Balancer is a n-dimensional automated market-maker built on Ethereum. It allows anyone to create or add liquidity to customizable pools and earn trading fees. Instead of the traditional constant product AMM model, Balancer’s formula is a generalization that allows any number of tokens in any weights or trading fees. Another way to view Balancer is as an inverse ETF: instead of paying fees to portfolio managers to rebalance your portfolio, you collect fees from traders, who continuously rebalance your portfolio by following arbitrage opportunities.
Balancer protocol is designed to be composable and has a few types of pools: 1) Private Pools where the only owner can contribute liquidity and has full permissions over the pool, being able to update any of its parameters. 2) Shared Pools where the pool’s tokens, weights, and fees are permanently set and the pool creator has no special privileges. Anyone may add liquidity to shared pools and ownership of the pool’s liquidity is tracked with a specific token called BPT - Balancer Pool Token. 3) Smart Pools which are a variation of a private pool where the controller is a smart contract, allowing for any arbitrary logic/restrictions on how pool parameters can be changed. Smart pools may also accept liquidity from anyone and issue BPTs to track ownership.
Balancer was launched in March 2020 and has been [audited by Trail of Bits, https://docs.balancer.finance/protocol/security/audits]. Balancer recently introduced its native governance tokens called BAL which are distributed to liquidity providers through a process called liquidity mining.
How to use Balancer?
Traders can use [Balancer Exchange, https://balancer.exchange] to swap between any two tokens. The [Pool Management dashboard, https://pools.balancer.exchange] allows you to add and remove liquidity to different pools and monitor the liquidity and trading volume of each pool.