What is Balancer?

As the Balancer DEX continues to grow in popularity, many are asking about whether it is a safe platform for retail investors. This is an important question, as the company has been around for only seven years. We will explore this question in-depth and answer it at the end of our blog post.   

Balancer is a DeFi platform that uses smart contracts to create tokens to provide liquidity to investors. Investors can buy and sell these tokenized securities on Balancer's trading platform, which offers benefits such as no listing fees, speedy settlement times, and lower transaction costs than traditional exchanges.  

Investing in Cryptocurrencies Safely

Due to the collapse of several crypto-related companies, like FTX, Voyager, and Celsius, we advise against opening an account with a crypto-only company. To invest in cryptocurrencies safely, consider using a SIPC insured and FINRA regulated U.S. brokerage firm. This will provide peace of mind that your money and investments are secure and won't vanish overnight if a company holding them experiences an issue.

We recommend Robinhood, a popular broker that is regulated by FINRA/SEC and insured by SIPC. Robinhood offers investing in many cryptocurrencies, stocks, options, and ETFs, all with no commission fees.

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Is Balancer a Scam?

Balancer appears to be a legitimate company that has been around for five years and is backed by several venture funds. The company is already partnered with Amazon Web Services Singapore and Singapore Press Holdings Limited. Furthermore, Balancer's team has extensive experience in various fields including management, artificial intelligence (AI), blockchain development, computer engineering, and software engineering.

Is Balancer a Legitimate Broker?

Balance is not an official broker, but rather it serves as an exchange. This means that the platform cannot hold customer funds and therefore cannot be held accountable in cases where it is hacked or transfers users' cryptocurrency to hackers.   The same is true of Uniswap and Fork Delta, which also allow users to create their own tokens.

Is Balancer Safe?

Who Owns Balancer?

Balancer is a Singapore-based company founded by Matt Chwierut and Daniel Poon, who are both from Birmingham, UK. Poon previously worked for blockchain startup ChainLink and as a software engineer at cybersecurity firm Guardicore, while Chwierut has extensive experience in software engineering, management consulting, blockchain development, and AI.

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Balancer History

According to Balancer's own documentation, the team behind the Balancer Protocol (Balancer Labs) has been in the DeFi space for a while, and started Balancer as a research project in early 2018.

In May 2018, the company ran a public beta test on its trading platform, and in November 2018 it announced its partnership with Amazon Web Services Singapore and Singapore Press Holdings Limited.

In December 2018, Balancer announced that it had raised $11 million in funding from venture capital funds such as Singapore-based Radin Capital and LuneX Ventures.

In early 2019, the company announced a partnership with Oasis Labs, a San Francisco-based blockchain startup, to launch its own decentralized exchange.

Balancer Size and Trade Volume

According to the coingecko DEX list, https://www.coingecko.com/en/dex, Balancer is currently in the top 20 largest DEXs (as of this writing). In the last 24 hours, Balancer has more than $32M USD in volume.

It took off very quickly initially and has since experienced steady, but semi-plateued growth. It still holds a few unique benefits compared to other DEXs that make it attractive.

Is Balancer a Scam?

Is Balancer Safe to Use?

As discussed above, Balancer is not a traditional broker. The company has no customer assets or funds to hold, so you must keep your crypto assets in your personal wallet.

Balancer has partnered with the decentralized security service Guardicore to ensure that its website is secure, and it also requires 2FA authentication on all login attempts. Furthermore, Balancer's documentation states that it does not store any user passwords or private keys.

Finally, Balancer uses the InterPlanetary File System (IPFS), which is an immutable public file system designed for reliability on interplanetary scales. This means that data stored on IPFS remains accessible even if individual servers go down or are unable to communicate with one another (connection problems).

As with every DEX, using Balancer has some inherent risks. All protocols are susceptible to hacks. Investors can experience impermanent loss if the values of their coin portfolios change quickly. While this risk is mitigated by Balancer's ability to convert currencies quickly, it is still a possibility.

Users taking basic crypto precautions can develop their own criteria for the risk/reward ratios.

Is Balancer Legitimate?

The Balancer exchange is legitimate. It has had several major backers and partners in its 3 years of existence. Its coin listing is relatively diverse.

Balancer claims to be registered in Singapore, which is the only country that has not issued specific regulations for cryptocurrency exchanges. However, it should be noted that the company was established in the UK and its founders are from Birmingham, England.

One of Balancer's most notable partners in 2019 is Oasis Labs. This San Francisco-based blockchain startup has raised $45 million in private funding and created partnerships with projects such as ZCash to help launch the hardware-embedded privacy tools in its ecosystem.

Why People Use Balancer Even Though it's Not Perfect

Like any investment, using Balancer has its own rate of risks and rewards. Many investors and traders use the platform to general solid returns as a part of a diversified approach to investing. Here are some general reasons that users like to use Balancer:

1. No Verification Required

Any user can sign up and begin trading immediately, without submitting for any KYC or verification. This is appealing to traders who want an anonymous trading experience, or to crypto enthusiasts who are restricted from using certain sites or countries.

2. Cheaper Fees Than Regular Exchanges

As the focus of the company is on maintaining a decentralized platform, Balancer charges lower fees than more traditional exchanges. Balancer does not charge any fees for crypto withdrawals. Investors will still have to pay gas fees to the Ethereum network as with any other transaction on that chain.

3. Cheaper Trades Than Exchanges

Right now, Balancer does not charge for trades. The company's future plan is to apply a maker/taker fee that will depend on the type of order and amount.

4. More Liquidity Since It is Margin Trading Enabled

Traders using Balancer can take positions both long and short, a feature that is not offered on regular exchanges.

5. The Ability to Use a Single Token to Enter a Pool

Unlike many other DEX pools, Balancer allows users to enter a liquidity pool by supplying just one of the tokens in the pool (if liquidity allows). On Uniswap, entering a pool requires the investor provide both tokens of a coin pair. For instance, a USDC/ETH pool, would require both USDC and ETH to enter the pool. For Balancer, on the other hand, it would only require USDC or ETH to enter the pool.

Balancer review

Balancer Crypto Review Final Thoughts

With a recent bankruptcy of FTX, Voyager, and Celsius, it is hard for us to recommend any crypto broker or crypto exchange. It is much safer to open an account with one of the stockbrokers mentioned above which also offer access to cryptocurrencies. With these firms you have SIPC insurance up to $500,000 and FINRA/SEC oversight.

Updated on 7/2/2024.

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