In partnership with Gauntlet, Balancer will soon be rolling out dynamic-fee AMM pools to its liquidity providers (LPs) at no additional cost.
New Simulation Model Will Provide Parameter Recommendations And Include Live Data Feeds
Increased participation in decentralized financial services (DeFi) and decentralized business operations (DEX) resulted in rising competitiveness in protocol areas as liquidity pools compete for most capital. Since pool switching costs are still bare-bones, some pool operators are looking for creative ways to draw and keep staking funds.
Balancer’s programmable liquidity protocol, in collaboration with Gauntlet, a research and simulation tool, is soon introducing the ability to adjust protocols in real-time to make liquidity pooling more versatile and rewarding for stakeholders. The newly-designed Balancer V2, a long-awaited upgrade, aligns with Balancer’s vision of being the dominant contributor of DeFi liquidity.
This strategic partnership will provide liquidity providers (LPs) with dynamic-fee AMM pools, at no added charge and with no hidden conditions. Gauntlet will optimize protocol parameters for Balancer V2 pools with its tried-and-tested tactics from the algorithmic trading industry to balance risk, resource performance, and incentives. The simulation model will be modified and stress-tested regularly to echo changing market realities. Additionally, there won’t be any premium fees charged for LPs that access these next-generation pools.
“It’s a privilege for Balancer Protocol and its liquidity providers to be able to tap on the galaxy brains of the Gauntlet team to maximize pool returns. It is better for all stakeholders for fees to constantly adapt to the market conditions,” says Balancer CEO Fernando Martinelli.
The Goal Is To Maximize Returns For Liquidity Pools
As DeFi transactions get costlier, primarily due to a rise in the Ethereum network’s gas costs, this new initiative will go a long way in optimizing performance and returns. Gauntlet has developed an optimization model for the real-time fee selection of Balancer V2 pools to meet this challenge. The model will create parameter recommendations for trading fees and will include live data streams to ensure that modified requests can be made in real-time as market conditions change.
Security, stability, capital performance, and gas efficiency are the four cornerstones of Balancer V2. It is a single vault that holds and manages all the assets added by all Balancer pools. The Automated Market Maker (AMM) logic is separated from token control and accounting in Balancer V2. The vault is in charge of token administration and accounting, while each pool’s AMM logic is unique.
According to Balancer COO John Morrow, “Balancer’s vision for their v2 pools is perfectly suited for our simulation platform. Dynamic fees allow Balancer to leverage our off-chain automation to improve on-chain LP returns. We’re looking forward to launch, but we’re even more excited for what comes after – our optimization platform gets smarter as we incorporate more live data.”
As new forms of AMM logic are designed on top of Balancer V2, there will be considerable potential for other teams and protocols to use Balancer to investigate real-time pool parameter optimization. The process of updating trading fees is just the beginning as the company also plans to add more utility tools in the upcoming days.