"Building on Balancer" - Jeremy Musighi

jeremy who is going to be talking about building on balancer and sort of what you can enable for your audience as a developer and also as a user so i see jeremy's already here and i'll let him kick off with his presentation so welcome thank you let me go ahead and share a screen all right is that uh working we're all good to go great so yeah uh hi everyone i'm jeremy mussigy i'm the head of growth at balancer labs and i'm going to be talking about how a balancer is being used as a building block for decentralized finance so first uh i'll start with a quick overview of what balancer is and how it works um on a high level balancer is a fundamental building block for defy and it makes a lot of different applications products and services possible both by allowing developers to reinvent systems of traditional finance but also by allowing people to create all new innovations that never existed before because they weren't really possible with the tools that were available so essentially balancer is a generalized amm protocol and in that sense it shares some similarities with uniswap but uh structurally the two protocols are actually uh fairly different and i think by the end of this presentation you'll see that balancer and use up are actually very different to start the balancer has the flexibility to create liquidity pools beyond simply a 50 50 split between two assets you can create liquidity pools that can skew their weights as far as 98 in one and two percent in the other but you can also create pools that hold up to eight different assets so uh kind of the main point that i want to get across and that i'll be illustrating is that balancer is a primitive for people to build and innovate on top of so balance or liquidity pools are smart contracts that hold between two and eight tokens and these tokens are held in balance with each other according to preset weights and these weights represent a proportion of the total value of the pool that is held in each token and every balancer pool is created with customizable configurations such as the tokens specifically that are allowed in that pool for example ether any erc20 token [Music] as well as the weights of those tokens and the swap fee that that pool will charge for trades that are made with that pool so users who interact with balancer can be split into four groups first being the liquidity providers who provide assets to pools on balancer and earn passive income from fees as well as having their portfolio automatically rebalanced the second is the traders who come to balancer to exchange tokens with low slippage and favorable rates uh the third being smart contracts that um are seeking to source liquidity for example dex aggregators or smart wallets but definitely many other use cases for those types of integrations as well and fourth would be the arbitragers who come to balancer seeking to profit from imbalances in price that occur in balancer pools and by trading those opportunities they serve a very key role in the on the protocol in quickly putting those pools back into balance according to their set weights so i'm going to cover the types of pools that exist on balancer so anyone can create a balancer pool and there are two general types shared pools when you create one you set the configurations as mentioned before and those configurations are finalized as soon as the pool goes live and at that point they can no longer be reconfigured and this allows shared pools to be trustless and because they're trustless uh anyone is allowed to add or remove liquidity anyone can be a liquidity provider for a shared pool and the creator of a shared pool has no additional rights compared to anybody else and there's no controller for shared pools so private pools are different because when you create a private pool you'll also set your configurations however they can be changed anytime after the pool is already live and the creator of a private pool becomes the controller of that pool and only the controller can add or remove liquidity to a private pool so not anyone can be a liquidity provider to a private pool there's a there is a uh there's a gate there and there's a controller who you would need to go through gatekeeper yeah that was the word i was looking for so um i'll go through one sample use case for each type of pool there are many use cases so this is just a limited view so for shared pools anyone who wants to earn passive income and automatically rebalance their portfolio can create or join a shared pool and for doing so they will receive bpt's balance or pool tokens which represent the their portfolio ownership in that pool and um you can think of this sort of like an index fund private pools can be used by a professional money manager who creates a private pool to allocate funds based on their own dynamic investing strategy and as the controller of that pool they would regulate who is able to invest in that fund and so this can be seen more similarly to a hedge fund so third type of balancer pool is smart pools these are private pools with a few modifications that give them certain superpowers a the controller of a smart pool is a smart contract and that smart contract acts as a gateway for anyone to add or remove liquidity trustlessly into a private pool structure and the controller as in a private pool is granted rights to make changes the configuration of the pool however those rights are specified during the creation of the pool and they can't be changed so they can be limited in that sense and that is transparent to all of the liquidy providers who would be interacting with that pool so for example if a smart pool was created that gave the controller the right and the ability to adjust the weights of the pool while it's live uh anyone who is interacting with that pool would clearly be able to see that the smart pool has that power but it does not have the power to change which tokens are in the pool or the swap fee for example so a smart contract controller can connect to any other smart contract on the ethereum network and therefore it can act and make decisions based on events that are occurring outside of balancer so any on-chain information that is on the ethereum blockchain can be leveraged in that way and and this is where things really get interesting so i'm going to cover a few of the use cases real use cases of smart pools on balancer and i want to note that most likely we have not discovered even a fraction of the potential use cases for smart pools which is you know really exciting because this is a new technology and essentially a new innovation it'll be interesting to see what people come up with but i'm going to go through a few of the things that have been come up that have been done so far or have that have been imagined at least so um the first use case is managed index funds uh the first ever smart pool was created and launched by paidow and they use balancer smart pools as the underlying infrastructure for their crypto index fund products and this allows investors to passively invest in their diversified tokenized index funds which are designed to give them consistent returns with managed risk so examples of these index fund products that paidow offers there's the d5 plus l and d5 plus s those are balancer smart pools that hold large cap d5 tokens and small cap defy tokens respectively there's the usd plus plus which is a balancer smart pool that holds four different usd stable coins uh which enables investors to maintain risk managed exposure to the us dollar via strictly crypto and there's the btc plus plus which is a a smart pool holding four different wrapped or synthetic btc assets um so that investors can uh use that to gain risk managed exposure to bitcoin within the ethereum blockchain a second example of managed index funds on balancer is realty which is a platform for tokenized real estate investment properties and realty token holders receive rent from the rental properties that they own through these realty tokens and it's converted into die and and paid to them as a dividend and so using balancer smart pools realty can create an index fund which is a single token that represents diversified real estate investments so an example of this concept is that realty could for example create a california real estate index fund via a smart pool that contains tokens for properties in various cities in california like san francisco la san diego and the way that this is possible is that you can create meta pools on balancer which is a pool of pools so let's say for example that there is a smart pool for a certain neighborhood in los angeles contains eight properties in that neighborhood which are represented by eight different tokens and that token from that pool is put together into another pool along with tokens from other properties in other neighborhoods throughout la and that meta pool is then uh you know like an la real estate pool and then you have uh your san francisco real estate pool you have your sacramento real estate pool and so on each of those pools also has a token that represents the ownership in that entire pool so if you took all of those uh tokens from those metapools you could create yet another level of metapool which represents basically diversified investment throughout the entire state uh through one token um which is pretty cool and you and you you don't have to stop there you could keep going up uh additional levels where um there are regional pools there could be national pools you know etc um really really cool stuff so um another use case for balancer smart pools is token sales um what we call liquidity bootstrapping pools or lbps and that's a very exciting name but it is actually a really exciting use case that is gaining traction as a new mechanism for fair and transparent token sales as an alternative to other ido mechanisms so a general example of how this could work is that let's say that crypto protocol is launching their new token and they deploy a smart pool that contains their token and as well as a reserve asset such as usdc and they can start they can create that pool with a 90 weight towards their token and 10 percent weight towards the reserve asset they can set a duration for a three-day token sale and then while the sale is live or which is while the pool is live they can gradually adjust the weights of the pool so that they skew in the opposite direction from where they started so they start 90 10 and they over the course of three days can skew towards 10 90 meaning that at the end of this three day period the the weights of the pool will be 10 network token 90 usdc and so the result of this is that the project has exchanged the majority of those tokens that they deposited into the pool for usdc and they have raised money for their protocol so the first team that did this was perpetual protocol they did the first ever lbp a few weeks ago and the second team actually just did it yesterday over the last 24 hours i think it may have just ended right now it's october 16th and that's was by the rally team so another use case is smart treasuries this is based on a concept originated by joel monegro who's a partner at placeholder vc which is an investor in balancer labs and the idea is for crypto protocols to use balance or smart pools to create a smart treasury that is then controlled either by the team or by a dow and it's it's quite a complex but fascinating concept and because of time constraints i'm not going to dive into it but i highly recommend reading the blog post on the placeholder blog it's called stop burning tokens and it proposes balancer smart pools as a solution for replacing the buy back and burn model with a buyback and make model so a few teams are already working on implementing this and aragon is leading the way on that so definitely check that article out to learn more last use case that i'll go over is surge pricing for trades so in moments of high liquidity demand in the crypto markets people are less sensitive to minor differences in trading fees if they you know need liquidity right away so to capitalize on that one could create a smart pool uh that dynamically changes its swap fees in reaction to market conditions by charging higher fees in times of heavy demand so this is a concept that's similar to uber surge pricing when a lot of people are trying to get a ride [Music] but so no one has implemented this idea yet but it's also an interesting one last thing i'm going to cover briefly is the balancer ecosystem fund where we provide grants and bounties to developers who are building on balancer so bounties are ideas that come from our community and from our team that we specifically want to fund developers to build so that's you know we would post those out there and any developer who thinks that they can do it can basically claim that bounty and build it and get funded and grants are projects that developers will [Music] come up with and pitch to us for funding the ecosystem fund is currently uh somewhere around 70 million usd in value and we'll have new announcement we'll have a new announcement coming up pretty soon with regard to the ecosystem fund so definitely stay tuned for that and that's all so thank you very much awesome uh thank you so much uh jeremy for that amazing presentation uh we uh we have a couple questions coming in from the chat uh we have a slight leg in uh everybody saying what i'm saying and uh i'm hearing this so we'll kind of coordinate our questions as they come in and in case we can't do that uh real time enough i'll encourage you to just join the chat after and just answer these questions to the people directly so the first question that we have is a quick clarification on how uh things are set up from uh from the back end of the contract side and the question is um kind of going from controller pool to a private pool is that a taxable event in the sense that the tokens themselves get swapped and traded so at least by us laws does that create to your knowledge a taxable event or is that a seamless record change so controlled pools and private pools are the same those are two words for the same thing um maybe if you mean like for engineering we're just reading the questions directly so maybe i'll ask this question to clarify if they see this in time but but regardless i i definitely am not qualified for tax advice so i don't really i can once we clarify that i don't know if i'll have an answer it's going to be a different answer based on every region so i totally understand that um the uh the second question that i have which uh which is slightly broader is uh i mean balance has been facilitating a lot of different types of pools and and you've seen some really creative use cases of this technology so what are come uh sort of some of the things that really surprised you uh in terms of what you didn't realize was possible and then sort of corollary like what are some of the things that you have on your wish list as a team that you haven't really seen come to uh the same fruition that you hoped for and would kind of encourage people to experiment with well i i would say definitely that joel monegro's idea for the um balancer smart treasuries really blew my mind um i thought that was incredible and i did not personally see that coming um the possibilities are endless you know these are building blocks that you can create all kinds of stuff with it's really infinite um which is so exciting i think that um me personally um i think it's important for the balancer ecosystem that we continue to uh you know integrate with developers who are building you know whether it's smart wallets or you know other types of applications that are looking to source liquidity or teams that want to leverage um smart pools for some you know investment products that they want to create or um you know to launch their token sales i mean there's there's really like so many different different ways to interact with the protocol if you have an idea or you want to brainstorm something like definitely reach out you can find me on twitter um and it's at immutable but immutbl that's an amazing name uh perfect so i think what we'll do is i'll have uh you sort of uh join the chat directly and just uh engage with our audience there if you have time and uh i want to thank you again for uh this amazing presentation um was a great reminder to all the hackers that are participating that uh uh balancer is a sponsor for this event and they're offering a handful of bounties so if you have any of the ideas that you want to take from this presentation do kind of try that out and even if you're not hacking for the online hackathon the the community pool uh is the ecosystem fund is a still a great resource for you that's available for anybody who's uh interested in experimenting and trying on different uh products and strategies so uh thanks again jeremy um thank you and uh what we'll do is uh we'll take a quick five-minute break for everybody on this chat so this will give you enough time to uh just enjoy a little bit of the radio and uh we'll resume with our next talk uh from sergey at uh 3 p.m eastern so we'll see you all in uh five you