Balancer Labs announced today the official launch of Boosted Pools. Boosted Pools aim to solve for decreased capital efficiency with yields on tokens deposited into Automated Market Maker Pools. The first iteration of this groundbreaking product will be with Balancer’s close collaborator, lending protocol Aave.
“The collaboration with Aave as the first iteration of the Boosted Pools launch is a natural fit and solidifies their place in the Balancer ecosystem. There are various levels of Boosted Pool innovations that lead to concrete results, deeper liquidity, more efficient integrations for liquidity, and higher yields.”
– Fernando Martinelli, Balancer Labs CEO & Co-Founder.
Typically, only 10% of the liquidity deposited into an AMM pool is being utilized by traders because the trade sizes are much smaller than the available liquidity. Boosted Pools allow the remaining portion of liquidity to be deposited into lending protocols where the liquidity earns additional yield.
Historically, in order to provide higher capital efficiency, AMM Pools hold wrapped tokens of yield-bearing assets aDAI instead of DAI, improving the overall pool yield. The problem is that wrapping and unwrapping tokens not only needs to be done with a relayer but also costs too much to be done during a swap. Aave Boosted Pools solve the costly effort of wrapping/unwrapping tokens during a swap, and leave those expensive tasks to arbitrageurs, who are correctly incentivized to do it.
Lending protocols can be very expensive to join or exit, and Boosted Pools can be a game-changer for both traders and liquidity providers. Boosted Pools allow users to deploy a given percentage of the liquidity in a pool to money markets like Aave and keep a smaller percentage inside the pool for traders to use as liquidity. The portion that is deployed on Aave will gain interest from the Aave platform and any distribution that the Aave pools have.
“The collaboration with Balancer for the launch of Aave Boosted Pools is a prime example of incredible innovation happening in DeFi. I have been following Balancer’s V2 launch closely and Boosted Pools offer users deeper liquidity and more access to Aave. With the help of Balancer, we look forward to providing users a seamless earning experience.”
– Stani Kulechov, Aave Founder & CEO.