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Balancer’s Programmable Liquidity is Coming to Moonbeam and Polkadot

Moonbeam Team

Mar 3, 2021

8 min read

We’re excited to announce that we’ll be working with the Parity team to initially port the Balancer protocol to Moonbeam. Balancer Labs has been offering grant funding to development projects that explore experimental deployments of the Balancer protocol to alternative Layer 1 blockchains. Parity and Moonbeam have decided to pursue a collaboration to bring a Balancer deployment to the Polkadot ecosystem.

This move adds an important capability to the growing DeFi ecosystem on both Moonbeam and on Polkadot. Moonbeam is the easiest entry point for developers trying to build applications on Polkadot, and our Ethereum compatibility features are a great fit for a port of the Balancer protocol by making it possible to leverage the existing codebase to have a Polkadot based deployment. In return, Polkadot-based assets such as DOT and other parachain tokens will be made available as ERC-20s to the instance of Balancer on Moonbeam.

We are looking for developers or a team that is interested in becoming the team that maintains the Balancer deployment on Moonbeam and Polkadot. Grants will be provided by both Balancer and Moonbeam to the team that is selected to work on this project.

The Balancer Protocol

Balancer has risen to prominence since its launch as a AMM-based DEX and it currently is one of the top DEXes in the world by Total Value Locked (TVL). Balancer is a generalization of the AMM idea popularized by Uniswap and Gnosis, allowing end users more control over the pools that can be created. A key Balancer feature is the ability to create pools with multiple assets that can have different weights rather than the more traditional asset pair that is maintained in a 50/50 ratio. Balancer supports up to 8 assets that can be weighted in different ways to create asset portfolios to express different ideas and use cases. Trading activity on a given Balancer pool will maintain the asset allocations that have been setup. Other important features include the ability for users to set the trading fee for pools that are created, as well as specifying if the pools should be public or private.

This generalization of the original x * y = k, 50/50 split AMM system initially implemented by Uniswap is extremely powerful and can be used to express many more ideas and support many more use cases than were previously possible in DeFi. This benefits liquidity providers that can invest into liquidity pools whose asset composition matches their investment strategy, but also gives them returns based on trading fees.

Balancer’s features can be used to power use cases such as:

  • Decentralized exchange use cases. You can easily facilitate trading a pair of assets using a Uniswap like AMM formula. Pool creators can specify trading fees that they feel are appropriate for the pool use case.
  • Setting up self-rebalancing index funds for different multi-asset portfolios, like a stablecoin asset portfolio, smart contract asset portfolio, etc. Investing into a Balancer pool gives you exposure to the underlying pool assets, but also returns from the trading fees that the pool generates.
  • Creating pools for projects to be able to create initial liquidity for their token. Increasingly projects are looking to decentralized ways of bootstrapping and funding their efforts. Balancer Liquidity Bootstrapping Pools are designed to create fair conditions for initial token distributions.

The freedom of expression that Balancer makes possible adds an important building block to the Defi ecosystem on Moonbeam and Polkadot.

View a Demo of Balancer on Moonbeam at DeFi Demo Day

The Moonbeam team will be demoing the Balancer deployment on Moonbeam at DeFi Demo Day TOMORROW, March 4 at 5:00 UTC. Join us!

Why does a deployment on Moonbeam make sense for Balancer?

Balancer Labs has been exploring experimental deployments of the Balancer protocol to alternative Layer 1 blockchains by offering grant funding to developer teams in a decentralized effort to expand the Balancer ecosystem. The Balancer team recognizes that the Polkadot ecosystem is growing and that there are a growing number of assets in it which could provide interesting use cases to explore outside of Ethereum.

“The Balancer Ecosystem Fund deploys capital to projects that create unique value for the Balancer protocol and community,” says Jeremy Musighi, Head of Growth at Balancer Labs. “ Supporting PureStake and Parity Technologies is a great opportunity for us to explore and learn from how the Balancer protocol can benefit from the unique trade-offs of the Polkadot blockchain. We welcome the opportunity to support this decentralized effort to take the first steps towards building on-chain liquidity for assets in the Polkadot ecosystem.”

Moonbeam’s deep Ethereum compatibility including a full EVM, Web3 RPC, and compatible accounts means that there are minimal changes needed to their existing codebase to create a Polkadot-based deployment. It also means that all of the same tools and services, such as Solidity, Truffle, and MetaMask can be used as part of the Moonbeam-based deployment. This ability to leverage the existing codebase, tools, and services means that the same infrastructure powering Balancer’s Ethereum-based implementation can be used to power both their Ethereum- and their Moonbeam/Polkadot-based deployments.

Substrate is the underlying Rust-based framework that is used to create parachains on the Polkadot network. By creating Balancer on Moonbeam, Balancer is able to leverage Moonbeam’s underlying infrastructure including our Substrate-based parachain implementation, our collators, our connection to the Polkadot relay chain, our integrations with other Polkadot based chains to bring assets to Moonbeam, among other things. This dramatically simplifies the implementation of Balancer on Polkadot as compared to a native parachain-based implementation. However, a deployment on Moonbeam does not preclude a future parachain-based deployment should the scalability and control that a parachain provides be needed.

Why does a Balancer deployment make sense for Moonbeam and Polkadot?

A Balancer deployment on Moonbeam is part of a broader DeFi story on Polkadot. We are seeing significant adoption and activity in the DeFi space on Moonbeam and on Polkadot. Some teams are building DeFi-focused parachains, while other teams are building on platforms like Moonbeam. Finding a less expensive and more scalable environment is a key motivation for many of the teams. But scalability is not the only driver.

DeFi projects want the company of other DeFi projects. In fact many DeFi projects depend on and compose with other DeFi protocols. So they are looking for places that have lower costs, but that also have a rich set of assets they can work with and protocols that they can integrate and compose with.

In this context, Balancer as a protocol provides an important set of building blocks for developers where they can create composed applications on Moonbeam, the same way they would on Ethereum. They join other DeFi protocols such as SushiSwap, IDEX, Linear Finance, and others that are building on Moonbeam. We are currently engaged with many more Ethereum-based DeFi protocol teams and expect more teams to follow Balancer in coming to Polkadot via Moonbeam.

But we shouldn’t also forget that a Balancer deployment adds significant end user utility to both Moonbeam and Polkadot. It provides useful DeFi services for investors looking to create investment portfolios consisting of Polkadot-native assets and who are looking for yield on those portfolios. It also provides trading and arbitrage opportunities for traders that will earn fees by helping keep portfolios balanced. And last but not least, it provides a way for teams to bootstrap liquidity for their project. These are all very valuable services that the growing ecosystem of Polkadot native assets needs.

“This integration is a great fit for both Moonbeam and Polkadot,” says Derek Yoo, CEO of PureStake. “Moonbeam serves as an easy way for Ethereum-based projects like Balancer to expand their protocol to the Polkadot network and all the networks connected to it. And Moonbeam developers will be able to compose with and incorporate Balancer into their applications”.

The Team Implementing Balancer on Moonbeam

The initial implementation effort for Balancer on Moonbeam will be led by Parity, the company developing Substrate and that developed Polkadot, with support from the Moonbeam team. Parity will perform the initial porting and verification that Balancer is working as expected on Moonbeam. However, while Parity will bootstrap the process and do the initial work, we are looking for developers or for a team that is interested in maintaining the Balancer protocol on Moonbeam beyond this initial porting effort. This team will be supported by grants from both Balancer and Moonbeam.

Balancer will be providing $10K worth of BAL tokens and Moonbeam will be providing 10K GLMR tokens (0.10% of genesis supply) as a grant to support the long term team and to provide initial liquidity to the system.

If you are interested in engaging with Parity, Moonbeam, and Balancer to create and maintain Balancer on Moonbeam / Polkadot, please complete a grant application:

Welcome Balancer

We welcome Balancer to the Moonbeam and Polkadot DeFi ecosystem, and look forward to working closely with Parity and the long term team to support bringing Balancer to market with Polkadot-based assets and use cases.