On June 17, the cross-chain synthetic asset protocol Linear Finance announced the launch of the ℓDEFI index on the Linear Exchange (Linear.Exchange), allowing currency holders to collectively invest in a series of blue-chip DeFi tokens, including ChainLink's LINK, Maker (MKR ), Aave, Uniswap’s UNI, Yearn.finance (YFI), Compound’s COMP, Synthetix (SNX) and SushiSwap (SUSHI), and high-growth projects including UMA, Ren, Loopring (LRC), Balancer (BAL), pNetwork ( PNT) and Enzyme (MLN), etc.

ℓThe DEFI index is constructed by financial experts from the PieDAO community and is rebalanced monthly. With the beginning of the new month, we will announce the latest configuration of the index.

The process of rebalancing can be simplified to the following steps:

PieDAO provides Linear with the weight of the current month in the form of a table → Linear provides the table to the oracle partner → the oracle partner provides Linear with updated ℓDEFI price data feed.

The chart below shows the allocation ratio, adjusted for the past 30-day average market capitalization of all targets.

The configuration method that PieDAO follows in constructing the index can be summarized as "correlation risk-adjusted market value".

When the community reaches a consensus on the selected underlying assets, the pie modeling process follows the following steps:

1. Calculate the 30-day average circulating market value of each underlying asset

2. Weight each asset allocation based on this 30-day market value, and set the highest percentage of allocation (the excess allocation will be continuously redistributed to other assets)

3. Calculate the number of tokens for each asset that constitutes the index based on the current price (Coingecko feed price), and the resulting overall weight configuration

*Although the constituent tokens of ℓDEFI are the same as PieDAO’s DeFi++, it should be noted that ℓDEFI will be rebalanced every month, while DeFi++ will be updated more according to the community’s requirements, that is, it will not follow a fixed rebalancing arrangement, so There may be an interesting contrast between our two indices.

To understand the details of PieDAO’s index construction, it is recommended to read the following Medium articles:https://medium.com/piedao/inside-the-bakery-how-we-build-pies-e8932718beaf

Linear Finance looks forward to bringing you more latest news on online indices and trading products.