Balancer, the automated market maker, has announced a widely-anticipated second version of its decentralized exchange protocol, which has featured a host of upgrades centered on “security, flexibility, capital efficiency, and gas efficiency,” but yield farmers are left wondering about the all-important liquidity mining details, which are still in development.
Fernando Martinelli, the co-founder and CEO of Balancer, said:
“The main architectural change between Balancer V1 and Balancer V2 is the transition to a single vault that holds and manages all the assets added by all Balancer pools.”
It has been reported that this architecture will mean all assets will be handled through a single central vault, a development that will, in turn, improve gas efficiency across the protocol.
Dude, where’s my farm? Yield farm fans are patiently waiting as @BalancerLabs gears up for its V2 launch. The new protocol will be able to provide pools for the latest hot tokens. https://t.co/J54Sm53nXn — Cointelegraph (@Cointelegraph) February 3, 2021
However, for traders and arbitrageurs, the improvements to gas price efficiency will be especially welcome. Gas prices have risen to stratospheric levels as of late, and the congestion has led multiple projects in decentralized finance and gaming to consider various layer-two scaling solutions.
The report said that many observers have expressed excitement about Balancer V2’s enhanced customizability.
Custom AMMs will have a powerful platform to call home: Balancer v2 ⚖️ Let the innovation on top flourish! 🚀 https://t.co/EWLWo6T2Uj — FollowTheChain⛓ (@FollowTheChain) February 2, 2021
It has been analyzed that Balancer is arguably already the most customizable of the major AMMs, allowing users to create their own pools with variable fee structures and pool weights. V2 will allow users to set the curvature of their pools, which could enable new products and greater efficiency following advancements in the understanding of pool curvature.
Shortly after the V2 announcement, a post on Balancer’s governance forums from Balancer co-founder and chief technology officer Mike McDonald invited users to “brainstorm” the V2 liquidity mining (or yield farming) parameters.
“Even the Balancer team has not read this as our goal is to start having more discussions in public to also bring in community members in the process.”
Likewise, the objectives for the new liquidity mining program will center on being agile enough to quickly provide pools for “hot tokens” and the trading fees they’ll bring in, while also ensuring sustainability and simplicity, as opposed to V1’s focus on “long tail” assets. McDonald also wrote that improvements to the liquidity mining program and the community incentives it provides are both parts of a long-term vision for fully decentralized governance.
Thus, he concluded:
“The goal is to have the widest distribution possible across users and time in order to achieve a decentralized ownership and therefore governance of the protocol.”