<aside> ⚠️ Because of the complexity of multi-collateral staking, Strike foundation postpones this feature to V2 or even further.

</aside>

Balancer Fund

To lower the volatility of the collateral in Liquidity Reserve, Strike uses Balancer Fund to provide multi-collateral staking. Balancer Fund is an Automated Market Maker with certain key properties that allows it to function as a self-balancing weighted portfolio and price sensor. This approach was first mentioned by Balancer Lab.

We will first explain the concept of Balancer Fund using a real-life example and then explain how to leverage Balancer Fund to achieve multi-collateral staking on Liquidity Reserve.

On **Strike DAO’s first release, SKEs and DAIs are equally weighted by default as underlying assets. We expect to add other types of assets (e.g. USDT, ETH, and etc.) to diversify risk in the future releases. The list of assets and their weights may be updated through governance.

Adding Liquidity to Balancer Fund

To better explain the features of Balancer Fund, let’s suppose ETH, DAI, and SKE are each weighted 1/3 by default at the initial stage.

The first Balancer Fund's Liquidity Provider (in reality, Strike DAO will be the first Liquidity Provider) will stake based on what she believes matches the weight of each asset. If a gap exists between this value and the market value, any arbitrager can profit and bring the price closer to the market price. A simple flowchart of the scenario is presented below:

Suppose Strike DAO, the first Liquidity Provider, provides 100,000 SKE, 10,000 DAI, and 50 ETH to Balancer Fund as liquidity. Strike DAO **would receive the 10,000 FundTokens mint by Balancer Fund.

FundTokens represents the ownership of assets in Balancer Fund. FundToken is an ERC20 token and includes a full implementation of EIP-20.

Anyone can stake the same value of assets and mint new FundTokens. Suppose Alice wishes to mint 100 FundTokens, she could deposit SKE, DAI, and ETH respectively:

$$ Deposited_{token} = ({{Supply_{FundToken} + Mint_{FundToken}} \over Supply_{FundToken} } - 1) \times Balance_{token} $$

$$ Deposited_{SKE} = ({{10,000 + 100} \over 10,000 } - 1) \times 100,000 = 1,000 $$

$$ Deposited_{DAI} = ({{10,000 + 100} \over 10,000 } - 1) \times 10,000 = 1000 $$

$$ Deposited_{ETH} = ({{10,000 + 100} \over 10,000 } - 1) \times 50 = 0.5 $$

Alice must deposit 1,000 SKE, 1,000 DAI and 0.5 ETH to Balancer Fund to receive 100 FundTokens. The Balancer Fund will then have 101,000 SKE, 10100 DAI, and 50.5 ETH respectively.