Author: D Analyst
Balancer is a community-driven protocol, automated portfolio manager and liquidity provider. It also acts as a price sensor that empowers decentralized exchange and automated portfolio management of tokens on the Ethereum blockchain and other EVM compatible systems.
The vault is a smart contract that holds and manages all assets in each Balancer Pool. It is the core of Balancer which acts as the portal where most transactions (swaps/joins/exits) take place.
The changes to V2 have allowed the vault architecture to separate the token accounting/management from the pool logic. This change simplifies pool contracts as users no longer need to actively manage their assets and only need to calculate the amounts for swaps, joins and exits.
The new architecture enables different pool designs to be streamlined. Creative thinkers with novel ideas for a trading system can customize pools plugged directly into Balancer’s existing liquidity instead of needing to build their own Decentralized Exchange.
Balancer stores all tokens in the same smart contract. This effectively reduces the amount of Gas required for transactions allowing for greater swap efficiency.
https://docs.balancer.fi/products/the-vault
The pools are the smart contracts that define how traders can swap between tokens on Balancer. Unlike other protocol pools, Balancer Pools are unique due to their limitless flexibility. While other pools have constraints, Balancer can accommodate pools of any composition and underlying math. This allows for users to develop their own pool type which allows customizable pricing functions in trading pools.
Below is a table to illustrate Balancer Pools’ flexibility
https://docs.balancer.fi/products/balancer-pools
Weighted pools allow for users to create a pool with up to 8 different assets with different percentage weightings from the typical 50/50 2-pool.
https://docs.balancer.fi/products/balancer-pools/weighted-pools