Access to adequate liquidity is seen as a crucial element for the future growth of DeFi. Many decentralized exchanges and dApps require reliable sources of liquidity to function. Which is where Balancer comes in to play, and Automated Market Maker, where users can swap tokens and pool funds. There are now various different AMM such as Mooniswap, Bancor, or SushiSwap – and they all have their own incentives for liquidity mining. With so many DeFi protocols in play, it is hard to choose where to start. Here we are going to look at Balancer liquidity mining and how you can earn BAL tokens.
What is Balancer?
Balancer pools should be seen as self-balancing index funds. What makes Balancer unique is that there is no forced 50/50 split between two tokens. Balancer’s pools can support up to 8 different tokens, and they can all have custom distributions. For example, one pool could be 80% ETH and 20% DAI whereas another could be 50% USDC, 5% LINK, 5% LEND, and 40% ETH.
The part to remember is that anyone can create Balancer pools and add liquidity to the protocol. However, not every Balancer pool earns BAL tokens. So this is where you must choose wisely.
Balancer Liquidity Mining
Each week 145k BAL tokens are distributed to users with liquidity on the protocol, totaling 7.5M BAL per year. This is a reward you earn as a liquidity provider, on top of the pool swap fee. Whenever someone performs a swap that uses the pool, the paid fee is distributed equally amongst liquidity providers. To summarize, you can earn trading fees and earn BAL tokens. Now let’s learn how to participate in Balancer Liquidity mining to earn BAL rewards.
Before You Start:
- You have Ethereum available to pay for transaction fees, if not buy some Eth quickly on Binance.
- Confused about DeFi? Start here.
- Never moved funds off an exchange? Maybe Bella protocol is for you.
Step 1: locate the pool
Depending on the assets in the pool and distribution ratios, different pools earn you more BAL tokens. You can use Pools Vision website to easily choose which pool is right for you. You can sort by Annual BAL to figure out which pools earn the most BAL tokens.
We recommend selecting a pool that includes a stablecoin peg such as DAI or USDC, because this will help you mitigate against impermanent loss.
Step 2: Add your funds
Once you have decided on the pool, you can click the pool address button on the left to automatically open up the correct pool dashboard on Balancer’s website. First Connect Wallet at the top right, and then click on Add Liquidity.
The great part about Balancer is, if needed, it lets you add liquidity as a single asset. So no need to buy every token before supplying liquidity, you just need at least one. Decide how much funds you want to supply and click Add Liquidity again to sign the transaction in your wallet.
And you’re done! Congratulations, you should find you have a BPT token in your wallet. BAL rewards will start being sent to your wallet on a weekly basis.