Balancer Labs and AAVE launch Boosted Pools to resolve low capital efficiency

Balancer Labs announced the official launch of Boosted Pools, which aim to resolve low capital efficiency with token yields deposited into AMM pools, Invezz learned from a press release. Balancer’s close collaborator, lending protocol Aave (AAVE/USD), will be the first iteration of this groundbreaking product.

Traders use just 10% of liquidity in AMM pools

Typically, traders use just 10% of the liquidity deposited into an AMM pool because the trade sizes are much smaller than the liquidity available. Boosted Pools make it possible to deposit the remaining portion of liquidity into lending protocols, where it earns additional yield.

Solving effort to wrap and unwrap tokens during swap

AMM pools hold wrapped tokens of yield-bearing assets (aDAI) instead of DAI to augment the overall pool yield, but token wrapping and unwrapping during a swap is too expensive and has to be done with a relayer. Aave’s Boosted Pools save this effort, leaving it to arbitrageurs, who have the incentive to make it.

Fernando Martinelli, Balancer Labs CEO and Co-Founder, said:

Stani Kulechov, Aave Founder and CEO, added:  

Boosted Pools: a gamechanger for liquidity providers and traders

Boosted Pools can be a gamechanger for liquidity providers and traders because lending protocols can be very expensive to join or leave. They allow users to keep a smaller percentage inside the pool to be used as liquidity and deploy a portion in a pool to Aave or other money markets. The latter portion will accrue interest from the Aave platform and any distribution from its pools.