Balancer, an Ethereum based DeFi, has started distributing its governance token ‘BAL,' making a massive debut in the fast-growing market. This token's price has surged by over 40% within the past 24 hours according to DeFi Pulse; its total locked value (TVL) is at $62 million as of press time ranking as the 5th DeFi in Ethereum's ecosystem.
The debut comes barely a week after Compound overtook Maker as the leading ERC-20 based protocol. Currently, COMP tokens dominate the $1.5 billion DeFi market with a 36% presence. With BAL tokens now in the picture, DeFi enthusiasts can scale their activity from lending protocols to governance tokens for automatic index balancing.
Balancer's Liquidity Pools
The Balancer protocol design allows the portfolio rebalancing based on pre-assigned ratios. Users create liquidity pools in which they can deposit a given amount of ERC-20 tokens. These portfolios are balanced such that a user could allocate 30% to one ERC-20 digital asset and the remaining 70% to another. Consequently, the pool will automatically rebalance itself should one of the assets' price change. This, in turn, creates liquidity through the sale of overweight tokens, hence trading activity.
Notably, Balancer is only a few months old and seems to have a strong value proposition given the market reaction on BAL token distribution. Its liquidity mining started on June 1, with users earning BAL tokens for contributing towards the protocol's pool.
However, it was only yesterday that the initial distribution of these BAL rewards kicked off on Ethereum's mainnet. Balancer announced that around 1,000 ETH addresses are ready to receive its governance token, having minted 35,435,000 BAL. Going forward, the protocol will facilitate distribution of 145,000 BAL tokens weekly, an approach that will see its minting last for around nine years unless altered by a vote.
According to Balancer's CEO, Fernando Martinelli, a gradual minting and rewarding infrastructure will likely preserve the protocol's decentralization goal,
“By far, the most important factor or reason why we are doing that is that we want this thing to be decentralized.
We believe in a decentralized, trustless future, and we want Balancer to do that. We need the distribution to be in a healthy way.”
The Burgeoning DeFi Market
While some have compared it to the ICO boom, decentralized finance (DeFi) has continued to prove itself. Some market analysts think that initiatives under this space have awakened Ethereum's (ETH) bulls. The past week alone has seen LEND and Synthetic tokens surge by 3,900% and 40%, respectively.
These two are both DeFi platforms with former operating as a lending protocol, while Synthetic is a derivative based protocol. Following the developments in this niche, DeFi activity cannot be ruled out, especially as the world moves to digital commerce in efforts to curb the pandemic.