nDEFI Rebalance

Abstract:
nDEFI is due for a rebalance, as the initial scope assets are currently out of balance. Rebalancing requires a government proposal.
We propose to remove the governance process and rebalance based on predefined criteria.

Motivation:
The need for rebalancing nDEFI has been long overdue, as the current composition of assets is no longer valid.
To reiterate, the basket’s scope is as follows:

  • The Polly DeFi Nest includes the top 5 projects by TVL on Defillama, with liquidity on Polygon.
  • Each project’s weight is determined by the TVL divided by the Fully Diluted Valuation (FDV).

The selection criteria for these protocols are as follows:

  • Protocols will be chosen based on TVL, using DeFiLlama’s website.
  • They must have at least $250k in liquidity on Polygon.
  • A Chainlink Price feed on Polygon must be available.
  • They should have at least 7.5% of the total supply in circulation with a predictable token emission over the next 5 years.
  • The protocol must have been operational for at least 3 months to be considered for inclusion in the nest.
  • In case of a security incident, the team must have responded responsibly and promptly, offering users a reliable solution and documenting a transparent breakdown of the incident.
  • They should have an Ethereum focus and a sufficient level of decentralization.

LDO meets the criteria and will replace SUSHI.
Currently, each rebalance proposal requires going through the governance process, but we aim to eliminate this step since the criteria for the nest are now established.
The Bao Finance team will handle changes to the composition and rebalancing ratios as part of their regular workload and at specified intervals.

Implementation:
The multisig will rebalance all positions in the nDEFI basket.
Currently, the nDEFI basket is heavily weighted towards AAVE, and the AAVE position will be adjusted to its correct ratio. The excess AAVE will be swapped to rebalance other assets.
Additionally, SUSHI will be removed and replaced with LDO.

4 Likes