Raft

Lending

Raft is a governance-minimized protocol that allows users to mint its R stablecoin by accepting liquid staking derivatives (LSDs) as collateral.

Risk Rating
Watch Out
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Raft is an innovative, governance-minimzed protocol that leverages LSDs to create a capital-efficient stablecoin, R, that can be used across the DeFi ecosystem.
What we like less
While the core protocol is immutable, Raft will initially be controlled by a limited 3/5 multisig for key parameters like protocol fees. There is also a minimum requirement to generate at least 3,000 R to open a borrow position.
What it means for you
Raft enables you to borrow R without paying any interest and with a minimum collateral ratio of 120%. This allows you to more efficiently use your deposited LSDs without worrying about accruing debt.
Podcast
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Degen Responsibly
Raft: The case for LSD-backed stablecoins
Our guest today is Richard, Head of Product at Raft. Raft is a governance-minimized protocol that allows users to mint a novel stablecoin, R, backed by liquid staked ETH as collateral. In this conversation, we explore the current state of the stablecoin landscape, what differentiates R from other stablecoins, the potential use cases for R, and how the protocol maintains peg stability. ----- Degen Responsibly is a series of live talks by Exponential DeFi and a guest protocol. In these conversations we explore some of the latest and greatest projects in DeFi, what makes them unique, their builders but also talk about the risks and what to watch out for. Our goal is to help investors make better informed decisions and help them save time as they do their own research. ----- Learn more about us at exponential.fi and follow us @exponentialdefi ----- Information provided here is presented for educational purposes only and does not consider financial advise or any offer or solicitation to buy any of the tokens or invest in any of the pools mentioned throughout the podcast.
Information
Exploit/Hacks
One
Info
Key Metrics
  • TVL: $33.7K (Rank #223)
  • TVL Ranking by Lending: #0
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $33.73K
Risk Assessment
Watch Out
Protocol Code Quality
  • Code reviewed by at least one experienced auditor; Trail of Bits audited in May 2023
  • Public team promotes accountability
  • One unmitigated protocol hack since launch
Protocol Maturity
  • Core protocol launched recently in 2023; maturity less than three months increases technical risk as smart contracts are not battle-tested
  • Top 5% by total value locked reduces risk
  • Core contracts require on-chain voting for parameter updates
  • Multisig consists of less than 4 signers, which makes the protocol more susceptible to centralization risks
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • No governance token and/or contracts are fully immutable
Protocol Design
  • No death spiral concerns
  • Robust controls to mitigate oracle price manipulation
  • Cross-collateral markets are exposed to systemic risks as each asset creates incremental risks for the platform as a whole
  • Solid controls in place to prevent risky borrowing
  • Solid mechanisms in place to ensure healthy liquidations
  • Basic method to accrue protocol reserves
Things to know about Raft

How Raft works

Raft is a protocol that allows users to mint R, a synthetic USD stablecoin, by depositing liquid staking tokens (LSDs) such as stETH or rETH as collateral. Users can adjust their collateral ratio (minimum collateral ratio of 120%) and borrow R based on their personal risk tolerance. Users must have a minimum debt of at least 3,000 R in order to open a borrow position. This is to ensure that there is enough incentive for liquidators to step in and cover the position in case of a shortfall. Users can also repay R and withdraw their collateral at any time. Holders who bought R on the open market can also redeem their R and get other borrowers' LSD collateral in return. Raft maintains the stability and peg of R through a combination of hard and soft peg mechanisms, such as liquidations, fees, incentives, and governance.

How Raft makes money

Raft does not charge any interest on borrowed positions. However, it does accrue fees from other sources including a mint fee, redemption fee, liquidation fee, and flash mint fee. The mint fee is the borrowed amount multiplied by the borrow rate, which is capped at 5%. Similarly, the redemption fee is simply the redemption amount multiplied by the redemption rate. The redemption fee makes it uneconomical for users to swap R for the underlying LSDs unless the R price is below $1. If a user's position falls below the 120% collateralization threshold, liquidators are allowed to buy LSD collateral at a discount, with half of the excess collateral going to the protocol treasury. Finally, Raft offers flash loans for R at a 0.5% mint rate that enable users to mint up to 10% of the total outstanding supply, with the condition it is all paid back within the same transaction.

How you make money on Raft

You can make money on Raft by depositing whitelisted LSDs as collateral to mint R. You can now use this newly deployed R to earn yield from other DeFi protocols, while your collateral ratio improves over time due to the accruing of staking rewards. You could also swap your R for more LSDs to leverage your exposure to a specific LSD asset.