In the latest feat of decentralized finance (DeFi) money lego magic, lending platform Aave and automated market maker (AMM) Balancer have teamed up on a hybrid liquidity-and-lending feature that may significantly fatten depositor yields.
In a blog post today, Balancer CEO Fernando Martinelli unveiled plans for the project, dubbed the Balancer V2 Asset Manager. In essence, the integration will allow users to earn two forms of return on their deposits: trading fees and yield farming from Balancer, as well as lending interest from Aave.
In Balancer’s current architecture, users deposit funds into a liquidity pool in order to enable decentralized asset trading. In exchange, they’re given a portion of trading fees, as well as yield farming returns in the form of Balancer’s native governance token, BAL.
However, the majority of assets in AMM pools often sit unused, as they’re not needed unless there’s an unusually large trade.
“Large trades cause a lot of slippage, so traders avoid them. This