Week 3 at the ETHIndia Fellowship is up and I’ve been looking into Balancer’s Docs and understanding how the protocol works.
Balancer is an AMM protocol with a unique and interesting approach to creating markets. They are flexible in the types of pools you can create, with the option of multi-token pools combined multi-weights assigned to them.
Some of the interesting pools that caught my attention and could prove useful to T[C]S are:
Composable Stable Pools: Composable Stable Pools are a superset of all previous Stable-type pools provided by Balancer (Stable Pools, MetaStable Pools, StablePhantom Pools, and StablePool v2) and therefore obsolete all previous pools.
They are designed for assets that are either expected to consistently trade at near parity, or at a known exchange rate. Composable Stable Pools use Stable Math (based on StableSwap, popularized by Curve) which allows for trades of significant size before encountering substantial price impact, vastly increasing capital efficiency for like-kind and correlated-kind swaps.
These pools are ideal for pegged-tokens such as DAI, USDC, etc. as well as correlated tokens such as wETH, stETH.
Boosted Pools: Boosted Pools are actually a subclass of other pools (typically Composable Stable Pools and Weighted Pools) but deserve their own page due to their powerful feature set. Boosted Pools bring the best of both worlds to Liquidity Providers (LPs) and Traders. Traders get access to deep liquidity with minimized price impact while Liquidity Providers get their liquidity positions sent to external protocols. A much more in-depth explanation is provided here with diagrams:
Using the flexibility and the powerful toolset given by Balancer, we could create a Composable Stable Pool (and probably even a Boosted Pool) that could allow the stable trade of carbon-backed tokens like BCT, NCT, MCO2, with ease and also generate extra yield for LPs. This could solve the incentive issue, add to this the issue of a carbon-backed reserve currency ($TCT - The Carbon Token) for the pool, with a protocol-owned-liquidity style setup, we could create something powerful and reimagine ReFi.
Have any thoughts? Let me know - DMs are open at @robin_rrtx on Twitter.
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