Automated portfolio manager and liquidity provider Balancer Labs has announced the official launch of Boosted Pools in conjunction with leading DeFi lending protocol, Aave.
Boosted Pools to Increase LP Yields
In a press release shared with CryptoPotato, Balancer noted that the new product is geared toward solving the issue of decreased capital efficiency with yields on tokens deposited into Automated Market Maker (AMM) pools.
According to Balancer, traders typically only use 10% of the available liquidity on AMM pools because the deal size is smaller than the available liquidity.
However, with Boosted Pools, the remaining liquidity, often left idle, will be deposited into lending protocols, allowing the liquidity to earn additional yield.
Speaking on the development, Fernando Martinelli, co-founder and CEO of Balancer Labs said:
“The collaboration with Aave as the first iteration of the launch of Boosted Pools fits naturally and strengthens their place in the Balancer ecosystem. There are different levels of Boosted Pool innovations that lead to real results, deeper liquidity, more efficient integrations for liquidity and higher returns.
Reducing Costs
AMM Pools typically hold wrapped tokens of yield-bearing assets to increase capital efficiency and improve the overall pool yield. But the wrapping and unwrapping of these tokens are often too expensive to do during swaps, and they need to be done with a relayer.
To address this issue, Balancer Labs worked with Aave, effectively reducing the costs of packing and unpacking tokens during an exchange while leaving it up to arbitrageurs, who are given the right incentives to do so.
A Game Changer
Commenting on the partnership, Aave founder and CEO Stani Kulechov said:
“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.”
Balancer noted that boosted pools could be a game-changer for traders and liquidity providers. It allows users to deploy a percentage of a pool’s liquidity to lending platforms like Aave and earn more return while keeping a lower percentage inside the pool that traders can use as liquidity.
