The realm of decentralized finance (DeFi) has evolved rapidly since its inception in 2020, offering a wide range of investment opportunities for both newcomers and experienced crypto users. Rivo has emerged as a pioneering platform democratizing access to DeFi for everyone.

The platform's core operational thesis is that financial well-being is a foundational element of global human development. By offering users an accessible entry point, Rivo enables seamless, secure, and self-custodial access to top-tier wealth-building opportunities, including those tied to crypto indexes like the 'DeFi Core Index'.

What is the DeFi Core Index?

Let's imagine an investor wants to enter the stock market. While there are multiple approaches, most individuals begin by purchasing shares in specific companies. This demands significant research and risk management skills.

Alternatively, a mutual fund is a more accessible option, pooling capital from various investors to create a diversified stock portfolio. This allows investors to gain exposure to a wide range of companies without buying individual shares.

In this context, the DeFi Core Index (also known as xDEFI) stands as a yield-bearing index consisting of major DeFi protocol tokens on the Ethereum blockchain and Liquidity Provider (LP) positions.

The index aims to provide easy access to DeFi assets and yield farming opportunities, essentially functioning as a "DeFi mutual fund" for retail investors. The index operates by converting user assets into FXS (Frax Finance), CVX (Convex Finance), CRV (Curve Finance) and ETH (Ethereum), which are then deposited into LP positions in their respective protocols.

Why should one choose the DeFi Core Index?

Investing in DeFi can be overwhelming due to the vast array of protocols and tokens. The DeFi Core Index simplifies this process by offering a single investment solution, saving investors time and reducing their learning curve.

The index incorporates multiple yield farming strategies, enabling investors to earn additional returns by participating in various DeFi protocols. These strategies are actively managed to optimize potential returns while minimizing risks.

A thorough vetting process is employed to select assets for the DeFi Core Index. This process involves analyzing factors such as user base, tokenomics design, growth potential, and security.

To this point, the DeFi Core Index possesses an impeccable security track record. Its underlying protocols (Yearn, Frax, Convex, and Curve) have been audited by leading market firms like Certik, MixBytes, PeckShield, and Nomoi, among several others.

Moreover, Yearn, Curve, Convex, and Frax boast impressive TVLs of $222 million, $1.95 billion, $958 million, and $638 million, respectively.

By combining established, blue-chip DeFi tokens with promising emerging projects, the index aims to maximize returns while preserving stability. The index is continuously monitored and adjusted to maintain its relevance and performance.

Pros and Cons

Like the vast majority of financial instruments available in the crypto market today, the DeFi Core Index comes with its share of pros and cons.

Pros

1. High degree of automation: The index’s automated yield farming and regular rebalancing save time and reduce the technical knowledge required to participate in complex DeFi strategies.

2. Perfect introduction to DeFi: The index offers an easy entry point for DeFi investing, with clear breakdowns of asset allocations and strategies. This transparency allows investors to understand where their funds are deployed without needing to manage multiple positions themselves.

3. Optimized yields: The index aims to optimize returns while adapting to changing market conditions by combining carefully selected strategies, compound yields, and regular rebalancing.

4. Instant withdrawals: One of the most appealing aspects of the index is that it does not require users to lock up their funds for a set period of time or require them to facilitate complex withdrawal mechanics.

Cons:

1. Network and Protocol Risks: As an Ethereum-based product interacting with multiple protocols, the index is subject to network congestion, gas fees, and potential smart contract vulnerabilities. Moreover, any issues with any of the underlying protocols could negatively impact the index’s performance.

2. Impermanent Loss Risk: Some strategies involve providing liquidity to AMMs, which can lead to impermanent loss under certain market conditions.

What is index rebalancing?

One of the DeFi Core Index's key features is its dynamic nature. A rebalancing strategy is employed to ensure the index remains optimized for risk and return in the ever-changing DeFi landscape.

Rebalancing is crucial for adapting to market shifts as optimal asset allocation can change with evolving DeFi protocols and market conditions. It also serves as a vital risk management tool, preserving the index's desired risk profile.

By adjusting allocations, the index can capitalize on the most promising yield opportunities, enhancing overall returns for investors. An advanced alerting system and regular tracking of key metrics for index components support this process

This proactive approach enables timely adjustments to the risk and reward balance, ensuring that the index remains within a given range of profitability and safety.

What lies under the hood?

The DeFi Core Index comprises three main strategies, each focusing on a different DeFi protocol:

Frax Finance (FXS) on Convex

User funds are deposited into the cvxFXS-FXS liquidity pool on Convex Finance, earning CRV and CVX emissions. These rewards are regularly harvested and compounded back into the strategy. Frax Finance is a major DeFi protocol on Ethereum, offering products like the FRAX algorithmic stablecoin and frxETH liquid staking derivative.

Convex Finance (CVX)

Funds are deposited into the CVX-ETH pool on Convex, earning CRV and CVX rewards. These earnings are regularly reinvested to compound returns. Convex Finance optimizes Curve yields and has acquired large amounts of CRV tokens for voting on Curve pools.

Curve Finance (yCRV) on Yearn

Funds are converted into st-yCRV tokens on Yearn, earning CRV emissions and other incentives. Accrued tokens are automatically compounded into the strategy. Curve Finance is one of the largest Ethereum DEXes, attracting liquidity providers and helping other protocols bootstrap liquidity.

The CRV token is used to direct Curve emissions through gauge voting. By depositing CRV on Yearn, the index takes advantage of Yearn's high yields.

Safety and risk assessment

Rivo employs a comprehensive risk framework to assess the safety of the DeFi Core Index. The framework considers three main factors:

1. Simplicity: 4/5

2. Longevity: 4/5

3. Protocol Safety: 3/5

These factors combine to give the DeFi Core Index an overall safety score of 70/100, indicating a relatively low-risk profile.

How to get started with the DeFi Core Index

Investing in the index via Rivo is simple and straightforward, even for DeFi newcomers.

1. Wallet connection: Begin by connecting an Ethereum-compatible wallet, such as MetaMask, to the Rivo platform.

2. Investment amount: Determine your desired investment amount. As a general rule, only invest what you can afford to lose.

3. Index interaction: Transfer your chosen amount into the DeFi Core Index.

4. Performance monitoring: Track your investment's performance on the Rivo dashboard, including principal amount, accrued rewards, and overall value changes.

5. Withdrawals: Withdraw your funds at any time.

Conclusion

The DeFi Core Index represents an innovative approach to DeFi investing, offering the right balance between potential high yields and diversification. By providing exposure to a number of major DeFi protocols and automated yield farming strategies, it simplifies the investment process for retail investors.