It has been reported that Fernando Martinelli, the CEO of Balancer, unveiled plans for the project, named the Balancer V2 Asset Manager. In essence, the integration will allow users to earn two forms of return on their deposits: trading fees and yield farming from Balancer, in addition to lending interest from Aave.
However, in Balancer’s current architecture, users deposit funds into a liquidity pool in order to enable decentralized asset trading. In exchange, they are given a portion of trading fees, in addition, to yield farming returns in the form of Balancer’s native governance token, BAL.
The majority of assets in AMM pools often sit unused, as they’re not needed unless there’s an unusually large trade.
The report said:
“Large trades cause a lot of slippage, so traders avoid them. This means that as long as prices don’t shift too much, a pool would be able to facilitate exactly the same trades with much lower liquidity actually being available.”
Likewise, unused tokens in the Balancer liquidity pool will be lent on Aave to earn additional yield, with the automated Asset Manager facilitating the transfer of funds between protocols.
“I’d say maybe around 80% of the average of the AAVE yields of the different tokens + all the trading fees from Balancer. 80% because we will keep a buffer (20% I’d estimate) for swaps to be able to happen.”
Thus, researcher Alex Evans at Placeholder Ventures is investigating swap optimizations, and Martinelli noted that the “keepers” responsible for executing the swaps have yet to be chosen, and there is ongoing research into how to incentivize the keepers as well.