In search of a new Defi Protocol? Balancer is a permissionless, decentralized Protocol built on the Ethereum blockchain. It can act as a non-custodial portfolio manager, a liquidity provider, and a price sensor all in one. Balancer includes investment pools, flash loans, analytics, and more. Find out if you should dive into thos DeFi Protocol with our complete Balancer review.
Balancer is a permissionless decentralized Protocol and non-custodial portfolio manager, liquidity provider, and price sensor built on the Ethereum blockchain, though the protocol is also accessible through Polygon and Arbitrum. Balancer allows for automated portfolio management by turning the concept of an index fund on its head. Traditionally, investors pay fees to portfolio managers to rebalance their portfolio, but Balancer allows investors to collect fees from traders who rebalance their portfolio for them by following arbitrage opportunities. In addition to pools and an exchange, Balancer also offers detailed crypto analytics and flash loans.
The Balancer trading app supports hundreds of Ethereum-based tokens and resembles the classic DeFi exchange interface as seen on platforms like PancakeSwap. Balancer even has a similar line graph chart next to the order panel, but it isn’t quite as good, which isn’t necessarily a testament to PancakeSwap’s platform as both are hardly useful, especially if you’re a trader. Most platform’s with charts, even if they are just line charts, show the price of specific assets, but Balancer’s charts are for pairs, so they don’t serve the same purpose and may not be of much use. Nevertheless, Balancer does offer you some order parameters related to slippage, choice of liquidity pool, and legacy vs. EIP1559 transaction type. They don’t, however, offer limit orders or any other order features.
Balancer has a huge number of liquidity pools for investors to earn yield. Most pools are pairs, but some have multiple assets similar to Curve Finance.
APYs for pools are fairly standard and on par with the likes of Uniswap, 1inch, or the like, with a range of a few basis points up to the higher end of 80% with the occasional triple digit outlier. Like many pooling protocols, you also have the option to create your own pool, and they even let you outline the specific weightings you want, which is very unique.
A unique feature of Balancer originally created by Aave are flash loans or uncollateralized loans that must be repaid (plus interest) in the same transaction as they are borrowed. Anyone who identifies a price discrepancy in two Balancer pools can execute a flash swap. An arbitrageur who makes a flash swap does not need to hold any of the input tokens that one would normally need to make a trade. Instead, the trader identifies the imbalance, tells the Vault (smart contact core of Balancer) to make the swap, and is rewarded with the profit. Flash loans will probably be best left to the arbitrage experts out there, but it is a great feature and not commonly found on platforms.
Though not heavily advertised, Balancer has linked up with Dune Analytics to offer users an unbelievable amount of data for volume, pools, and all sorts of other relevant information.
Bancor is another platform who has linked up with Dune and does a better job of integrating and emphasizing it, but the information is all the same. It’s one of the most exhaustive data resources for crypto out there and surely something to look into. Dune isn’t exclusive to any protocol, so you don’t need the Balancer platform to use it, though some platforms integrate it quite seamlessly for the benefit of their users. That said, if you use Balancer, you will find an abundance of helpful information specific to their protocol that will serve you well.
Balancer pools are extremely customizable, and each pool can have a different fee. It is up to the pool creator to decide how high the fees will be priced and can range from 0.0001% to 10%. Balancer offers fee recommendations aimed towards dynamically maximizing LP returns throughout changes in market conditions, but that translates to a very open-ended fee structure. This means certain fees could be better than other platforms or protocols, but many will also be much higher. Given this somewhat situational fee dynamic, I would say DeFi flat-rate alternatives like Uniswap or SushiSwap (0.3%) and even consistently low dynamic-fee structured platforms like 1inch would be more ideal, but this will depend on the market circumstances and asset you are trading/pooling.
If you click on the ‘Docs’ tab near the top right of the Balancer homepage, you will be taken to what is ostensibly a help center. Though not explicitly referred to as such, it offers the same high-quality and well-organized information about the protocol and its services. There aren’t any included videos, but it makes sure to cover all aspects of the platform and is chock full of pictures and graphs to explain things as simply as possible.
Balancer also had a helpful pop-up window at the bottom right of the app page where you can search for information or message a member of support directly. Support isn’t available on weekends and the formatting of the information aggregator could use some improvements, but it’s a convenient and useful resource.
The last support resources worth mentioning are the Balancer blog and their Discord. The blog is very underdeveloped and only includes a small amount of information related to protocol updates, but is still worth checking out. As for the Discord, while not quite on par with the Discords of Uniswap or many other DeFi platforms, it has a considerable amount of members and should prove to be an excellent resource when looking to engage with real people about any questions or concerns you might have.
Conclusion: Balancer Review
When it comes to liquidity pooling, Balancer is a very competitive option rivaling the likes of SushiSwap and 1inch, especially considering they have multiple asset pools and custom weightings, but they are hardly the most ideal platform for exchanging/trading. While they have plenty of supported assets, their fees vary widely and—although at times potentially low—don’t offer the consistency or predictability generally desired by frequent traders. Balancer does, however, have exceptional analytics through Dune and a fairly unique automatic rebalancing feature for liquidity providers similar to Shrimpy’s portfolio rebalancing that sets them apart from many competitors. Their flash loans, too, set them apart, but that will be a much less commonly used feature and probably not a make or break for most people deciding between platforms. Keeping all this in mind, I think balancer is a great platform for anyone not focused on trading. Balancer’s features and services outside of their exchange are very competitive, making it a potential top contender in areas like pooling and analytics, so, provided those are your focuses, I would strongly recommend giving them a try, especially if you are an arbitrageur capable and willing to use flash loans.
- Excellent analytics
- Automatic portfolio rebalancing
- Customizable/multiple asset pooling
- Flash loans
- Open-ended and often high fees
- Not suited for traders