0xfa0142fe…25casent to0x665339c6…2673·#24,724,494·view on Etherscan
# DGI Index Update: Emergency Proposal to Remove RESOLV and Rebalance Portfolio
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1. Summary
This proposal outlines an emergency action to remove the RESOLV token from the DeFi Growth Index (DGI) and proportionately rebalance the resulting weight across the remaining assets in the basket. This action is a direct response to the recent exploit on the Resolv protocol and the subsequent cascading risks to RESOLV’s on-chain liquidity.
2. Background & Rationale
A core mandate of the DGI is to maintain exposure to high-growth DeFi protocols while actively monitoring and mitigating smart contract and liquidity risks.
Recently, the Resolv protocol suffered a security breach. Following this exploit:
USR Depeg: The protocol’s underlying asset, USR, is currently trading at a significant discount to its peg.
Liquidity Contagion: A thorough analysis of RESOLV’s on-chain liquidity profile reveals an outsized reliance on USR-paired pools.
Price Action Risk: Because the primary liquidity routes for the RESOLV token are deeply intertwined with a depegged and compromised asset, the RESOLV token is highly vulnerable to severe price depreciation and a liquidity crunch.
Retaining RESOLV in the DGI basket exposes the index to unacceptable systemic risk and potential unrecoverable drawdowns.
3. Proposed Action
To protect the integrity of the index and shield holders from further downside, the following steps will be executed via the Reserve Protocol:
Target Weight Adjustment: Reduce the target weight of RESOLV in the DGI basket from its current allocation to 0%.
Asset Liquidation: The Reserve protocol's rebalancing mechanisms will incrementally sell off the existing RESOLV inventory.
Pro-Rata Rebalancing: The capital preserved from the removal of RESOLV will be redistributed pro-rata among the remaining assets in the DGI basket, increasing their respective weightings to absorb the vacant allocation.
4. Impact & Risk Mitigation
Executing this proposal will immediately sever DGI’s exposure to the Resolv protocol's ongoing crisis. By relying on Reserve's native rebalancing auctions, we aim to exit the position with minimal slippage given the current liquidity constraints, while reinforcing the index's remaining high-conviction positions.
5. Next Steps
Upon approval of this proposal, the target weights will be updated on-chain, and the Reserve protocol will commence the rebalancing auctions to restructure the basket.