Balancer AMM: What It Is and How It Powers Decentralized Trading

When you trade crypto on a decentralized exchange, you’re often using something called an Balancer AMM, an automated market maker protocol that uses weighted liquidity pools to price assets without order books. Also known as Balancer Protocol, it’s one of the oldest and most stable ways to swap tokens without relying on centralized intermediaries. Unlike Uniswap, which uses a simple 50/50 ratio, Balancer lets you create pools with up to eight tokens and custom weights—like 70% ETH and 30% USDC—giving you more control over how your liquidity behaves.

This flexibility makes Balancer AMM a favorite for advanced DeFi users who want to minimize slippage, reduce impermanent loss, or build custom token portfolios. It’s not just a trading tool—it’s a liquidity engine. Projects use it to bootstrap trading pairs, investors earn fees by supplying tokens, and developers build on top of its open contracts. The automated market maker, a system that uses math instead of buyers and sellers to set prices behind Balancer runs on smart contracts, meaning no one controls it. That’s why it’s trusted in ecosystems like Ethereum, Arbitrum, and Polygon. Related concepts like liquidity pools, collections of locked crypto tokens used to enable trading on DEXs and DEX, decentralized exchanges that let you trade directly from your wallet are core to how Balancer works. You can’t understand Balancer without understanding these.

What you’ll find below isn’t just theory. We’ve reviewed real DEXs that use Balancer AMM under the hood, dug into failed tokens built on its infrastructure, and called out scams pretending to be part of its ecosystem. You’ll see how Balancer compares to other AMMs, why some projects thrive on it while others vanish, and what to watch for when your wallet interacts with its pools. This isn’t a beginner’s guide to DeFi—it’s a practical look at how Balancer AMM actually performs in the wild, and what you need to know before using it.