Uniswap and Balancer are two of the leading Decentralized- Exchanges (DEXes) in Decentralized-Finance (De-Fi). One may be more popular than the other, but both platforms still offer excellent features.
While the Uniswap protocol offers a distinctive and decentralized governance model, the Balancer protocol enables users to set custom trading fees and provide liquidity for up to eight assets in a single liquidity pool.
In this article, we will showcase the key differences between Uniswap and Balancer. After reading this article, you will be educated enough to make a wise choice and pick the DEX that suits you best.
Let us first begin with Uniswap.
Uniswap – More Liquidity, Less Slippage
The so-called King of De-Fi reigns supreme in the decentralized finance market, continuing to rise every single day. According to market data provider DeFi Pulse, Uniswap is ranked first on their leaderboard and hosts $2.59 billion in collateral assets.
This is up to $590 million more than the next leading De-Fi project and almost one billion dollars more than the third-ranked platform.
- Uniswap is one of the older DEXes to introduce an Automatic Market Maker (AMM), the hallmark of modern DEX. Users have the ability to provide liquidity to a large number of Liquidity Pools (LPs) and trade tokens. Since the project hosts no decentralized oracle to keep prices accurate, arbitragers are incentivized to keep the difference in price as low as possible.
- Apart from LPs and token swaps, users also have the chance to participate in the governance of the project. The model is supported by Uniswap’s UNI token, one of the most decentralized tokens in all of De-Fi.
- A majority of the tokens are distributed to existing supporters, leaving no room for centralization and random whales taking full control of the governance. The Uniswap community can freely change anything they want, starting from the design of the exchange to introducing new LPs.
- Since Uniswap holds the highest amount of locked assets, it represents one of the best options for high-volume traders. The DEX features liquidity that cannot be seen on any other De-Fi exchange. Therefore, you should stick with Uniswap if you wish to buy and sell cryptocurrencies with the least amount of slippage.
Balancer – A Competitive DEX With Unique Features
Balancer is also a popular DEX, but it isn’t even close to its rival Uniswap when it comes to activity. DeFi Pulse shows that the project is ranked 13th place based on the total value of locked assets. At the time of writing, the data provider reveals that users have collateralized around $228 million of digital assets on Balancer.
Just like most exchanges in De-Fi, Balancer is eerily similar to Uniswap. They both offer identical platforms, apart from some minor differences. This is mainly because both Uniswap and Balancer use the same AMM smart contract.
However, Balancer has modified its AMM a bit to accommodate it for personal usage.
- The main difference between these two options is that Balancer supports up to eight different assets in one liquidity pool. Therefore, an LP can provide far more liquidity and different types of it to make it radically more profitable for its users.
- Another key difference for Balancer is that all trading fees are set by the LP creator. This encourages significantly higher competitiveness, as users will constantly look for the most profitable LP to farm.
- The third major difference is that LP assets weighting is arbitrary on Balancer. Therefore, users do not have to provide equal amounts of liquidity when farming on a pool. For example, to farm on Uniswap a farmer would be forced to provide 1 ETH and 370 USDT. This logic boils down to a 1:1 weighting ratio system on Uniswap.
- One more important thing to note is that farmers can create private LPs on Balancer. The creator of a private LP can set who can join the pool and who cannot. There are also smart LPs, which allow all of its users to vote on the LP’s fees.