Raft
Raft is a governance-minimized protocol that allows users to mint its R stablecoin by accepting liquid staking derivatives (LSDs) as collateral.
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- Documentation
- Auditors
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- Website
- Tags: Lending
- TVL: $27.4K (Rank #250)
- TVL Ranking by Lending: #0
- Blockchain: Ethereum
- Chain TVL
- Ethereum: $27.42K
- 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
- 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
- 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
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.