Balancer: Self balancing pools, a DeFi primitive with Alex Van de Sande

okay seems i am mine hey everyone who's watching uh so thanks uh i will be talking about balancer both about self-balancing tools and the default predictive that you should know i think like what is a self-balancing pool that's an interesting question right when i first joined bouncer everyone was saying hey like balancer is just an automatic market maker and i think there's a much more interesting story there and the story is let's say like i'm from brazil we have sugar cane here that's sort of how the country started and if you put sugar cane inside the meal that's how it gets sugar but turns out you also get the gas and by gas is a side effect that is actually very useful in some in some situations there's actually a lot of energy so the same thing can be thought about curves you get arbitrage you put it on a curve and you get an exchange and you also get a liquidity pool unlikely the liquidity pool is sort of the of the of the side effect of the by-product of having an exchange and the pool works in a very interesting way right you've probably heard about the green people they are everywhere and the way they work is you can think of them as two connecting vessels uh where as one of the sides one of the like sides starts to like grow more what happens is that like let's say you have a eater in bitcoin one as as bitcoin grows grow grow what's going to happen is that sort of going to flow over into the other side right so and that those bitcoins will be sold and turned into each other and the same thing will happen all the time like if as as as eater goes up like it starts falling on the other side as bitcoin goes up it starts falling and then it's uh a self-balancing and a self-equilibrium pool right and it's it's like it's literally a pool you can think of it in the pool of water and what i'm saying is if you think of oni swap the biggest automatic market maker it is for trading and as i buy product you get a self-balancing portfolio of two tokens right but balancers started with the idea of trying to build self-balanced portfolios and they got into the basically the same mechanism and we are creating we actually want to create self-balancing portfolios for any number of tokens and as i buy product you get trading and i think that's that's a a super interesting switch there because why why do self-balancing portfolios work right let's take a look look at the current defined market right i i every so often i update those numbers um right now we have like 13 billion dollars maker eleven billion dollars in eight nine billion dollars in compounds seven curves seven and even swapped bouncer is at eleven with two billion dollars which like it's a lot of money but it's just that there's a lot of other competitors there if you put it in in the in in context right that's let's say the dot of the eye is i think two million dollars something like that this would be two billion dollars this would be seven million dollars eleven thirteen million dollars which is maker but put in that in context that's also robin hood right you can see that robin hood can eat up all of d5 swallow up and it still fits together inside robin hood right like it's it's getting like it's getting shorter right it's it's getting like we are getting there probably not it's too big or not but if you get something like berkshire hat away there are 800 billion dollars like we are like if like if we or the earth berkshire hat away is jupiter or something like that right and if we zoom out we can go and zoom out more and more and more what we're gonna get is like even berkshire hathaway is a small fish compared to people like vanguard and why am i comparing defy to vanguard and to berkshire hathaway right if we are this little planet bangword is the sun berkshire hathaway is like jupiter right this is us this is home like the pale black dot why am i comparing those two things right it seems that they are completely unrelated but i would say no because really like what those guys do is just they do portfolios right that's all those guys do they just they just keep changing the portfolio they're just adjusting the portfolio here and there but you can think of a portfolio as just there are assets there's a strategy there's governance right those three things it makes what berkshire hathaway is what bankwood is what robinhood is it's just a bunch of assets with some governance and some strategy right and you can think of the assets the strategy can be assets can be uh like of course assets are in the physical world in bangalore and berkshire hathaway but like or i think what builds us all together is to believe that probably like everything that is out there everything that is on nasdaq everything that is on that it can can be traded on on on a stock market will be tradable in crypto right everything is being cryptonized so like everything that can be on a crypto asset will be a real asset strategy is a trading curve it's just that how exactly do you decide when do you sell and when do you buy and governance is what decides which assets you have right and normally we think of assets we think of oh there are high risk assets they're low risk assets there's a bad set of assets you can set all of that inside the making of this curve and people are doing a lot of course right so we have like just basic pose in in and bounce right now which is just straight for the poles one two or three tokens like it can be up to eight it used to be that was up to eight tokens now we launched a new version it's basically infinite tokens i think it's like a hundred tokens something crazy like that and and it's just like okay you create a pool and it's going to forever be those two tokens with that specific rate right so it's maybe it's 80 ball 20 doll eater and and it's gonna be forever like that but people are doing other very interesting things right a paid out there they want to create an autonomous index fund as a balancer and they are doing that and the idea is really like look you you get that traditional exposure that crypto exposure that cash you turn that into crypto assets you put that in a balancer right catnip exchange it's like i love this this super cute uh little cat they're creating production markets on wall of fame why because a production market is always somewhere it's balanced like it's also a self-balancing pool right you have like one token yes you have token no maybe you have like multiple tokens and you want to sell them and you want to make sure that they trade at a specific price so what you can do is you just set you you can just set a pool there and and when you you have a wave in which the price sort of like where the price sort of changes according to the market and the um and that will provide you the liquidity and allow you to automatically switch to automatically balance that out and i think so you cannot insert like elbows a lot of things you could do a prediction market you just pick a pool put two tokens there yes and low or whatever is the tokens and you start selling the pool you have the liquidity you have a lot of the work in building the liquidity prediction market itself it's already automated inside the boat prime though it's another it's not tied out before it was primed out it's helping do liquidity bootstrapping now liquidity books trapping is something that is super interesting right so and and and i think the best way to think of it is icos right when we started the ico crate of 2017 we think of oh 2017 that was the ico grades and what happened is that people were really trying to play around with the idea of how is what is the best way to sell a token online right do you put it online and then and then you set a price and if you set a price that doesn't doesn't match whatever is the market price then you have a problem in which people like it sells out very quickly and if you force it not to sell out very quickly or if you force and what happens is suddenly you have an option on gas prices right what would you you need to some ico started started lasting instead of weeks they would start last a day or less an hour last five minutes and the problem is the minute that it starts your ico only lasts five minutes then the real option what's happening on the on the gas prices gas prices where like the miners were getting all the va the extra value of of how the market if the market is wants to pay a thousand dollars or something that is being sold a hundred dollars and every and like what happens is people were are gonna pay a hundred dollars for the token and pay nine hundred dollars i guess and the way and and then like maybe you do into an option maybe you do like a dutch action where it goes down but then often what happens then you don't have enough liquidity for that so i think and you create a good strap into who is something that has been happening with a lot of tokens and what they do is they create just a token a pool that has a scada to it so it stores let's say 90 percent eater or maybe it's like 50 either fifty percent die you sort of do very two very liquid tokens and then you just a tiny bit you take one percent of that and you add the new token on there what's going to happen is that that ninety percent of that token like the market market doesn't still know what price is gonna have so it's going to go up it's going to go down but mostly it's it's a tiny market cap so it doesn't really matter but every day or every hour increase that amount a little bit and then a little bit more right and let's say you start with a million dollars in very very liquid assets like each on buy and you start with like one percent of that is in a very illiquid asset of a new token that nobody really knows like what the price is if you and now the the that's who will work as creating a buy pressure where every so like every hour or so it's gonna buy one more percent of that it's gonna sell it and wanna buy it on that token and the pool will do that automatically just increase the you just increase the the share slowly and people are able to buy and sell the tokens to that pool at whatever market price price they want right that's the interesting thing right the pool basically be saying look i'm i'm gonna buy i'm buying this token at this price and then you sell more token and you would sort of figure out the price of the right price market price and then it's basically eating up that volatility until at some point you have a token you you have a pool that is maybe eighty percent or fifty percent or whatever rating you want for new mutual why is that that's interesting because suddenly now you have two things first you are able to sell the token you start with a million dollars and now it's mostly made of a token it means it meant that if at any moment you join the pool you would get like if you you joined the pool in the beginning on when when the token when the who was just eater and died then by the end of it you bought tokens without having to worry about whatever is the market price but with all the fluctuations in fact you gain like as a liquidity provider as like as a solomon who wanted to buy something initially you actually gain interest that you gain all the trading fees of people just buying and selling the token until it found the market uh market imagine if you do that let's say with bitcoin or ether and just you could do that with just eater buy right you could say look i want to buy a million dollars and die like collectively of course not you are going to buy a new loan bitcoin maybe you want to sell a million dollars in bitcoin but you don't know what price to sell it and you want to do it over a year you could create a boom that starts with a big amount of money and slowly it sells and it sells out and it sells out and sells out and it's in practice if you work like a uh you call it a dollar dollar average in which you're just buying the average price and i think that's a great way of thinking of of the of both next so that's how the huge booths better that people would work and i think they work like and like i if you just search for how people are launching tokens you realize there's a whole new universe of people launching tokens one after the other using those rules and i think that's super interesting so balancer victor we just launched in beginning of march and beginning of may we are in may and i think there's something some very cool things and i think just let's talk about elephants in the room also like uniform v3 i like balancer and unisap has a heavy interesting story right because they started together in which they started away and they sort of converge on the same uh solution and now they are diverged very deeply right so bouncer once the the fernando started writing a white paper because he wants like self-balancing portfolios uniformly trading they they ended up with the same solution which is likely beautiful and now what islam feature is very different from where we are going right i think it's great it's very good for the ecosystem that everyone is trying different things so first thing that i find super interesting is that before every time you had to create a pool you have to create you know a new smart contract like we did you have new assets are on that smart contract with the new logic is not a smart contract whenever one someone wants to interact with that they would need to to do an approval transaction for that smart contract in v2 we are changing all that there's like one big uh main smart contract which is like has been super audited and it's actually very simple because all it does it handles the tokens right there is like one big smart contract all the tokens inside and then when you like whenever you want to create a news work on your pool you just create a logic for it and it plugs into that big hole and it creates a lot of advantages like there's there are there you pay less fees on it and then gas in it and there's also something very cool the arbitrage is a lot cheaper on that right before if you saw let's say three or four pools and there's an arbitrage opportunity if you like i'm gonna buy this guy and then sell with that guy and trade with that other thing over there you had to actually own all those tokens and trade off them and balance it with you all you need to do you realize that arbitrage you send instructions to the pool and maybe you don't even need you don't even need to have any tokens out right you don't have to have your own tokens or ever do execute executable trades you just get the profit out of that right you just tell hey i realized an arbitrage if you sell this and buy this and sell that and buy this and then it's gonna do all of that sort of internally and it's just gonna send you the the profit like cheaper gas better profit and i think that's that's actually fun so it's a lot more gas efficient for for that reason and like we all know how gas is right now uh yeah that's i i so that's when i also talking about how how you like all the assets are now in one big smart contract and i think that there's a lot of like advantage that like you can actually like you you can create any logic that you want in your contact just plug it to the mother chip and you can launch whatever pool you want right like make a prediction market out of it make make a dow out of it right i think just think of this out like the original de dao in which like you you had a vote and then you had a vote on how to spend things and if you didn't want you had to rage quit and and that's like alpha moloch though i think that's that's almost all of that is already inside uh a pool because when you're part of a pool you get liquidity pool tokens which is a token which you could use to share you you could desire either to sell and get those tokens out or you could use to vote and use those votes to let's say change the radio right and then suddenly like creating a dow it's a lot easier another cool thing i think that's actually like super cool captain efficiency normally like in two token spool you have like you have a large amount of capital and then you only need uh when you only need like a small one that is being used for trading right and in v2 and i think it's this is clearly where we and unity have diverged and i think it's fantastic like what you do is you allow the pool to automatically take that capital that is not being used and use it everywhere elsewhere in a landing platform let's say right so you can let's say you can have a million dollar in a pool uh but only you have only let's say 100k of trading dollar so you only need let's say 200k of a capital in that pool the rest of the 800 k can be put in compound or put in a lending platform and automatically that's that lending goes back to the pool so by owning a share of the pool not only you own the trading fees of the food not only you get the self-balanced portfolio advantage but you also are can be investing it like it's all like your money is on balancer but it's it's also on on on wi-fi right it's also on on idle finance and i think that is that is that that makes the difference and the balancer is for builders right what we want is like balancer is for you who want to build stuff and i hope you come to us and you learn more about how pools work because fools in fact when you learn how they work you realize oh my god i can do so much with food they can build so much so so so many other stuff and i think that's that's really fantastic and that's it that's my presentation i think 21 winners i think it's good so you can put balance on finance actually you can go to balance for five but like we have a new address down for five which is just but it's going to get the the uh they really like it automatically and like balancer labs and you're hiring so if you want to work at balancer just shouldn't you email it to us and thank you that's it you have any questions one okay well thanks thanks eric's poland for having me thanks anthony and and and i really hope to see you at some point after kobe done yeah thanks a lot alex thank you bye bye