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Weight Update

The primary mechanism for portfolio rebalancing is an update of the underlying Balancer Managed Pool weights using Balancer's updateWeightsGradually function.

How weight updates contribute to efficient rebalancing

There are several mechanisms that can facilitate portfolio rebalancing on-chain. An auction mechanism is the most popular alternative and allows a set of bidders to make price quotes. The problem with auction mechanisms for frequent rebalancing is as follows:
  • Auctions are overly sensitive to current market price,
  • Auctions restrict participation to larger pools of capital and infrastructure to identify and participate in the auction.
Instead, Aera elects to rebalance portfolio using a Balancer Managed Pool by using weight schedules that steadily change the spot price over time. This has several benefits:
  • Many more market participants are participating in Aera trading (even unknowingly, for example by using trade routing services),
  • Rebalancing is spread out over time, retaining some of the benefits of TWAP trading.