Re-understanding Balancer: From AMM Popular Player to Token Value Discovery Platform

Re-understanding Balancer: From AMM Popular Player to Token Value Discovery Platform

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Balancer, who has not been successful in the field of AMM, has shown an explosive momentum in the trend of IDO.

Original title: “From DEX to Token Value Discovery Platform? It’s time to get to know Balancer again.”
Written by: Liang Yushan

If Sushiswap did not preemptively, and used blood-sucking attacks + currency to enter the game, what kind of pattern will the DEX market now take?

Boldly guess: Uniswap and Curve are still in the top two, and Balancer won a place in the top three. The positions of Uniswap and Curve need not be elaborated. The sum of the market shares of the two has already occupied half of the DEX. Why is Balancer comparable to the former?

Revisiting Balancer: From AMM Popular Player to Token Value Discovery Platform

Looking back to the DeFi explosion period last summer, Balancer was the first DEX to introduce liquidity mining. Driven by market effects and its own mechanism design, its liquidity increased by 3400% from June to September, becoming enough to compete with Uniswap, Curve is a decentralized exchange that sits on an equal footing.

Unfortunately, in the subsequent “Sushiswap and Uniswap war” that broke out, Balancer was forced to “out” and quit the top three. At the same time, affected by Uniswap’s successful verification of the AMM model, various types of swaps have emerged in the market, and Balancer rivals have begun to increase…..

Is Balancer submerged in the highly competitive DEX market? Not only not, it is still gaining momentum. According to the latest data from Defipulse, YTD, Balancer’s lock-up volume has increased from 580 million U.S. dollars at the beginning of the year to 1.64 billion U.S. dollars, an increase of more than 175%. DEX ranking jumped to fourth, surpassing competitors such as Bancor and 1inch. In the same period, its user base has grown by more than 40%, breaking through 110,000; the native token BAL has risen by 270%, which is about to approach a historical high.

What forces are driving the quiet growth of Balancer? Is it expected to enter the center of the DEX market again? From the perspective of market environment and trend evolution, Mars Finance App will take you to re-understand Balancer (BAL).

Balancer takes advantage of IDO’s wind to rise again

Let us understand the truth about the quiet growth of Balancer from the subtle point of view.

Year-to-date, all indicators of Balancer are rising. Among them, mid-February became a key node for its rapid development. Based on Duneanalytics data, Balancer weekly trading volume, new users, and BAL prices have seen significant increases during this period.

Revisiting Balancer: From AMM Popular Player to Token Value Discovery PlatformBalancer weekly trading volume

Specifically, the weekly trading volume of Balancer reached US$700 million in the week of February 22, a record high; the number of new traders increased by more than 6,000 a week, which also reached a peak. So far, Balancer has about 110,000 users, an increase of 4.4 times from last summer.

Revisiting Balancer: From AMM Popular Player to Token Value Discovery PlatformBalancer weekly new and old users

Revisiting Balancer: From AMM Popular Player to Token Value Discovery PlatformAs of March 10, the cumulative number of Balancer users reached 112,562

From the perspective of timeline, the growth period of Balancer basically coincides with the trend of IDO. IDO stands for Initial DEX Offering and is called the first decentralized exchange token issuance (another term is “the first DeFi issuance”). Since February, many new DeFi projects have chosen to use DEX to complete their initial token issuance, and the IDO concept has become popular as a result.

According to incomplete statistics, from February until now, the new DeFi projects that have chosen to use Balancer for IDO include:

  • DeFi Insurance Agreement InsurAce

  • Decentralized code collaboration platform Radicle

  • Decentralized Option Agreement SIREN Markets

  • Kylin Network, Polkadot ecological data infrastructure component

  • Cross-chain liquidity provision protocol HydraDX

  • The oracle project Razor

…..

Affected by the IDO boom, users’ trading behavior on Balancer increased sharply, and their lock-up volume increased sharply in February. On the 13th, nearly 10,000 ETH were newly locked-up, reaching the highest level since December last year.

Revisiting Balancer: From AMM Popular Player to Token Value Discovery PlatformBalancer lock-up volume in February

From DEX to token value discovery platform

The birth of the IDO model can be traced back to June 19 at the earliest. At that time, Binance announced that Raven Protocol (Distributed Deep Learning Protocol) will conduct IDO on its DEX. However, because the user response was not positive at the time, IDO failed to make a big storm.

As of last summer, as Uniswap successfully experimented with the AMM model under the liquidity mining boom, a large number of DeFi projects deployed smart contracts to create a pool of funds to issue tokens. It can be said that Uniswap played an enlightening role in the early development of IDO.

But this does not mean that there are no drawbacks to the ICO at Uniswap. We know that gas is required for transactions on the Ethereum network. At the time of continuous network congestion, gas fees have risen, and retail investors have no advantage compared with scientists and large investors, because the latter can use machine algorithms and high gas for preemptive transactions.

When a scientist holding a large amount of funds enters the market first, the price of tokens in the capital pool will be greatly increased, which is unfair to retail investors and is not conducive to token price discovery.

In the Balancer design, it solves the problem by launching a liquidity guide pool. Unlike Uniswap, which requires a 1:1 ratio to store tokens in the pool, Balancer allows project parties to customize the ratio of tokens in the fund pool (the maximum deviation ratio is 2:98). At the same time, the project party can reduce the token price by adjusting the proportion of stored assets to prevent the price from rising out of control due to the influx of speculators in the early stage.

At the same time, retail investors do not have to worry about being rushed to trade, and can use any tokens to purchase tokens pushed by the liquidity guide pool. In the design of the liquidity guide pool, all investors participate in the purchase of tokens fairly, and the volatility of the new currency price is reduced.

In fact, Balancer launched the liquidity guide pool as early as last year, when DeFi projects such as the derivatives protocol Perpetual and the liquidity mining aggregator APY.Finance all completed the token issuance on its platform. However, due to the collapse of most liquid mining tokens in the fourth quarter of last year, the DeFi investment market has tightened, and the number of projects issuing new coins has declined. Balancer’s advantage in token value discovery has flooded the market.

As of February this year, with more and more DeFi projects issuing coins, the market has picked up again, and the advantages of Balancer’s liquidity guiding pool have once again been highlighted, and more projects have begun to be selected as the token issuance platform. It is foreseeable that if the IDO boom continues, it will evolve from DEX based on the AMM model to a token value discovery platform.

Concluding remarks

From the perspective of the development process of Balancer, as the first DEX to start liquid mining, it occupied a favorable market position in the early days of the DeFi outbreak. However, the subsequent break of Sushiswap and Uniswap’s counterattack by issuing coins to make up for the shortcomings have turned the Balancer, which was once active in the center of the market, into the audience off the stage.

However, in the IDO boom that broke out in February, Balancer relied on the liquidity guiding pool mechanism to fight for competitive opportunities for it. But it should be noted that in the short term, it is difficult to surpass Uniswap, Sushiswap and Curve. In addition, although the project party chose Balancer as the token issuance platform, it will eventually migrate the fund pool to Uniswap. The decentralized privacy protection protocol HOPR is one of them.

Although Balancer is difficult to compete with Uniswap, Sushiswap and Curve in the short term, it is expected to eventually break through in the second-tier DEX arena thanks to its early accumulation and IDO blessing.

Source link: news.huoxing24.com

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