Balancer Price

A Balancer Pool is an automated market maker with certain key properties that cause it to function as a self-balancing weighted portfolio and price sensor.

Balancer turns the concept of an index fund on its head: instead of paying fees to portfolio managers to rebalance your portfolio, you collect fees from traders, who rebalance your portfolio by following arbitrage opportunities.

Balancer is based on a particular N-dimensional surface which defines a cost function for the exchange of any pair of tokens held in a Balancer Pool. This approach was first described by V. Buterin , generalized by Alan Lu , and proven viable for market making by the popular Uniswap dapp.

Balancer independently arrived at the same surface definition by starting with the requirement that any trade must maintain a constant proportion of value in each asset of the portfolio. We applied an invariant-based modeling approach described by Zargham et al to construct this solution. We will prove that these constant-value market makers have this property.