Decentralized finance protocol Balancer is nearing the launch of its version two upgrade and has just released a teaser of what’s in store.
The next iteration of the Balancer DeFi lending platform, which received VC investment in November, will include something called a generalized automated market maker. This is essentially a transition to a single vault that holds and manages all the assets added by all Balancer pools.
This effectively simplifies the protocol by creating a single access point for all interactions with Balancer v2. It added that only one token approval will be necessary for users to trade or invest liquidity in any Balancer pool.
Evolving the AMM
This will be the primary change to the architecture between the old and the new versions. The blog post explained further;
“Balancer V2 separates the Automated Market Maker (AMM) logic from the token management and accounting. Token management/accounting is done by the vault while the AMM logic is individual to each pool.”
Version 1 trades with two or more pools isn’t an efficient use of gas because users have to send and receive ERC-20 tokens from all pools. The current average price of a transaction has skyrocketed back over $15 again as ETH prices hit a new ATH.
With Balancer’s new Protocol Vault, only the final net token amounts are transferred to and from the vault, saving a significant amount of gas in the process, and giving another advantage to arbitragers.
It added that v2 will offer weighted pools, which are index fund style pools like in v1. Stable pools will also be available, suitable for tokens that are soft pegged to each other. There will also be something called Asset Managers which are external smart contracts nominated by pools to improve yields.
V2 will include improvements to price oracles and restructuring of protocol fees with the introduction of a flash loan fee. The announcement added that audits are in progress and March is the expected launch month;
“Internal audits are underway, and Balancer V2 is expected to launch this March.”
BAL Token Price Update
Balancer’s native BAL token has made a move of 4.5% on the day to reach $32.70 at the time of writing. It has had a very positive week, adding 50% over the past seven days, and is up over 100% since the same time last month.
The all-time high for BAL came in early September 2020 when it hit $35, but it is very close to that now according to CoinGecko. In terms of collateral locked, there is an all-time high of $970 million on the protocol which has moved it up to ninth in the DeFi TVL charts according to DeFi Pulse.