchange. Other popular AMMs include Uniswap, Kyber Network and Curve Finance.
Balancer differs from platforms like Uniswap as it allows for uneven weighting of assets in a liquidity pool (such as 80/20 instead of just 50/50 like Uniswap). It also lets you have more assets (up to 8) in a single Liquidity Pool token. Currently in Argent the highest is 3.
What is BAL?
The Balancer Protocol Governance Token (BAL) is the native governance token for Balancer. BAL holders can vote on proposals submitted by the community. It's an ERC-20 token, which means you can trade, invest and transfer it in Argent.
You can read more about BAL on Balancer's website.
Can I earn BAL for contributing liquidity in Argent?
Yes! Every week, 145k BAL is distributed across all users (not just those in Argent) with liquidity in Balancer pools. This totals to 7.5m BAL a year.
Head over to https://claim.balancer.finance/ to claim your BAL from liquidity mining. You can connect Argent to this interface using WalletConnect (just click 'Connect Wallet', select WalletConnect, then scan the QR code.
You can read more about BAL Liquidity Mining here.
How to use Balancer in Argent
- Tap 'Invest' in Argent
- Select a pool to invest in. Pools are sorted by liquidity and the ratio is shown next to the tokens (Eg. WBTC/WETH 50/50)
- Tap 'Buy Investment', note that you will need to own at least one of the tokens in the pair (your ETH will automatically be wrapped into wETH by Argent)
- Select the token you wish to use, and enter the amount you want to invest.
Balancer and impermanent loss
Using Balancer means you are exposed to more risk than just by holding a token in your wallet.
One of these risks is 'impermanent loss', which means you might make less from putting your tokens in an AMM than if you had just held them.
The higher the weight (proportion) of a token in the pool, the lower the risk between holding the token and providing liquidity in the token becomes. If one token price changes in the pool, an arbitrage opportunity emerges, incentivizing balancing of the AMM (and resulting in a loss for the liquidity providers). However, uneven splits also can incur more slippage.
You can read more about impermanent loss here.
FAQ
Can I also trade using Balancer in Argent?
Yes! Trades in Argent may be routed through Balancer automatically when you trade with our decentralized exchange aggregator. You can also use the Balancer trade interface here with your Argent wallet. Just click 'Connect Wallet', then select WalletConnect and scan the QR code from Argent.
Can I add one token to be automatically split, like with Uniswap liquidity?
The token you invest is automatically split into ratio of the pool (eg. 20% WETH, 80% BAL).
Is every Balancer Liquidity pool available in Argent?
We have started with 20 pools and will add more in the future. You can still add liquidity to other pools via WalletConnect on the Balancer web interface. Got a pool you want to see added? Let us know in the Argent Discord channel.
When I sell what token will I get back?
The token you'll receive will be shown on the sell page in the description.
When you sell, you'll receive the token that has the highest distribution in the pool (in the example above, they would get BAL). If ratio is 50% WETH : 50% DAI, we will payout in DAI.
How does Balancer make money?
Balancer does not currently charge a fee for Liquidity Pools (these are set by the LP creator) they are funded by venture capital firms including placeholder.vc, Accomplice, CoinFund, and Inflection. 5m BAL tokens have been allocated to the Balancer Ecosystem Fund and Fundraising Fund to support ongoing operations.
What are the risks of using Balancer?
Balancer advises that, as it's a new protocol, users planning to invest only do so in small amounts to start. The smart contract code has been audited by independent auditors Consensys Diligence, Trail of Bits, and Open Zeppelin. Balancer states there are "no admin controls, upgradeability, or shutdowns" built into their smart contracts.
One risk of Balancer is impermanent loss, which is discussed above. Since Smart Pool operators can, by definition, alter the parameters of the pool during active trading, all require some level of trust in the pool creators (beyond the general smart contract risk) - the more parameters they can change, the more trust is required.
Additional resources
- Bancor on AMMs
- Bankless on Balancer AMMs
- DeFi Pulse on Liquidity Mining in Balancer
- BAL Liquidity Mining (Balancer)
