Balancer generalizes the AMM concept beyond two-asset pools, allowing weighted pools with up to 8 assets in arbitrary proportions. A Balancer pool can hold 80% ETH / 20% USDC, or 33% WBTC / 33% ETH / 33% USDC, enabling portfolio-like exposure without active rebalancing.
Weighted Pools
Balancer's constant weighted product formula generalizes Uniswap's xy=k to n assets with arbitrary weights: ∏(xᵢ^wᵢ) = k. An 80/20 ETH/USDC pool behaves like an index product that automatically sells ETH as it appreciates (rebalancing to maintain weight), while charging arbitrageurs a 0.3% fee for each rebalancing trade.
Protocol teams use weighted pools for their token launches. An 80/20 pool (token/ETH) provides bootstrapping liquidity with reduced impermanent loss compared to a 50/50 pool, since the pool retains 80% exposure to the native token.
Stable Pools and Composable Stable Pools
Balancer's stable pool variant uses a Curve-style StableSwap invariant for pegged-asset pairs. Composable stable pools are wrapped versions that issue BPT (Balancer Pool Tokens) directly usable as collateral in Aave — a critical integration that allows staked assets (stETH, sDAI, rETH) to earn both their native yield and Balancer trading fees simultaneously.
Boosted Pools
Balancer's boosted pool architecture routes idle liquidity in a pool to Aave for additional yield. When a trade doesn't use all available liquidity, the surplus earns Aave supply rates. This "capital efficiency" feature aims to make Balancer pools more attractive to LPs than simple single-purpose AMMs.
BAL Token and veBAL
Balancer adopted a vote-escrow model similar to Curve. BAL holders lock tokens for up to 52 weeks to receive veBAL, which amplifies their BAL rewards and grants gauge voting rights. The veBAL system created a parallel version of the Curve Wars, with protocols competing to accumulate veBAL to direct emissions to their pools.
Aura Finance is to Balancer what Convex is to Curve — an aggregator that accumulates veBAL voting power and offers auraBAL (liquid locked BAL) to depositors, extracting and redistributing gauge voting rewards.