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Balancer, a recognized player in the DeFi domain and a decentralized exchange, has recently combined efforts with Chainlink Price Feeds on the Arbitrum mainnet. This collaboration seeks to fortify the pricing of several staked ETH tokens through Chainlink’s impeccable, tamper-proof price feeds.
Background
Staking, with its increasing traction, has made it imperative for DeFi platforms like Balancer to fortify their frameworks with an apt oracle solution. In this scenario, Chainlink steps in to bolster Balancer’s LST composable stable pools. These pools play a pivotal role in fashioning the financial underpinning essential for the vast-scale adoption of LST.
Historically, tokens staked in Ethereum have been non-transferable and non-collateralizable. However, the inception of liquid staking tokens (LSTs) revolutionizes this by unlocking the potential value these tokens possess, thereby facilitating their trading and use in DeFi platforms. This is a cardinal step towards ensuring composability, heightened adoption, and liquidity. Liquid staking protocols, which currently boast a whopping $20B+ total value locked (TVL), are indeed a significant stride for Ethereum’s DeFi landscape.
Balancer’s Role in the LST Landscape
As LSTs pave their way to mainstream acceptance, Balancer’s LST composable stable pool, encompassing wstETH, rETH, and cbETH, emerges as a vital participant. For users, this pool offers superior stableswap liquidity that astutely keeps concentration around the peg, effectively reducing slippage and arbitrage chances, vital for high-volume transactions.
A unique feature of Balancer is its ability to incentivize liquidity. It achieves this by channeling a fraction of the LST yield as voting incentives for the same pool, thereby creating a self-propelling loop where the pool supports its own incentive structure.
The Imperative Nature of Chainlink Price Feeds
With Balancer at the cusp of being a primary facilitator of efficient LST swaps on the foundational Ethereum blockchain and several layer 2s, the security of the pool becomes non-negotiable. The price oracle stands out as the most crucial element, especially for the LST composable stable pool.
Chainlink Price Feeds became the top choice after evaluating several options, owing to their prioritization of security and a comprehensive suite of features:
- High-Quality Data: Chainlink’s data sourcing from multiple top-notch data aggregators ensures a precise global market price that is robust against API downtime, flash crash outliers, and data manipulation.
- Trusted Node Operators: Chainlink’s nodes are maintained by seasoned blockchain experts and entities, ensuring reliability even during peak network stress.
- Decentralization: The decentralized nature of Chainlink Price Feeds at multiple levels offers formidable protection against potential threats.
- Transparency: Chainlink also provides transparent frameworks and tools for users to independently assess the historical and real-time performance of node operators and oracle networks.
In words of Fernando Martinelli, the Co-Founder of Balancer, “Balancer’s LST pool is geared up to be an integral part of ETH staking and LST acceptance. Chainlink Price Feeds, with their proven security, are the ideal choice for this mission.”