# Token scaling

Working with fixed-point math in Solidity presents a unique set of challenges that developers must navigate to ensure accurate and secure smart contract functionality.

In an effort to abstract this complexity, the Vault manages decimal and rate scaling internally, scaling all token balances and input values prior to being sent to the Pool. By doing this, we ensure consistency of rounding direction across all Custom Pool implementations, removing a significant amount of complexity from the pool and allowing it to focus primarily on its invariant implementation.

# Decimal scaling

All token balances and input values are scaled to 18 decimal places prior to being sent to the Pool. Once scaled, these numbers are referred to internally as scaled18.

# Pool registration

During pool registration, the vault stores the tokenDecimalDiffs for each token in the pool in the PoolConfig bits. Refer to the full implementation hereopen in new window.

tokenDecimalDiffs[i] = uint8(18) - IERC20Metadata(address(token)).decimals();

A token with 6 decimals (USDC) would have a tokenDecimalDiff = 18 - 6 = 12, and a token with 18 decimals (WETH) would have a tokenDecimalDiff = 18 - 18 = 0.

# Scaling factors

The tokenDecimalDiffs are then used to calculate the decimal scalingFactors for each token. This implementation can be found in the PoolConfigLibopen in new window.

function getDecimalScalingFactors(
    PoolConfig memory config,
    uint256 numTokens
) internal pure returns (uint256[] memory) {
    uint256[] memory scalingFactors = new uint256[](numTokens);

    bytes32 tokenDecimalDiffs = bytes32(uint256(config.tokenDecimalDiffs));

    for (uint256 i = 0; i < numTokens; i++) {
        uint256 decimalDiff = tokenDecimalDiffs.decodeUint(i * _DECIMAL_DIFF_BITLENGTH, _DECIMAL_DIFF_BITLENGTH);

        // This is equivalent to `10**(18+decimalsDifference)` but this form optimizes for 18 decimal tokens.
        scalingFactors[i] = FixedPoint.ONE * 10 ** decimalDiff;
    }

    return scalingFactors;
}

# References

To review the scaling implementations, refer to ScalingHelpers.solopen in new window.

You can review the logic flow of swapopen in new window, addLiquidityopen in new window and removeLiquidityopen in new window to better understand how the vault manages token scaling.

# Rate scaling

With the successful rollout of The Mergeopen in new window and the adoption of ERC-4626open in new window, the ecosystem has seen a proliferation of yield bearing tokens. Recognizing the pivotal role that LSTs will play in the liquidity landscape moving forward, Balancer seeks to position itself as the definitive yield-bearing hub in DeFi.

To facilitate the adoption of yield bearing liquidity, Balancer abstracts the complexity of managing LSTs by centralizing all rate scaling in the vault, providing all pools with uniform rate scaled balances and input values by default, drastically reducing LVR and ensuring that yield is not captured by arbitrage traders.

# What is a token rate

The classical example of a token with a rate is Lido's wstETHopen in new window. As stETHopen in new window accrues value from staking rewards, the exchange rate of wstETH -> stETH grows over time.

# How does the Balancer Vault utilize token rates

Besides decimal scaling a token's rate is taken into account in Balancer in the following scenarios:

• Price computation as part of Stable and Boosted pools
• Yield fee computation on tokens with rates

A token's rate is defined as an 18-decimal fixed point number. It represents the ratio of the token's value relative to that of its underlying. For example, a rate of 1.1e18 of rETH means that 1 rETH has the value of 1.1 ETH.

# Creating a pool with tokens that have rates

On pool registeropen in new window a TokenConfigopen in new window is provided for each of the pool's tokens. To define a token with a rate, specify the token type as TokenType.WITH_RATE. Additionally, you must provide a rateProvider address that implements the IRateProvideropen in new window interface. Refer to Token types for a detailed explanation on each token type.

# Rate scaling usage

Rate scaling is used on every swap, addLiquidity and removeLiquidity operation. If the token was registered as TokenType.WITH_RATE, an external call to the Rate Provider is made via getRate. If the TokenType.STANDARD was selected, the rate is always 1e18. These rates are used to upscale the amountGiven in the Vault primitives.

You can read more on the Rate Providers page.

# Live balances

The term liveBalances is used internally to refer to balances that have been:

1. Decimal scaled - Upscaled to 18 decimals
2. Rate scaled - Adjusted for token rates
3. Yield fee adjusted - Had yield fees deducted.

Any token balances sent to the pool will always be in live balance form. This ensures consistency across all tokens and removes the burden of token scaling from the pool logic.