Original author:naly, DeFi researcher
Original compilation: Leo, BlockBeats
Original author:Balancer, DeFi researcher
Original compilation: Leo, BlockBeats
In the encryption space in 2023, the rise of LSD is expected. To a certain extent, liquid staking is also a relatively safe way for encryption users to make profits. Agreements such as Lido, Rocket Pool, and Frax have taken off. With the postponement of the upgrade in Shanghai, there may be more favorable innovations on the LSD track. When it comes to the competition on the LSD track, there is an agreement worthy of attention——
, Balancer has made improvements at the technical level and is committed to higher staking returns. DeFi researcher naly wrote an article to analyze the advantages of the Balancer protocol in the LSD track, compiled by BlcokBeats as follows:
Three key factors for the rise of Balancer tech:
-Phantom BPT
-Unique vault architecture
- rate provider
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vault architecture
Anyone using Balancer technology can take advantage of the interconnected liquidity base layer, with its own gold house in the vault. For other Dex in DeFi, the pool contract must actively manage assets (logically), while also performing all pool account work. Balancer Vault simplifies this in two steps (pictured below):
- Separate pool account work from logic
BTC >- Put all account assets under one contract
Since all account assets are under the same contract, the fund pool only needs to calculate the amount of exchange, deposit and withdrawal, and no longer needs to actively manage the assets in it. What benefits does this bring?
ETH to ETH > wstETH
On Balancer, such gas-intensive operations have been improved, all accounts are under one environment, and only the final amount of tokens is transferred to and from the vault. BTC > stETH, Balancer eliminates the need for frequent Gas consumption logic, this innovation is called BatchSwap (batch exchange).
As shown in the figure below, it can be seen how efficient Balancer BatchSwap is in terms of Gas consumption costs. Through the innovative Vault design, all LSD deposited in Balancer can seamlessly use its liquidity center for transactions.
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Next, let’s talk about the actual pool. LSD uses a type of fund pool that continuously and effectively updates the rate of pledged assets (instead of utilizing a stable pool). These pool types are called composable stable pools. The standard stable pool transaction is as if the ratio of LSD to the underlying asset is 1:1. Not very reasonable, but how effective is it?
Phantom BPT
Not too good for investors. As an LP, your potential LSD gains are effectively squeezed out by arbitrage traders who profit from arbitrage with inaccurate rates in the pool.
However, composable stable pools solve this problem. These pools have a built-in function called a rate provider, which can query tokens and update them to the correct rate at any time when a transaction occurs. This function means liquidity. The proceeds actually flow to liquidity providers.
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Why "composable"? Composability is a very common word in the DeFi space, but these pools are indeed a good example.
Suppose there is a three-pool (DAI USDC USDT).
Composable stable pools allow this specific pool to be "embedded" into LSD pairs, and rETH can be paired with this tri-pool to allow all underlying stablecoins to be connected and paired extremely efficiently. rETH-(DAI USDC USDT)
It sounds similar to Curve, but what is the difference between Balancer and Curve? What really makes Balancer unique is how the "embedding" process is completed. Although the vault unlocks the base layer of liquidity, it still needs to call the underlying exchange, deposit and withdrawal functions.
By embedded and vault design, all Liquid Staked protocols provide an efficient and interconnected liquidity center for their LSD and other tokens.
Summarize
At the same time, through the interest rate provider, users can use the latest and most effective technology to obtain interest-bearing tokens.
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Summarize
The technology is currently very flexible and may even be further developed, so we will not delve into it in depth, but for users, Balancer does allow traders to use its technology to trade with ETH and LSD in typical LSD pools. Pairing with the corresponding ETH provides higher returns.
In conclusion, Balancer technology provides the best place for LSD because:
-Interconnected vault architecture
-Super rate provider
