Balancer (BAL) is the utility token of the Balancer multifunctional DeFi protocol built on the Ethereum (ETH) blockchain, designed to provide decentralized crypto exchange and liquidity services. With BAL, users can conduct various DeFi operations, including exchanging assets, liquidity mining, profiting from liquidity, and earning rewards.
Let’s go through the core features of Balancer and find out what this token is about.
How Balancer (BAL) Works
The Balancer platform is an automated market maker (AMM), similar to various popular DeFi protocols, such as UniSwap (UNI), and BAL is the project’s crypto token.
BAL is an essential component of Balancer’s AMM mechanism that uses algorithmic solutions to conduct trades between users and the platform, who get assets from the platform’s liquidity pools. To understand the role of BAL in the Balancer ecosystem, we need to take a look at how AMMs work.
BAL tokens provide liquidity for various assets as part of trading pairs on Balancer, and users actually conduct trades thanks to the crypto balance in different liquidity pools.
However, the platform doesn’t own the assets, and traders don’t need to connect to each other to facilitate a trade. Instead, the AMM mechanism pulls crypto from buyers and sellers and ensures an automatic execution of transactions with the help of smart contracts. The smart contracts ensure everyone sticks to their end of the deal and release crypto automatically once a trade is executed.
It’s convenient for AMMs to have their own crypto token for providing liquidity, and that’s why BAL has a key role on the Balancer platform, making BAL a DeFi coin above everything else.
Balancer is based on Ethereum (ETH), making it an ERC-20 token. This is quite convenient for users because they can exchange BAL for hundreds of ERC-20 tokens across different exchange platforms, and they can even swap BAL for more than 600 tokens on the Balancer platform.
Also, BAL is compatible with the Arbitrum and Polygon (MATIC) Ethereum Layer-2 blockchains, which are much faster than Ethereum itself. This allows users to execute trades without the usual five-minute waiting period for Ethereum transactions. Arbitrum and Polygon take a few seconds to process a blockchain transaction.
What Is Balancer (BAL) Used For?
BAL tokens have the most utility when used on the Balancer platform thanks to the various services focused on BAL.
BAL is very handy as an intermediary crypto for conducting trades on the Balancer platform since users can trade BAL for over 600 ERC-20 tokens. This makes BAL a highly versatile crypto because most ERC-20 tokens don’t have deep liquidity for trading with so many other tokens, especially not on decentralized platforms.
However, the most important use case for BAL is to provide users with liquidity-providing rewards on the Balancer platform. Users can put their BAL tokens to work and earn crypto over time. There are numerous liquidity pools that allow users to deposit BAL and earn BAL, along with additional cryptos.
However, BAL’s key strength is that users can earn BAL tokens even without depositing BAL. That’s because there are many liquidity pools on Balancer that deal with other cryptos, but users get BAL rewards.
BAL liquidity providing can yield anywhere between a few percent to two-digit APYs, depending on which liquidity pool you choose.
Additionally, users can participate in liquidity mining in the veBAL section of Balancer by staking their BAL tokens. veBAL stands for vote-escrow BAL, and it’s used for liquidity mining through a maximum one-year vesting mechanism where users exchange BAL for veBAL, which is composed of 80% BAL and 20% WETH. With veBAL tokens, users can join liquidity mining pools and earn a 2.5x boosted APY.
Where to Buy Balancer (BAL)?
According to the Balancer CoinMarketCap page, there are more than 40 active BAL markets, with over 100 trading pairs. This means it’s very easy to get hold of some BAL tokens since the cryptocurrency is widely available on both popular and less popular centralized exchange platforms and DEX platforms.
You can purchase BAL on Binance, Coinbase, Bitfinex, and other top trading platforms directly with fiat currency or stablecoins. As for DEX platforms, UniSwap is the leading decentralized market for BAL. Additionally, you can buy BAL on the Balancer exchange platform with some ETH, USDC, DAI, or other ERC-20 tokens by connecting your crypto wallet to the platform and initiating a trade.
How Long Has Balancer (BAL) Been Around?
Balancer Labs, the company behind the Balancer protocol, was founded back in 2018. However, the company was originally just a software research arm at a company called BlockScience. Soon after the launch of Balancer Labs, the team headed by Balancer founders and blockchain professionals Mike McDonald and Fernando Martinelli started working on the Balancer project.
The founding duo envisioned an Ethereum-based AMM, which allows users to participate in liquidity pools, exchange assets, and benefit from boosted liquidity mining thanks to a special vested token, veBAL.
In March 2020, Balancer joined the market, but it didn’t have its own BAL token at that time. It wasn’t until June 2020 that the team finally decided to launch BAL as a utility token used for participating in liquidity pools and creating veBAL tokens.
What’s Controversial About Balancer (BAL)?
Balancer has had a steady development path since the project’s launch in 2020. The developer team is known for constantly including new features such as liquidity pool options, new networks, swap features, and upgrading the veBAL token mechanics.
Balancer is positioned just outside the top 100 cryptocurrencies, and there weren’t any unfortunate events or controversies so far.
How Many Balancer Coins Are There?
The BAL maximum supply is 100 million tokens. However, there are 54 million tokens in circulation for now. The protocol releases a new batch of BAL tokens on the market weekly as liquidity mining rewards.
Every four years, the weekly issuance of BAL will be halved, similar to Bitcoin’s halving mechanism. The halving process ensures that BAL tokens are steadily released on the market and made more scarce over time as the market grows.
Can BAL Be Mined?
Users can’t mine BAL through conventional crypto mining that uses GPU mining rigs or ASIC miner machines. However, BAL is mineable through the protocol’s liquidity mining feature, which rewards users with BAL when joining liquidity mining pools with veBAL tokens.
Market Cap and Price History of Balancer (BAL)
Balancer’s solid market capitalization of over 320 million USD showcases the deep liquidity of the protocol’s various liquidity pools.
Regarding the token’s price, its current value fluctuates around 7 USD per coin, but during the initial market phase of the project, BAL tokens were valued at around 10 USD. During the 2021 bull market, BAL reached an all-time high of nearly 70 USD.
The current value of BAL reflects the general market conditions, with leading cryptocurrencies sharply below their all-time highs due to the latest bear market phase.
Biggest Competitors of Balancer (BAL)
Balancer has many high-quality competitors among the top 100 cryptocurrencies, but the project’s features are very competitive, and it won’t come as a surprise if Balancer manages to advance its market position in the future considerably.
Some of Balancer’s main competitors are UniSwap, the largest AMM and DEX on the market, along with Curve Finance (CRV), Lido DAO (LDO), and Convex Finance (CVX). All of these projects focus on Ethereum-based services, and some of them even support additional blockchains, like in the case of UniSwap, Curve, and Convex Finance.
If Balancer succeeds in integrating new blockchain networks in its DEX and liquidity-providing features, it might become serious competition to the listed projects.
What Does the Balancer (BAL) Project Road Map Look Like?
Balancer is a very well-developed DeFi project, and the team has introduced a broad scope of essential features since Balancer’s launch in 2020. The future development of Balancer is mainly centered around the inclusion of new assets for balancer liquidity pools, as well as partnerships with other projects.
Pros and Cons of Balancer (BAL)
Pros
- Users can earn BAL tokens as liquidity mining rewards.
- Partnerships with various DeFi protocols allow users to utilize BAL and veBAL across additional platforms.
- Users can earn high APYs when staking BAL tokens in liquidity pools on the Balancer platform.
- BAL is easily exchangeable for numerous Ethereum-based assets because it’s an ERC-20 token.
Cons
- Balancer’s competition is very strong, and some of its competitors support multiple additional blockchains.