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Automated market maker Balancer is partnering with on-chain risk management simulation platform Gauntlet to bring dynamic-fee AMM pools to its V2 liquidity providers (LP), the firm said in a press release shared with The Chain Bulletin on 23 March.

According to the announcement, the new partnership will help Balancer move away from fixed-fee pools through Gauntlet’s “battle-tested” techniques to help protocols manage risk, capital efficiency, and rewards. By optimizing the Balancer V2 protocol parameters, Gauntlet will help the DEX provide its LP’s with dynamic-fee AMM pools, which will help them maximize their pool returns. The CEO of Balancer, Fernando Martinelli, said in a statement:

“I believe fixed-fee pools won’t be able to compete with dynamic-fee pools just like taxis can’t compete with ride-sharing apps. It is better for all stakeholders for fees to constantly adapt to the market conditions.”

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The move will help Balancer attract more liquidity providers to its platform, as “appropriate” trading fees can allow LP’s to profit from the price volatility of assets in a pool. The dynamic fees model will enable Balancer to leverage Gauntlet’s off-chain automation to improve LP’s on-chain returns.

The on-chain risk management simulation platform has used its technology to build an optimization model for “real-time fee choice” of Balancer V2 pools, and integrated live data feeds to ensure recommendations are made in line with the changing market conditions. Gauntlet’s technology will now be a core component of Balancer V2, and will continuously improve its simulation model to provide LP’s with optimal trading fees for each pool “in real-time”. The COO of Gauntlet, John Morrow, said in a statement:

“Dynamic fees allow Balancer to leverage our off-chain automation to improve on-chain LP returns. We’re looking forward to launch, but we’re even more excited for what comes after – our optimization platform gets smarter as we incorporate more live data.”

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