Rebalance Function

Definition ∞ A rebalance function is a programmed operation within a smart contract or automated financial protocol designed to adjust the asset allocation of a portfolio or liquidity pool. This function automatically restores predefined target weights among different digital assets, often in response to market price fluctuations. It aims to maintain a desired risk profile or optimize capital efficiency without manual intervention. The process ensures adherence to an established investment strategy.
Context ∞ Rebalance functions are fundamental components of many decentralized finance (DeFi) protocols, including automated market makers (AMMs) and yield farming strategies. News often covers updates or exploits related to these functions, highlighting their critical role in maintaining protocol stability and profitability. Their effectiveness directly influences the performance and risk exposure of users participating in these automated strategies.