A 200% increase in capital in the past week and 30% in the last 24 hours. These impressive developments by yield aggregator Rari Capital (RGT) require our close investigation.
People generally invest in decentralized finance (DeFi) because of one primary reason: they want to earn more. While we all recognize that DeFi brings a whole new level of risks that can lead to an “amateur” investor quickly losing all of his investments, it also brings with it a strong earning capacity that can sometimes be too true to believe.
For an experienced investor, this might not be an issue, but the lure of higher returns might be too tempting to overlook for someone just starting. The ensuing wild goose chase of higher yields might result in investing in schemes that have hidden backdoors in unaudited smart contracts or being exploited by the wolves lining the DeFi streets, and even getting “rug pulled.”
To avoid this unsavory situation, Rari Capital has devised a tested and trusted means of how investors can follow their risk appetite to earn the best rewards possible while not getting burned. In short, it looks to help users minimize risks while maximizing whatever returns they could be able to get.
Rari’s one of a kind roboadvisor
Introduced in mid-July 2020, Rari Capital has one of the unique features in DeFi with its roboadvisor that seeks to help investors optimize for the highest possible yield at every possible time. It merely means that Rari would always put the investors’ yearnings at the forefront of whatever it does by looking for avenues where they can essentially earn on their investments with little risks attached to it.
The DeFi Protocol started as a safe option for investors to earn returns on their investments without automatically incurring any losses; it later pivoted into a startup that focuses strongly on helping users earn as much as possible by leveraging yield farming strategies.
Rari, short for Ferrari’s top luxurious car, earns yield for its investors by carrying out lending and farming activities across several DeFi protocols like Compound, KeeperDAO, Aave, and others. Its pools have also been designed in a way that they cover every possible yearning of an investor.
An investor looking to play it safe could invest in the stable pool that only invests with audited contracts, which the system have been termed to be safe, while an investor with a higher appetite for risk would be putting his eggs in the basket of the yield pool that seeks to maximize returns regardless of if the contract is unaudited or even leverage. The focus of this pool is to protect the investor and bring back the profit.
Due to the higher level of risks in the yield pool, investors here would have the platform’s highest possible returns. And the last option would be for investors to put their funds in an Ethereum-based asset pool that also guaranteed a level of safe and stable rewards over time.
How does Rari work?
Rari works in one of the simplest and easiest ways of any DeFi app. Investors first have to deposit their assets into a specialized Rari fund where Rari Fund Tokens (RFT) are minted. These RFTs are usually equal to the deposit, and they automatically begin to earn an interest of over 10 percent.
Rari Protocol uses the deposited assets to earn returns by combining several strategies and the best DeFi platform to guarantee their investors return in a timely and risk-free manner. In essence, every RFT value would be the same as the value of stable coins held in the Rari Fund. So, whenever an investor looks to withdraw his earnings or holdings, these tokens are automatically burned.
How to deposit and withdraw?
Investors looking to deposit would have first to connect any of the supported wallets of the Rari Protocol. This wallet could be any from MetaMask, WalletConnect, Portis, Torus, Formatic, and Authereum.
An investor must then consider his risk appetite to determine the pool he would be investing in. We should restate here that investors could pick any of the three pools depending on how much he is willing to risk.
Then, an investor clicks on the transaction button, which brings a deposit window where he can pick from an array of supported assets to deposit on the pool. He can then choose to keep tabs on his earnings via individual pool dashboards or on the multi-pool dashboard.
Withdrawing from the platform also follows the same progression; an investor connects one of the supported wallets. He picks a pool to withdraw from and then converts into any supported crypto-assets and withdraws from the pool.
How to integrate Rari capital?
Rari Capital is open to integration on other platforms as it would open up the protocol to more investors. Presently, Rari has been integrated on Rainbow Wallets, which allow their users to earn. The yam community has also integrated with the Rari ecosystem to enable earnings on its treasury.
What are the risks of Rari Capital?
The advantages posed by Rari is quite enormous, but whatever has an advantage must have its fair share of disadvantages. An investor looking to invest with Rari should bear in mind that the following could be risks attached to its system:
- Rari runs on the Ethereum blockchain. The blockchain depends on Ethereum Virtual Machine(EVM) for its operations. So, in a situation where EVM cannot power the Ethereum blockchain again, it would affect Rari’s operations.
- Rari integrates specific protocols into its system to help it provide better services for its investors. If any of these protocols were to suffer a hack or get infected with a bug, it could lead to a loss of funds. However, the likely scenario here is that these protocols return only an incorrect yield.
- Rari Protocol itself could be under the risk of a hack of the admin contract keys, rebalance codes, or even the front end, leading to a loss of funds.
More exciting developments
In early December 2020, Rari Capital migrated its liquidity to its own fund on the Melon Protocol following the release of Melon v2. This is an ideal partnership where Melon (renamed Enzyme Finance) will benefit from Rari’s liquidity and Assets Under Management (AUM) growth as it ships more and more products, while Rari will increasingly be free to focus entirely on researching and delivering on the best strategies in DeFi.
Users are assured of a safer experience and greater choice as the Rari developers focus on testing and expanding their yield strategies. As per commitment, security is top priority and by working together, Rari and Enzyme Finance can ensure a safer and more robust protocol.