What is DeFi?DeFi is the blockchain industry’s answer to a financial system. This decentralized financial system is open to everyone and operates independently of central authorities. By combining the internet, cryptography and blockchain technology, users can now build and control their own financial system.
The saying goes: “Don’t trust, verify.” This means that one can verify every transaction that occurs on the blockchain and in effect, control your finances.
Introducing BalancerBalancer is a decentralized exchange (DEX) that allows users to create and add liquidity to customizable pools and earn trading fees plus Balancer Tokens. Furthermore, you can swap a host of ERC-20 tokens with each other on a decentralized platform.
Balancer is an Automated Market Maker (AMM) system with a difference. An AMM is an automated agent that defines the rules for trading. These agents are controlled by various algorithms and are active in both the selling and buying of a trading pair. This is where liquidity providers make profits – from the spread that exists between the buy and sell prices. With the Balancer AMM system, anyone can earn trading fees by adding liquidity to the exchange, not just portfolio managers.
How to earn passive income with BalancerAdding liquidity to the Balancer protocol is a great way to earn passive income. You will be rewarded for providing liquidity in the form of coins that are needed to swap one ERC-20 token for another between various trading pools.
On the Balancer website, you can choose from a variety of staking pools that offer different returns. Earn the fees for every swap in proportion to your pool as well as Balancer Tokens. These tokens are paid into your MetaMask wallet once a week. Balancer Tokens (BAL) are trading at $20.19 at the time of writing, according to Coinmarketcap.
There are three types of pools on Balancer:
- Private Pool
Allows the owner to add liquidity and has full permissions over the pool.
- Shared Pool
The owner has no special privileges in a Shared Pool as fees are set. Anyone may add liquidity whilst the pool’s liquidity is tracked by the Balancer Pool Token (BPT).
- Smart Pool
Smart Pools are private pools that are controlled by a smart contract. There are restrictions on how parameters can be adapted. Smart pools can accept liquidity from anyone and issue BPTs.
In conclusion, as with all types of investment opportunities, there are risks involved. DYOR and decide for yourself if you are willing to take the associated risks or not. Be sure to keep an eye on the Rads ACT YouTube channel presented by our very own Richard de Sousa for these and other exciting opportunities in the crypto space.