DeFi Lego Kingdom begins to build: Balancer liquidity pool full solution
Summary
The event of Balancer blocking YFII on July 29 aroused market dissatisfaction with Balancer. TokenInsight Research analyzed the liquidity pool data of the Balancer platform on July 30 and found that there was an empty pool on Balancer. However, Balancer, as one of the revenue aggregation channels embedded in the YFI platform, perfectly presents the Lego characteristics of DeFi with YFI, and promotes the sound development of DeFi.
secondary title
1. Balancer is an important part of YFI's serial liquidity mining
On July 29, 2020, Balancer's front-end shielding of YFII caused dissatisfaction with Balancer in the market. YFI is the governance asset of the yearn.finance project, which aroused heated discussions in the DeFi market with extremely high returns in July. With the help of YFI's recent development momentum, YFII turned out to be a new topic. TokenInsight Research believes that the Balancer incident is just an episode in the YFI boom, and there will be more projects and events emerging in the follow-up DeFi development; and in view of the initial accumulation of bubbles in the DeFi industry during the liquidity mining period, this YFI boom has made DeFi The bubble builds up further on that basis.
In June this year, automatic market makers (AMMs) performed strongly with the help of liquidity mining, and Balancer’s performance in June was slightly worse than other AMMs. The historical performance of DEX and AMM is introduced in detail in TokenInsight Research's recent "DeFi Industry Research Report for the First Half of 2020-Part1 DEXs".
image description
The popularity of YFI is that users can complete different liquidity mining strategies through yearn.finance, including liquidity mining through Curve, Balancer, and yearn.finance. First, obtain yCRV by providing assets in Curve’s ypools; the second step is to deposit 98% yCRV and 2% YFI on Balancer in exchange for BPT, and get BAL rewards; finally, put BPT on the yearn management page to earn YFI.
image description
YFI chain liquidity mining strategy, source: ChainLinkGod
All CFMMs are mainly distinguished by the pricing mechanism adopted. The Uniswap liquidity pool is composed of two types of assets, and the ratio is fixed at 50%:50%. Balancer is more flexible than Uniswap. The liquidity pool can be composed of a variety of different assets; in the liquidity pool composed of two types of assets, it is not even limited to 50%: 50%. The governance asset YFI of the yearn.finance platform can create a liquidity pool with the smallest impermanent loss (98% yCRV and 2% YFI) in Balancer, so Balancer was selected as an important participant in the yearn.finance platform.
secondary title
TokenInsight Research took the data from Balancer's official website on July 30, 2020, and further analyzed the overall picture of its liquidity pool on that day. As shown in the figure below, the current total liquidity pool of Balancer exceeds 1,000, and the total liquidity exceeds 300 million US dollars. The liquidity pool of the platform consists of two types: private pools and shared pools. The open liquidity pool allows any user to provide liquidity and trade corresponding assets; the closed liquidity pool provides liquidity Traders are restricted, but traders are allowed to trade. The open type far exceeds the private type in terms of quantity, liquidity capacity and transaction volume.
image description
Basic overview of Balancer liquidity pool, source: Balancer, TokenInsight
There were only 23 private liquidity pools on July 30, and each liquidity pool contained different asset types and quantities. Five of the 23 private liquidity pools shown in the figure below consist of only one type of asset, and one liquidity pool has as many as seven types of assets. The number of liquidity pools composed of two types of assets is the largest, and obviously users prefer liquidity pools composed of two types of assets. This conclusion has also been verified in open liquidity pools, and TokenInsight Research believes that the reason for this phenomenon is that its risk is lower.
image description
Balancer's private liquidity pool asset type distribution, source: Balancer, TokenInsight
In addition, the 24h total transaction volume of private liquidity pools is very small, and only contributed by 3 liquidity pools. The liquidity capacity data also shows that the distribution of private liquidity pools is extremely unbalanced. Among them, 17 liquidity pools are below USD 500, 2 are between USD 450,000 and USD 650,000, and 4 are above USD 1 million. TokenInsight Research found that these 17 low-liquidity liquidity pools are not in the whitelist of Balancer. Due to risk considerations, very few users choose to provide liquidity for these pools or trade assets inside the liquidity pool. Therefore, these liquidity pools are often in the state of depletion.
2.2 Open liquidity pool
image description
Balancer open liquidity pool asset type distribution, 24h trading volume and liquidity pool capacity, source: Balancer, TokenInsight
TokenInsight Research further analyzed the two dimensions of liquidity capacity and 24h trading volume and found that the open liquidity pool of Balancer is obviously empty. The liquidity and 24h trading volume data of Balancer’s open liquidity pool are shown in the figure below. On the day of the study, 50% of the liquidity pools experienced liquidity depletion, and 17% of the liquidity pools had zero 24h trading volume even though they were not exhausted. Whether this depletion phenomenon is long-term or short-term still needs to be further explored.
On July 30, Balancer’s open liquidity pool was empty. Source: Balancer, TokenInsight
secondary title
The data intercepted on July 30, 2020 shows that there are 24 liquidity pools containing YFI in Balancer, and all of them are open liquidity pools. The total liquidity of these 24 liquidity pools reached nearly 12 million US dollars, and the 24h trading volume exceeded 1.2 million US dollars. The comparison of liquidity pool data with and without YFI is shown below.
image description
Comparison of Balancer open liquidity pool with YFI and without YFI, source: Balancer, TokenInsight
The following figure shows Balancer’s daily trading volume, number of traders, and number of liquidity providers since June. The figure shows that after yearn.finance announced the launch of the governance asset YFI on July 17, all three data of Balancer ushered in historical increase. This phenomenon shows that YFI has a benign impact on Balancer.
image description
Balancer's historical daily trading volume, number of traders, and number of liquidity providers trend chart, source: Dune Analytics, TokenInsight
To prevent illegal fund-raising activities under the banner of "blockchain" and "virtual currency" by various financial platforms, TokenInsight will strictly abide by national laws and regulatory regulations, and resolutely resist the use of blockchain for illegal fund-raising, network pyramid schemes, 1C0 and other Variations, dissemination of bad information and other illegal acts.
risk warning
To prevent illegal fund-raising activities under the banner of "blockchain" and "virtual currency" by various financial platforms, TokenInsight will strictly abide by national laws and regulatory regulations, and resolutely resist the use of blockchain for illegal fund-raising, network pyramid schemes, 1C0 and other Variations, dissemination of bad information and other illegal acts.
If you find that the content contains sensitive information, please contact us in the background, and we will deal with it in time.
