Balancer is an automated market maker (AMM) that lets users build liquidity pools using any combination of up to eight different tokens. A fundamental component of the ecosystem for decentralized finance (DeFi) is automated market makers (AMMs). AMMs are essentially smart contracts that allow for automatic management of the crowd-sourced liquidity pools that provide tokens to decentralized exchanges. These tokens reflect a portion of a pool's ownership and may be reinvested in other parts of the DeFi ecosystem. The Balancer cryptocurrency protocol is comparable to a weighted index fund in conventional finance. Investment methods called index funds concentrate on holding specific proportions of various assets. Balancer crypto pools, which may manage portfolios of up to eight distinct ERC-20 tokens, serve as weighted index funds for the DeFi ecosystem. Balancer employs its constant mean market maker equation to automatically rebalance assets inside pools every time a trade is made – thousands of times per day — as opposed to manually rebalancing liquidity pools like a standard index fund. Balancer crypto exchange trading commissions are paid directly to liquidity providers as opposed to paying fees to a fund managet like an index. Providers also earn multi-purpose Balancer (BAL) tokens on a weekly basis The ownership stake in the platform and voting privileges in community governance are effectively represented by these tokens.

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