After reading through the chats here, I am wondering will Rari Fuse Pool move the dial. Is it worth the effort of doing the risk analysis, determining collateral ratio and designing a model that incentivises liquidations to occur.
I’m particular interested to see if liquidations get called. We all seen what happened with the FLI products via Compound (Tier 1) when the market was volatile. We have the same risk exposure on Rari (Tier 3 IMO), but the pool is a smaller and doesn’t have the presence of Compound in the market.
If the liquidation are not performed efficiently, then the loans risk being under collateralised. Unlike Aave; Compound & Rari don’t have a safety module to make lenders whole with in the event the liquidator function is not performed and there is a loss of capital. Given Rari doesn’t have a large safety net behind them at the DAO level and has recently been exploited, I’m not sure if the DAO could make lenders whole if something went wrong. It would probably require outside funding.
This liquidation risk is a blocker for me that would prevent Index Coop capital from being deployed into Rari. It would be high risk and it is unclear what the Return On Investment (ROI) would be.
I’d be really curious to see what a peer comparison would bring. I understand the narrative, but what does the data say.
- Why Rari and not another protocol
- Why Rari with Cream and Aave
- What data is there available from RAI that can be used to determine if this will have any impact on our KPIs and NorthStars
- What is the ROI
Aave (Aave backstop, high barrier to entry, no upkeep by Index Coop)
Rari (Compound, fragmented markets limiting cross asset borrowing options, Index Coop involvement required)
Cream (Compound with no barrier to entry, Cream manages everything)
