The ecosystem needs to provide liquidity to the most trading assets in order to offer the most efficient slippage posible. AMM like Balancer offer that long term investor can provide this liquidity to the ecosystem and to obtain some return for that risk that they incurr.
Impermanent Loss is the risk that a liquidity provider has to take to get the returns on the trading. ETH and BTC are assets that show little correlation, so in that case we have less risk than other assets and the returns on trading make sense.
That opportunity enables that the long term holders can profit for that service and as long term holder, probably they will get most exposure to their investment. We think that it will extract less value from the ecosystem than traditional exchangers.
I think allowing to invest in the long term in Pools is an option that maker has to permit in order to facilitate liquidity to the ecosystem and revenue for the long term holders that want to take that risk.
Balancer is one the Top AMM projects in the ecosystem, so that will permit to this investor to have also more liquidity.
- Who is the interested party for this collateral application?
- Provide a brief high-level overview of the project, with a focus on the applying collateral token
Balancer is an automated portfolio manager, liquidity provider, and price sensor.
Balancer turns the concept of an index fund on its head: instead of a paying fees to portfolio managers to rebalance your portfolio, you collect fees from traders, who rebalance your portfolio by following arbitrage opportunities.
Balancer is based on an N-dimensional invariant surface which is a generalization of the constant product formula described by Vitalik Buterin and proven viable by the popular Uniswap dapp.
There are two categories of users who can benefit from the Balancer Protocol: liquidity providers - who own Balancer Pools or participate in shared pools, and traders - who buy or sell the underlying pool assets on the open market.
Anyone can be a liquidity provider. For example:
- Portfolio managers, who want to have controlled exposure to different assets without complicated and expensive rebalancing
- Investors who have ERC20 tokens sitting idly in a wallet, and would like to put them to work earning passive income from fees
We propose to add as a collateral the most liquid pool of Balancer that has 120 Millions on Dollars in 50% ETH and 50% BTC
- Provide a brief history of the project
Balancer began in early 2018 as a project being incubated by Block Science, an engineering and research firm, before being spun out as a separate company, Balancer Labs. It was started to provide a means to provide liquidity, but on your own terms, by creating automated market-making pools with numerous assets and customizable weights.
Rigth now Balancer is in the Top Ten DeFi project by TVL and has more thatn 500 Millions of Assets.
- Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.
Whitepaper: https://balancer.finance/whitepaper/ 1
Source Code: Balancer Labs · GitHub
- Link any available audits of the project. Both procedural and smart contract focused audits.
Audit section of Docs: https://docs.balancer.finance/protocol/security/audits
- Link to any active communities relating to the project.
- How is the applying collateral type currently used?
Currently many long-term investors of assets such as Bitcoin or Ethereum have the possibility of being able to obtain an additional return by offering liquidity to these two assets. At the moment the returns of these Pools are above two digits, and as they have a lot of correlation the Impermanent Loss is lower than in other assets. It is an excellent opportunity for long-term investors to help give these two assets much more liquidity, something really important to achieve greater price stability meanwhile having an income.
- Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?
No, Balancer Exchange and the BAL token are decentralized. Balancer Labs is a privately held company which created Balancer v1 and is still heavily involved in directing the project.
- Where does exchange for the asset occur?
There is not too much trading of the WBTC-ETH balancer liquidity tokens outside of balancer itself. Balancer allows redemption between liquidity tokens and the underlying assets at any time. By definition, there is always the required liquidity for this redemption.
- (Optional) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.
I am not aware of any publicly available legal opinions addressing the project or token’s regulatory standing.
- (Optional) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.
None as far as I’m aware.
- (Optional) List any possible oracle data sources for the proposed Collateral type.
Not sure. I suspect the best way to go about this is to have oracles report the prices for the underlying assets and then get the ratio from the balancer contract.
- (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type.