TL:DR
In decentralized finance, liquidity is crucial for the ecosystem's health, but traditional liquidity pools suffer from idle liquidity that doesn't generate yield or fees. Balancer's Boosted Pools address this issue by storing the majority of liquidity as yield-bearing tokens on external protocols, allowing liquidity providers to earn yield while contributing to the liquidity pool. Boosted Pools have demonstrated success with the impressive performance of the bb-a-USD Pool on Balancer. Two Boosted Pools are now live on Aurora: the Aurigami USDC-USDT Boosted Pool and the Bastion USDC-USDT Boosted Pool, providing users with improved capital efficiency and yield opportunities while benefiting the entire Aurora ecosystem.
Liquidity is King
In the world of decentralized finance, liquidity is like the lifeblood of the ecosystem. It is essential for the health and vitality of all participants, including traders, liquidity providers, and the protocols themselves. However, traditional liquidity pools are inefficient due to the presence of idle liquidity that doesn't generate any yield or fees. In fact, according to industry data, swaps typically won't use more than ~20% of the balances in the pool since trades of that scale would significantly change the price.
This idle liquidity decreases LPs' profits, motivating them to move their liquidity into other protocols and tools that offer better utilization and yield. This creates a problem for the entire ecosystem as it leads to a decrease in liquidity, making it harder for traders to find fair prices and reducing overall returns for LPs.
One way to think about the problem of idle liquidity is from the perspective of alternative cost. When liquidity is idle, it represents a lost opportunity cost for liquidity providers. They could be earning a return on that capital elsewhere, but instead, it sits idle in a liquidity pool. This creates a trade-off for liquidity providers between earning a return and providing liquidity.
What are the Boosted Pools?
Launched by Balancer in 2021, Boosted Pools achieve high capital efficiency by storing the majority of their liquidity on external protocols as yield-bearing versions of common tokens. This results in more profits for liquidity providers since their liquidity is no longer idle, and they no longer have to choose between using their liquidity in a pool or in a lending protocol.
By eliminating this trade-off, Boosted Pools offer liquidity providers the best of both worlds:
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The ability to earn yield on their assets
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and the flexibility to provide liquidity to a pool that benefits the entire ecosystem.
This makes Boosted Pools a win-win for all participants, ultimately contributing to the growth and sustainability of the decentralized finance space.
Boosted Pools consist of two types of tokens: the common pool tokens and the yield-bearing pool tokens. The common pool tokens, such as USDT and USDC, are used to provide liquidity to the pool, while the yield-bearing pool tokens, such as yUSDT and yUSDC, are used to generate yield on the liquidity. These yield-bearing tokens are wrapped versions of the common pool tokens that can be used in external lending protocols to generate yield.
Proven Business Case
Boosted Pools have proven to be successful for decentralized finance, as demonstrated by the impressive performance of the bb-a-USD Pool on Balancer. This pool has reached an all-time high total value locked (TVL) of hundreds of millions of dollars.
The unmatched capital efficiency of Boosted Pools, particularly evident when integrated with 1inch, enables ecosystem participants to utilize the best trade rates possible as demonstrated by the bb-a-USD Pool on Balancer, which reached an all-time high in weekly trade volume of hundreds of millions of dollars after being integrated with 1inch
Welcome Aurigami and Bastion Boosted Pools on Aurora
We are excited to announce the launch of two Boosted Pools on Aurora: the Aurigami USDC-USDT Boosted Pool and the Bastion USDC-USDT Boosted Pool. These pools enable users on Aurora to supply USDT and USDC and capitalize on lending through Aurigami and Bastion simultaneously. Both pools are already integrated with 1inch, and we believe that over time they will offer unparalleled trade efficiency for the entire Aurora ecosystem.
How to join the pools:
To join either pool, all you have to do is deposit your USDT or USDC. The pools will then work their magic through arbitrage and balance your position.
If you already hold a USDT/USDC position on Aurigami, you can directly deposit your auUSDT and auUSDC into the Aurigami Boosted Pool and earn additional trading fees from USDC/USDT trades and HLDR emission on top of that.
If you already hold a USDT/USDC position on Bastion, you can directly deposit your cUSDT and cUSDC and earn additional trading fees from USDC/USDT trades as well.