Balancer V2 is described as a generalized automated market-maker (AMM) protocol that improves upon V1 by achieving greater flexibility, security, and overall efficiency.
Introducing Balancer V2 – the protocol for generalized AMMs
Balancer V2 is flexible, secure, and efficient.
Here’s what you need to know. ??https://t.co/A0DbYJsmn4
— Balancer Labs (@BalancerLabs) February 2, 2021
Highlights of the improvements found in Balancer’s V2 upgrade can be broken down as such:
- Protocol Vault for all Balancer pool assets
- Improved gas efficiency
- Permissionless, customizable AMM logic
- Capital efficiency through Asset Managers
- Low gas cost and resilient oracles
- Community-governed protocol fees
The biggest change in this upgrade is the structural design of Balancer’s pools, in V2 all deposited assets go into a single vault. This new design enables the protocol to save users a ton in gas fees as well since only net token amounts are transferred to and from the vault.
Balancer’s new structure will also make it much more attractive for high-frequency traders as the shared vault design enables internal token balances.
This way Balancer can keep both tokens in the vault which may be used for the next trades, avoiding any unecessary ERC20 transactions altogether. This feature also aims to reduce gas fees for end-users and exchange aggregreators alike.
Another important feature of Balancer V2 is it’s customizable AMM logic and the three types of Balancer pools that anyone can create using the protocol. This includes weighted pools, stable pools, and smart pools. Weighted pools are great for constant weight index products. The new stablepools take inspiration from Curve and enable greater trading effiency for assets that are soft-pegged to each other. Finally, the smart pools will allow for ongoing paramter changes. All three of these pools co-exist and provide a shared bucket of liqudity for the Balancer trade router.
The final killer feature that is found in the V2 upgrade is the introduction of asset managers in the Balancer ecosystem. According to the team asset managers are external smart contracts nominated by pools that have full power over the underlying tokens the pool has deposited in the vault. Asset managers would even be able to lend underlying tokens to another lending protocol to achieve yield for pool partcipants.
BAL token holders should also note that this V2 upgrade includes the addition of protocol fees that accrue to the BAL token. At onset, the trading and withdraw fees will be turned off while flash loan fees begin accuring in the protocol treasury.
Code audits are underway and Balancer V2 is set to offically launch in March. The team welcomes new builders that want to develop ontop of Balancer to apply for the launch partner program here.
To keep up with Balancer, follow them on Twitter.
Business Development and Operations at TrustToken – TUSD. Jack is a startup generalist and DeFi enthusiast. Stay connected with him by following @HHJackSun on Twitter.
