Moonbeam is fast establishing itself as the fulcrum between Ethereum and Polkadot, luring developers, ETH projects and DeFi creators into its cross-chain ecosystem. In one of the biggest endorsements of Moonbeam yet, Balancer has supplied a grant to explore the recreation of Balancer liquidity pools on Polkadot.
It will fall to Parity and Moonbeam to perform the heavy lifting and turn the concept into reality, aided by a Balancer grant. Given the tech prowess of the two Polkadot development teams, however, the initiative is likely to succeed. In the process, it will further support cross-chain liquidity, which is finally starting to become a reality.
Balancer Weighs Up Polkadot
In a blog post on March 3, Moonbeam laid out details of the programmable liquidity it will be creating on its cross-chain network utilizing Balancer’s code. The Balancer protocol has established itself as one of the most robust and advanced DeFi primitives on Ethereum, where it facilitates token swaps, auctions, liquidity pools and index funds that can automatically rebalance based on the weighting of pooled assets.
Porting Balancer’s protocol over to Polkadot is a major undertaking, but with the support of the Parity team, Moonbeam anticipates the task being completed to the satisfaction of all parties – and the delight of DeFi users, who will be able to capitalize on Polkadot’s low fee environment to execute low-cost token swaps.
Explaining the rationale for bringing Balancer to Moonbeam, the latter explained how its ecosystem offers the "easiest entry point for developers trying to build applications on Polkadot," adding that "our Ethereum compatibility features are a great fit for a port of the Balancer protocol by making it possible to leverage the existing codebase to have a Polkadot based deployment."
In keeping with the spirit of cross-chain interoperability, Polkadot-based assets such as DOT will also be made available as ERC-20s, making them compatible with the instance of Balancer on Moonbeam.
The Evolution of AMMs
Just over two years ago, Uniswap launched its DEX on Ethereum with little fanfare and little liquidity. By the time Balancer launched in 2020, AMMs had evolved and decentralized finance was becoming a thing. Today, Balancer is one of the most valuable DEXs on the market based on TVL, and is utilized by an array of leading Ethereum projects. Bringing its algorithmically weighted system of pooling to Polkadot would be a coup not only for Balancer, but for Moonbeam too.
Polkadot isn’t the only L1 or L2 that Balancer has directed funding towards, incidentally; part of its remit is to explore the possibilities that non-Ethereum chains have to offer. Because Moonbeam bridges Ethereum and Polkadot, courtesy of its EVM-compatible parachain, it’s the ideal testing ground for recreating Balancer.
Moonbeam’s main value proposition lies in its ability to support native smart contract languages. This means that Ethereum devs can build on Polkadot without the need to rewrite their code from scratch. Moonbeam allows devs to use the tools that are already a staple of their everyday workflow such as Remix, Truffle and MetaMask. If all goes to plan, soon there will be another useful tool popping up on Moonbeam in the form of Balancer.