# On-Chain Rebalancing ⎊ Area ⎊ Resource 2

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## What is the Procedure of On-Chain Rebalancing?

⎊ This refers to the automated, deterministic process by which the asset allocation within a decentralized fund or vault is adjusted back to its target weights. The trigger for this action is typically a deviation exceeding a predefined tolerance threshold from the desired portfolio composition. Such operations are executed entirely on-chain via smart contract calls.

## What is the Automation of On-Chain Rebalancing?

⎊ The core value proposition lies in removing manual intervention and the associated counterparty risk from portfolio management. Once triggered, the contract executes the necessary trades—buying under-allocated assets and selling over-allocated ones—without external custodianship. This ensures continuous alignment with the investment mandate.

## What is the Efficiency of On-Chain Rebalancing?

⎊ Quantifying the efficiency of this process involves a careful analysis of the associated gas costs versus the expected benefit from maintaining optimal exposure. High frequency rebalancing can be prohibitively expensive, thus the threshold setting is a critical parameter for performance optimization.


---

## [Off-Chain Computation On-Chain Verification](https://term.greeks.live/term/off-chain-computation-on-chain-verification/)

## [Real-Time Collateral Rebalancing](https://term.greeks.live/term/real-time-collateral-rebalancing/)

---

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**Original URL:** https://term.greeks.live/area/on-chain-rebalancing/resource/2/