ON–049: DeFi (Part 2)

• Since Perpetual Protocol launched the first-ever Balancer Liquidity Bootstrapping Pool (LBP) to conduct their token sale in September, this emerging use case for Balancer Smart Pools has increasingly gained traction; with crypto projects such as Rally, Nsure Network, APY Finance, TapMyData, and CrescoFin following suit in announcing their own Balancer LBP token sales in October and November.

• Another emerging use case for Balancer Smart Pools is smart rebasing pools (AKA elastic supply pools), as first pioneered by Ampleforth. The AMPL/USDC pool utilizes a Smart Pool’s ability to dynamically adjust token weights to remove all impermanent loss associated with AMPL’s expanding and contracting supply. For example, assuming the pool is weighted evenly 50/50 between AMPL and USDC, if AMPL supply were to grow 2x, the pool would automatically shift to a 33/66 weight ratio. Over the last 14 days, this pool’s liquidity has grown 4,100%, from $204K to $8.6M, quickly becoming the 11th largest liquidity pool on Balancer. In the last 24 hours, it has accounted for $1.1M in trading volume.

The largest liquidity pool on Balancer is the WBTC/WETH pool, which has grown 138% over the last 30 days, from $52M to over $124M in liquidity. Over the last 7 days, it has generated an average trading volume of $2.25M per day. As of the time of writing, it is the largest non-stable liquidity pool in all of DeFi, with only four Curve stablecoin pools holding more liquidity, according to Pools.fyi. Of the top 10 liquidity pools among all AMMs, two are non-stable Balancer pools and the other eight are Curve stablecoin pools.

Aside from its size, an interesting characteristic of the Balancer WBTC/WETH pool is its wide distribution among liquidity providers, signaling more even participation from investors compared to other top AMMs, where whales are more dominant. The largest holder of the Balancer WBTC/WETH pool owns a 8.91% stake, with the next 20 LPs each holding above 1%. This is a stark contrast from Uniswap and Sushiswap, where the largest pool owner in each identical trading pair holds 97.81% and 99.71%, respectively.