Automated portfolio manager and liquidity provider Balancer Labs announced the official launch of Boosted Pools in collaboration with the 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 utilize only 10% of the liquidity available on AMM pools since trade sizes are 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, the co-founder, and CEO of Balancer Labs said,
“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.”
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 solve this problem, Balancer Labs collaborated with Aave, effectively reducing the costs of wrapping and unwrapping tokens during a swap while leaving the task to arbitrageurs, who are correctly incentivized to do it.
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 the liquidity in a pool to lending platforms like Aave and earn more yield while keeping a smaller percentage inside the pool for traders to use as liquidity.