CeFi Model
Designed for tradFi institutions, the "CeFi model" is an index standard that relies on custodial entities to provide the most secure and compliant experience for institutional investors seeking exposu
Incorporating a trading bot is necessary to establish a connection between Centralized exchanges and the smart contract.
In the centralized finance model (CeFi), a bot assumes a pivotal role in asset management across both centralized exchanges (CEX) and custodian wallets. Its primary functions include the buying and selling of underlying assets, categorized into two main actions: issuances/redemptions and reindexing/reweighting.
In issuance/redemption actions, the bot fulfills user requests by buying and selling assets. On the other hand, the bot also engages in buying and selling assets to adjust the percentage and weight of assets in accordance with the market (reindexing/reweighting).
In this explanation below, we elaborate on how the bot manages the weights of underlying assets and keeps the asset list updated.
Re-Indexing and Reweight of the Indices
The bot receives updated market data and generates a list of assets, including their corresponding percentages determined by market capitalization data. This action is conducted separately for each index.
Once the bot computes the necessary assets and quantities for selling and buying, it triggers the execution of these actions on the exchange. The bot creates a precise trading strategy to make the fewest trades possible in order to reduce the trading fees.
As the bot executes buys and sells, the custodian wallet portfolio gets re-adjusted. To ensure maximum transparency, a third-party auditor diligently monitors the portfolio, consistently verifying the updated balances within the custodian wallet.
The third-party auditor sends the newly updated data of the custodian wallet to the Chainlink Proof of Reserve (PoR), enabling users to monitor the updated assets on chain within the smart contract and on the website.
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