CIP #1 - Update CLI rebalancing periods

Status: Proposed Author: @ChefGR Discussion Link: https://gov.cook.finance/t/crypto-largecap-index-cli/30 Created: 13th September 2021

Executive Summary

Crypto market conditions change very fast, so this proposal intends to update the rebalancing periods of CLI from 3 months to 2 months.

Problem Statement

Crypto market operates twenty-four seven and globally. Token prices can fluctuate a lot in a very short period of time. Over one month, token prices and market capitalizations can differ a lot. A rebalancing period of three months does not ensure that CLI index tracks the latest performance of its underlying tokens: BTC and ETH.

Proposed Solution

Overview

This proposal intends to address the problem stated in the problem section by updating the rebalancing periods from 3 months to 2 months.

Rationale

The rationale behind this proposal is to ensure that CLI can better adapt to the fast-moving crypto market and better benchmark the prices of underlying tokens.

Since token prices and market capitalizations in the crypto industry fluctuate a lot in a short timeframe, a more frequent rebalancing helps ensure that CLI composition is up-to-date with the latest changes in the market. However, more frequent rebalancing would also mean higher transaction and gas fees that might cause CLI to deviate from the prices of underlying tokens. As a result, we consider that a two months rebalancing period is a good balance to keep CLI price up-to-date while not incurring a lot of transaction overheads.

Specification

The Cook Protocol team needs to update the smart contract so that anyone can invoke the rebalancing function of CLI two months after the previous rebalancing.