Balancer attracts Liquidity from OlympusDAO due to its decentralized automated portfolio manager and decentralized exchange
OlympusDAO has committed to moving $50 million of liquidity to Balancer Protocol following the community governance proposal. The principal purpose of this structure is to reduce the price effect of accessing $OHM through $DAI and $WETH. OlympusDAO, Balancer DAO, and Balancer Labs collaborated on this project.
Balancer's multi-token capabilities and variable weighting flexibility, for example, are being used to address liquidity fragmentation. The maximum treasury distribution will be $25 million $OHM, $12.5 million $DAI, and $12.5 million $ETH. Protocols are increasingly requesting that their token public auctions be conducted in OHM. However, there is currently insufficient OHM liquidity on the Balancer protocol to support this form of auction.
Security, adaptability, and capital efficiency are the foundations of Balancer V2. A constant product AMM is stiff, but an invariant AMM is flexible. While it is true that a 50/50 weighting between two tokens has the smallest relative price effect on swappers, not all cases are the same. The versatility of Balancer gives LPs the ability to create custom solutions for their specific use cases. The advantage of pooling liquidity to boost the pricing effect for swappers is shown by the case of Olympus.
Another instance would be underutilized liquidity pools. In other words, given volume as a fraction of available liquidity, the price effect is less critical (price depth). In this case, pool weightings on Balancer might be tweaked to reduce IL and reserve upside while keeping the same volume at no expense to swappers.
The transfer of $OHM liquidity to the Balancer Protocol is a case study for any project that manages or incentivizes liquidity on a decentralized exchange. Balancer Weighted Pools' versatility and customization, together with the usability of Balancer Protocol products like LBPs, give a one-stop-shop solution for liquidity management. It is feasible to solve for more than only price effect, and this may be done in tandem with decreasing liquidity fragmentation.
Understanding Balancer and the Rise of Maximizing Protocol Liquidity
DeFi treasuries are interested in exploring ways to maximize their protocol-owned liquidity or incentive programs as moving to Balancer. Balancer is a decentralized exchange, an open-source protocol, and an automated portfolio manager. Balancer is based on the Ethereum blockchain, provides fresh answers to the issues plaguing traditional and centralized exchanges. Developers use Balancer as a permissionless building block to design new treasury management systems. Balancer's purpose is to become the most flexible and powerful platform for programmable liquidity to be the dominant source of DeFi liquidity.
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