The balloon is filled with flammable hydrogen gas. We can tell that the
balloon contains a gas that is less dense than air since the balloon
appears to float above the surface.
A balloon filled with hydrogen gas burns when ignited but does not produce a large bang. If the balloon is filled with hydrogen and then allowed to remain untouched for awhile, oxygen gas from the air begins to effuse through the tiny pores in the balloon. After awhile, the balloon contains a mixture of H2, O2 and some other non-reactive gases.
When ignited with a lighted candle, the gases inside the balloon quickly react to produce yellow flames and a large bang.
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