A new decentralized financial platform is ready to ride the wave of yield farming by automating the process of finding the most efficient opportunities for its users.
The platform, Rari Capital, automatically moves users‘ funds to the highest yield platform. At launch, Rari just plays around with the yield differences between Compound and dYdX, constantly rebalancing between the two as their dynamic interest rates change.
Rari only supports performance in stable currencies, but an integration with 0x allows users to automatically sell their crypto currencies when depositing on the platform. Once deposited, Rari will automatically switch between Dai, USDC and USDT to maximize performance and arbitrage its deviations from the dollar peg.
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Since they use Compound, their users will also be entitled to COMP rewards for using the platform. As Jack Lipstone, co-founder of Rari, told Cointelegraph, the fund will automatically settle all COMPs and distribute them to users every three days.
The team claims that the annualized return achieved through the platform is three times that of Compound, despite the hype about yield farming.
The system uses a tokenized sharing system as first introduced by Compound with its cTokens. By committing capital to Immediate Edge, users receive a Rari Fund Token that represents their share of the pool. At any time, the token can be redeemed for the underlying funds, plus any accumulated returns. The token is fungible, which means that the shares can be transferred and exchanged in a similar way to the Compound tokens.
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The disadvantage of using Rari is the 20% performance fee on cumulative return, similar to that of many traditional hedge funds. Lipstone revealed that a future potential for Rari involves entering traditional markets and „becoming an ETF“, although that is far in the future.
The launch of Rari is one of the first new projects to subscribe to the Guarded Launch concept described by Ken Deeter, partner at Electric Capital. Although Rari was audited by Quantstamp and independent researchers, it still limits deposits to a maximum of $350 for the initial period. This ensures that any potential weaknesses in their smart contracts will not result in significant losses to their users.
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Safety precautions also mean that Rari will not get involved in high-risk strategies such as aggressive yield farming in Compound. Since the reward scheme also distributes funds to borrowers, some enter into leveraged positions on the platform through recurring asset loans and credits to maximize their participation in COMP. This approach may expose „farmers“ to fluctuations in market prices, which could liquidate some of their positions.
The system is not yet fully decentralized, as the rebalancing mechanism is operated centrally, although it is based on a white list that can only send funds to the protocols it works with.
However, given the large number of performance opportunities in DeFi, it is likely that Rari will be quite useful for those who do not have the time to find the best opportunities on their own.