Balancer Announces V2 Upgrade With Protocol Vaults and Scalability Features
The Balancer protocol has announced a March launch for its V2 upgrade. The upgrade introduces a single vault and an improvement to gas fees.
Popular decentralized finance (DeFi) project, Balancer, has announced a new update to its protocol. The protocol has rejiggered its protocol to answer some of the burning needs of the DeFi space in the hope of improving its overall service.
Switching to a Single Vault
Balancer's V2 upgrade will see an architectural change through a generalized automated market maker, per its announcement. This will create a single access point through a single vault to hold and manage assets added by the pools.
The improvement in gas efficiency will be especially welcome news for traders, who will have more freedom to initiate transactions and trades without having to pay so much on fees. The issue of increasing gas fees is particularly damning for DeFi protocols, with many scrambling to find ways to sidestep it. Ethereum's solution to its scalability concerns is built into its Ethereum 2.0 offering.
The widely-anticipated upgrade promises to introduce new scalability features to Ethereum, with gas fee management being an added advantage.
Addressing Rising Gas Fees
Average gas fees have been on the rise, particularly this year. Data from YCharts showed that average gas fees on the network crossed $10 twice in January. On January 11, they smashed through an all-time high of $17.43.
For now, protocols are moving towards layer-two solutions. These solutions reduce gas fees and improve Ethereum's scalability by moving most transactions to side chains. By freeing up space on the blockchain, they reduce congestion and, by extension, gas fees.
There are also solutions like Polkadot, which applies a sharded multichain network capable of processing several transactions on smaller chains in parallel to its main blockchain. As opposed to processing transactions one-by-one, this approach can improve scalability.
Speaking on how this upgrade will benefit users, Balancer pointed out that its initial version used two or more pools, which would have to send and receive ERC-20 tokens from all pools. With the new protocol vault, only the final net token amounts will be transferred, and they will be done to and from a single vault. The developers explained,
“Balancer V2 separates the Automated Market Maker (AMM) logic from the token management and accounting. Token management/accounting is done by the vault while the AMM logic is individual to each pool.”
Balancer added that the upgrade would also offer improvements to its price oracles and restructure its protocol fees. Audits for the upgrade are in progress, and a launch is expected in March 2021.