Title: Rari Capital - The Path to New Market Development for Long-Tail Asset Lending

Author: Rollin

Section 1 Research Report Highlights

1.1. Core Investment Logic

Rari Capital currently focuses on the long-tail asset lending sector, with business development aligning with industry trends. The business is experiencing rapid short-term growth and is expected to further expand into the B to B or Dao to Dao interbank lending market. The project does not have any VC investment background; its scale growth is primarily driven by organic business growth without token incentives. The team's style leans towards being diligent, with relatively little marketing content. Additionally, the team has a sense of social responsibility, aiming to allocate 50% of protocol earnings for donations. Overall, this project is worth long-term attention.

1.2. Valuation

Compared to traditional decentralized lending platforms, considering Rari Capital's own development space and the risks it faces in the future, the current market valuation is at a relatively reasonable level.

All views in this article should not be considered as investment advice.

1.3. Main Risks

The current project's main risk comes from the susceptibility of long-tail asset oracle prices to manipulation.

Section 2 Project Overview

2.1. Project Business Scope

Rari Capital is a decentralized finance protocol, with its main products being yield aggregators and the Fuse interest rate protocol, governed by the RGT token.

Rari Capital primarily offers the following three types of products:

• Fuse: A customizable interest rate protocol that allows users to tailor their own lending pools. Customizable parameters include but are not limited to assets, whitelists, oracles, collateral coefficients, and liquidation incentives.

• Yield Aggregator: Based on USDC, DAI, and ETH, it algorithmically obtains optimal yields from various lending protocols (Compound Finance, Aave, dYdX, mStable, Fuse Pools).

• Tranches: A tiered stablecoin pool created by Saffron Finance based on Rari Capital.

2.1.1. Fuse Lending Pool

Fuse is an open interest rate protocol that allows users to lend and borrow digital assets. The Fuse protocol enables anyone to create and deploy their own lending pool instantly. Users can select all custom parameters, and the risks of other Fuse lending pools are completely isolated, unlike the unified large lending pools used on traditional lending platforms. Each lending pool is independent, and the pool creator can customize their lending pool according to their risk preferences without compromising the safety of other pools. Depending on the creator's preferences, the lending pool can be set as public or private. The following image shows the asset pool situation of Fuse lending pool number 18, with supply-side assets on the left and borrowable assets on the right.

Source: Rari Capital Official Website

Essentially, each pool has a specific set of assets that can be "provided" to earn loan interest, and the provided assets can also serve as collateral for loans. By using the provided assets as collateral, users can borrow from the same set of assets. The lending pool creator not only constructs these asset sets but also selects certain parameters, such as the collateral coefficient (also represented as LTV: Loan-to-Value ratio). This ratio defines the maximum number of tokens that can be borrowed against specific collateral in the pool.

For example, if the LTV of RGT in the pool is 85%, then for every 1 RGT worth of collateral, the borrower can borrow 0.85 RGT worth of other tokens from the pool. If the price of the provided assets decreases, or if the borrowed assets increase, causing the borrowed amount to exceed the LTV limit, the user's position will be liquidated. This makes it crucial to monitor borrowing limits and borrow cautiously within those limits.

If the provided tokens are also borrowed by other users in the pool, the provider earns interest from the borrower's payments. The ratio of interest earned and repaid by users is determined by the asset interest rate curve chosen by the pool creator for that asset and the utilization rate of that asset. This is consistent with the interest pricing curves of lending platforms like AAVE.

To achieve a healthy utilization percentage, the curve has a turning point around 80%, where the curve begins to rise sharply at each utilization step (increasing slope). Essentially, when utilization exceeds around 80%, borrowing rates rise sharply. This is to prevent "bank runs," as high utilization without sufficient liquidity would prevent users from exiting supply positions. Therefore, higher supply rates incentivize more liquidity provision, while higher borrowing rates encourage loan repayments, both of which can affect asset utilization.

Source: Rari Capital Official Website

When creating a Fuse pool, the creator can set the following parameters:

• Custom Assets: As long as there is an oracle (a price oracle supported by Fuse), the Fuse pool can support the quoting of that asset.

• Custom Oracles (Chainlink, Uniswap/Sushiswap TWAPS, Keep3r, etc.): Fuse supports multiple oracles, and the creator needs to choose a specific oracle for the asset.

• Platform Fees: 10% of all accrued fees are allocated to the treasury owned by the $RGT community.

• Management Fees: Fuse pool creators can choose to add additional management fees on top of the protocol fees.

• Liquidation Incentives: This is additional collateral provided to liquidators as an incentive to liquidate underwater accounts. For example, if the liquidation reward is 1.1, the liquidator will receive an additional 10% of the borrower's collateral for each unit they close.

• Whitelist: If they wish, Fuse pool creators can choose to allow specific Ethereum addresses to access the pool. This may be for KYC purposes, helping to develop capital entry in future partnerships.

• Upgradability: When the upgradability feature is enabled, the underlying Fuse pool smart contract and any pool parameters set during the pool creation phase can be modified.

• Collateral Coefficient: The collateral coefficient ranges from 0-90%. Generally, larger or more liquid assets have higher collateral coefficients, while smaller or less liquid assets have lower collateral coefficients. If an asset's collateral factor is 0%, it cannot be used as collateral (or seized in liquidation) but can still be borrowed.

• Reserve Factor: The percentage of borrower interest that is converted into protocol reserves. Reserves represent a portion of historical interest retained as liquid cash, which can be extracted or transferred through the protocol's governance. A small portion of borrower interest accumulates in the protocol, determined by the reserve factor.

• Administrator: The deployer and owner of the pool. This can be a single Ethereum address, a multi-signature, a DAO contract, etc. The address that owns and manages the lending pool is used for parameter maintenance.

2.1.2. Yield Aggregator

Rari Capital's yield aggregator automatically optimizes asset yields across various DeFi lending protocols (such as Compound Finance, dYdX, KeeperDAO, mStable, yEarn, Aave, and Fuse Pools) to earn the best profits for users. Currently, the platform offers yield aggregation pools for USDC, DAI, and ETH.

Source: Rari Capital Official Documentation

The yield farming process is as follows:

a. Users deposit ETH or ERC-20 tokens into the corresponding asset pool of Rari;

b. Rari unifies the assets deposited by users into equivalent value pool assets (USDC, DAI, or ETH) through 0x or mStable;

c. Rari automatically seeks the highest yield strategies available, placing funds into the corresponding underlying protocols for farming;

d. The profits from farming are reinvested into the pool for further farming, repeating the above steps to achieve compound interest;

e. When users exit the stablecoin pool, Rari charges users 17.5% of the profits (User Profit = User Deposited Value / Total Value of Stablecoin Pool * Pool Yield).

Although it involves multi-strategy farming, the overall strategy design is relatively standard and lacks innovation.

2.1.3. Tranches

Access to Saffron Finance through the Rari Capital interface offers risk levels from high to low, divided into three tiers: S Tranche, AA Tranche, A Tranche. Tiered products are not the main focus of Rari Capital, and the overall risk of these tiers is relatively high (except for AA), making them not recommended for ordinary users.

Source: Rari Capital Official Website

Rari Capital's early positioning was as a smart investment advisor, with initial business focused on yield aggregators. However, due to limited innovation in its aggregator and the absence of further leverage mechanisms, as a purely application layer, its imaginative space is limited. Since Rari Capital created Fuse in March of this year, its TVL has begun to ramp up and maintain a rapid and healthy growth state. The main business of Rari Capital has shifted from yield aggregators to a refined lending platform, with its TVL growing from 150 million to 1 billion in just two months. Compared to the current rough lending market, Rari Capital's refined lending business still has significant growth potential and is currently in the early stages of development, with promising prospects for the future.

2.3. Business Development Status

Among Rari Capital's three main businesses, Fuse has made significant strides. Since the launch of Fuse in March, Rari Capital's TVL has begun to enter a positive cycle, growing from 10 million to the current 1.3 billion, with Fuse's TVL accounting for about 92%, approximately 1.2 billion. Therefore, this report will focus on analyzing the business situation of Fuse.

Source: DefiLlama

The current concentration of funds in Fuse lending pools is very high, and the development of long-tail asset pools has just begun.

Fuse pools are divided into two categories: community-reviewed lending pools and unreviewed lending pools. There are 23 Fuse lending pools with a scale exceeding 1 million dollars, of which 21 are reviewed and only 2 are unreviewed. The following image shows the historical growth of TVL for each pool, with the current TVL primarily concentrated in the top 5 pools: Tetranode's Locker, Olympus Pool Party, FeiRari, ChainLinkGod's, and Frax & Reflexer Stable Asset Pool. These five Fuse pools account for approximately 9 billion in total TVL, making up 75% of the total Fuse pool TVL.

Source: Rari Capital Official Website

As seen in the image above, the TVL growth of the top-ranked Tetranode's Locker pool far exceeds others, with a single pool TVL of 460 million, accounting for about 35% of the total TVL. Among them, the TVL of the SOHM asset alone is about 400 million, accounting for 87% of Tetranode's Locker pool TVL and 33% of the total lending pool TVL.

The high proportion of SOHM is mainly due to the fact that currently, only SOHM in the Fuse pool is directly connected to the OHM project's single-coin mining channel. Therefore, SOHM in Fuse can obtain extremely high mining yields and can also be used as collateral to borrow other assets from the same pool.

Note: SOHM is a token certificate obtained by staking OHM.

Source: Rari Capital Official Website

The overall fund utilization rate of Fuse lending pools is relatively low, around 20%. Compared to traditional lending platforms, a low fund utilization rate in the long-tail asset lending market is reasonable. Each small Fuse pool effectively segments asset liquidity, and while it processes lending demand in a refined manner, it also further hinders the overall utilization of funds. The community is currently aware of this issue and plans to develop a small tool for cross-pool liquidity optimization in the future.

Currently, Fuse is still in the early stages of development, with initial business growth achieved without any token incentives, which is relatively rare in the early stages of DeFi projects. The lending business related to long-tail assets has just begun, and the high concentration of Fuse in the early stages is very easy to occur. As more single-coin mining tools like OHM and cross-pool asset optimization tools are developed in the future, long-tail asset pools will have greater development space and flexibility, and asset concentration will gradually decrease.

2.4. Team Overview

The Rari Capital project was co-founded by three university students, all of whom have previous successful entrepreneurial experience and approximately three years of blockchain-related experience.

David Lucid, Co-Founder of Rari Capital. Currently studying at the McCombs School of Business, University of Texas at Austin. Served as CTO of CRAFT Scooter (a scooter company) from October 2018 to February 2020. Self-employed from December 2015 to April 2020, engaged in various smart contract and web development work.

Jai Bhavnani, CEO of Rari Capital. Currently studying at the University of Southern California, residing in Beverly Hills, California. Jai Bhavnani was previously the founder of Ambo and served as Vice President of Strategy at MyCrypto. Initially, he learned programming by playing Minecraft and developed applications, using the earnings to fund the optimization of the Ambo application for cryptocurrency. Subsequently, Ambo was acquired by MyCrypto.

Jack Lipstone, Co-Founder and COO of Rari Capital. Currently studying at the University of Wisconsin-Madison. Previously, he was a co-founder and Chief Marketing Officer of Ambo, which was later acquired by MyCrypto, where he transitioned to Director of Business Development until April 2020.

In addition to the three founders, Rari Capital has gradually moved towards DAO governance, as shown in the governance structure below. From Rari Capital's development path, the team has been working diligently, continuously innovating, and maintaining a high level of community engagement and order management.

Source: Rari Capital Official Disclosure

Section 3 Business Analysis

3.1. Industry Space and Potential

3.1.1 Opening the Long-Tail Asset Lending Market

The traditional decentralized lending market operates by allowing users to deposit assets into a large pool, from which other users can borrow and earn returns for depositors. This singular pool aggregates the liquidity of all collateral assets, forming a consistent single-asset lending rate. This approach maximizes liquidity but also shares risk among all participants, losing corresponding flexibility. If a particular asset encounters issues or experiences a severe liquidation, the risk spreads throughout the entire pool, requiring everyone to bear the consequences. This is why protocols like Compound and Aave need to strictly filter eligible asset categories, limiting their ability to expand into long-tail assets.

Fuse lending pools differ from large asset lending pools like Aave and Compound, as users create their own small lending pools on Fuse. This approach not only provides more assets with the opportunity to participate in the lending market but also isolates risks from assets in other Fuse pools. The Compound platform only lists 18 asset categories, and adding a new asset increases the overall risk to the entire system. In the Fuse platform, since risks between pools are isolated, it can quickly adapt to market token trends, with the rapid integration of OHM being a prime example. Additionally, the hottest tokens in gamefi and socialfi can also quickly establish corresponding lending pools. The following image shows a gamefi-themed lending pool that includes popular gamefi tokens. With such flexibility, the lending liquidity of various new long-tail assets can be activated.

Source: Rari Capital Official Website

Risk isolation is merely a method of risk segmentation and does not eliminate the risks brought by the high volatility of these tokens. Users need to carefully select asset pools based on their understanding and judgment. To address these issues, Rari Capital has developed a custom risk rating mechanism to score each pool's risk level (RSS). The RSS rating will comprehensively consider factors such as asset market capitalization, liquidity, volatility, and staking rate, ultimately providing a rating from A to F. The specific scoring mechanism can be referenced here:

Rari Safety Scores:

https://medium.com/rari-capital/rari-safety-scores-17893c4d998

3.1.2. Differentiated Pricing

When users use different assets as collateral or are under different collateral risk rates, the borrowing rates they are willing to pay should differ. This is not achievable on platforms like Compound and AAVE, which can only control overall risk by limiting collateral asset types and setting a unified asset collateral rate, failing to provide differentiated pricing and stratification for borrowing behavior.

We know that the asset categories in each Fuse pool differ, and the maximum staking rates corresponding to each asset can also vary, meaning that users participating in each pool bear different risks, and thus their corresponding borrowing rates will also differ.

Comparing the collateral coefficients of Pool 6 and Pool 18:

Source: Rari Capital Official Website

For borrowing USDC, we compare the borrowing rate differences between Pool 6 and Pool 18:

Source: Rari Capital Official Website

Pool 6 has more asset categories than Pool 18 (the screenshot is not fully displayed), and the overall asset risk is also somewhat higher. At the same time, the collateral coefficient of Pool 6 is much higher than that of Pool 18, and its overall borrowing rate is also significantly higher than that of Pool 18. Therefore, we can see that Fuse lending pools have better stratified user borrowing demands, further optimizing the existing large pool model, allowing users with different asset categories and risk preferences to choose pools and rates that better suit them for borrowing.

Note: Pareto Improvement refers to a situation where at least one person becomes better off without making anyone else worse off.

3.1.3 Cleverly Establishing a Credit Lending Foundation

The establishment of Fuse pools is signed, incorporating personal or organizational credit components. Current blockchain lending platforms operate on an over-collateralized basis, which we know results in low asset utilization. However, without the development of on-chain credit, this is the only reliable method. Such lending platforms cannot easily increase asset staking rates, as this would raise the risk for the entire pool. However, the emergence of Fuse pools introduces a new credit concept and potential for a new ecosystem. The following two points illustrate the new ecosystem brought by Fuse in credit lending.

First, Fuse pools can be established by creators with their own token incentives.

As shown in the image below, a token pool established by the Fei community has now implemented its own token incentives to promote the liquidity of its token, similar to a pool incentive. In the future, more Fuse pool creators will continuously create liquidity for their pools. Fuse is merely a tool, and the creators will become the true managers of these pools, with both profits and risks incorporating the creators' credit components.

Source: Rari Capital Official Website

Second, the small credit lending model from Dao to Dao, transitioning from P2Pool to B2B.

Fuse not only allows for the definition of maximum staking rates but also enables the setting of whitelists. This means that lending transactions can occur between familiar offline individuals. This flexibility effectively transfers offline trust to the online realm. In the current blockchain ecosystem development model centered around DAO governance, collaborations between DAOs will become increasingly common. Taking Tokemak (a next-generation liquidity management platform) as an example, Tokemak needs to collaborate with many other project DAOs and will involve some lending business between DAOs. The flexible Fuse lending pool has become their preferred tool for future business development. I believe that such collaboration demands will continue to grow, and this type of small credit lending and interbank borrowing will be an important part of both the traditional financial world and the on-chain financial world.

3.2 Project Comparative Analysis

The overall lending market is growing slowly. Apart from established decentralized lending platforms like AAVE and Compound, the long-tail asset lending market has become a battleground for emerging lending platforms. Cream Finance, Euler, and Beta Finance are all targeting the long-tail asset lending market. Among them, Euler has yet to release a product, and Beta Finance is still in the early development exploration stage, while Cream Finance is the longest-established and largest long-tail asset lending platform.

Cream Finance not only focuses on the long-tail lending market but also further strengthens its efforts in Dao to Dao lending, with a high overlap in business with Rari Capital's Fuse platform. This report will focus on comparing the differences in business development between Cream Finance and Fuse.

Cream Finance offers lending services for approximately 100 types of tokens and LP assets. Unlike Fuse, Cream Finance's lending model is similar to traditional Compound, adopting a large pool model without risk isolation mechanisms, and each asset's staking rate and reserve factor (the percentage of interest extracted by the platform) are uniformly set by the platform. The following image shows the collateral rates and reserve factors of some assets on Cream Finance, where the reserve factors generally range from 25% to 40%, significantly higher than the 10% commission on the Fuse platform.

Source: Cream Finance Official Documentation

Based on data from Defipulse, as shown in the image below, Cream Finance's TVL is 500 million, approximately 40% of Fuse's. Fuse has rapidly and steadily increased in scale over a few months, primarily benefiting from its B2B business model. The Fuse pool's risk isolation and high flexibility are very attractive to many DAOs. They can use the Fuse platform to better provide liquidity for their tokens and improve asset utilization, while also facilitating the expansion of interbank borrowing and small credit businesses. Conversely, Cream Finance, which also aims to open this market, faces greater difficulty in controlling overall risk due to its large pool unified management model, significantly reducing its flexibility.

Source: Defipulse

The risk of hacking attacks is the biggest risk for long-tail lending platforms. Historical data shows that Cream Finance's TVL has experienced several ups and downs, primarily due to multiple hacking incidents. Cream Finance has a flash loan feature and has also implemented a whitelist mechanism, allowing zero-collateral borrowing for certain high-credit addresses (mainly institutional addresses). Cream Finance's relatively aggressive business innovation model has increased its business risks.

To date, Cream Finance has experienced three hacking attacks: in February, it suffered a loss of 37.5 million dollars; in August, it faced another attack with a loss of 18 million dollars; and in October, it encountered a third attack, resulting in a loss of 130 million dollars. After these hacking incidents, the price of the Cream token has struggled since August.

Source: CoinGecko

Rari Capital has also faced two hacking attacks: one in May targeting the ETH yield aggregator with a cross-chain attack, resulting in a loss of 2,600 ETH, equivalent to 60% of user funds at that time, causing its token (RGT) price to drop by about 50% within an hour; the other occurred in early November, when the Fuse lending pool experienced an oracle attack. This pool used Uniswap V3 prices, but due to the shallow trading depth of the long-tail asset, hackers manipulated the price of VUSD (an asset in pool number 23) on Uniswap V3, causing losses to the Fuse pool. Subsequently, Rari Capital's DAO organization took on all user losses by issuing bonds.

Rari Capital is still exploring the risks associated with oracles, striving to use multiple price sources and a time-weighted average price (TWAP) approach to minimize attack risks. However, currently, such risks still exist. The risk isolation feature between Fuse pools provides the platform with more fault tolerance, allowing users to spread their funds across various pools to reduce risk concentration.

3.3. Token Model Analysis

Rari Capital's native token is RGT, with a fixed total supply of 10 million tokens, which has mostly been released.

Due to some hacking incidents, on August 28, the Rari Capital community proposed a new plan to issue an additional 2.5 million RGT to the DAO treasury for three consecutive years, totaling an additional 7.5 million RGT. Including the initial 10 million tokens, the total released amount is now 12.5 million tokens. The purpose of the token issuance is for future DAO organizational team building, liquidity incentives, and to address unexpected risks.

The initial distribution of the 10 million RGT tokens is mainly divided into two parts, as detailed below:

a. 87.50% of the tokens were distributed to the community through liquidity mining. RGT liquidity mining started on October 20, 2020, and ended on December 19, 2020, lasting 60 days, and has now been fully released.

b. 12.50% is allocated for team rewards, to be released over two years.

Source: Rari Capital Official Documentation

Among the top 100 token holding addresses, excluding the top 10 contract addresses, the total proportion is about 40%, indicating a good degree of token holding dispersion.

The functions of the RGT token are: 1) RGT holders can create proposals to improve the Rari protocol or Rari series products;

c. Vote on proposals that maintain and improve the Rari protocol or Rari series products.

The Rari protocol automatically collects 10% of all interest earnings from the platform, with 50% used for repurchasing and burning RGT (currently, there is no burning plan, nor has any burning occurred), and the remaining 50% is used for foundation management, primarily for donations to corresponding charitable organizations.

3.4. Risks

3.4.1. Oracle Attack Risks

The liquidity of long-tail assets is usually low, making prices susceptible to manipulation. Rari Capital always faces the risk of oracle hacking attacks. This is an unchangeable fact for long-tail asset-related businesses. The risk isolation feature of Fuse prevents this risk from spreading to other pools, and we hope for better risk prevention mechanisms in the future.

3.4.2. Initial Liquidity Risk

The establishment of Fuse pools for long-tail assets requires activating initial liquidity; otherwise, lending operations will be difficult to carry out. Currently, Fuse mainly relies on cooperation with some project DAOs to activate initial liquidity. The quality of liquidity heavily depends on the willingness and ability of pool creators, which is also the reason for the current high concentration of pools. If Rari Capital can better address the issue of initial liquidity, its business development will enter the next rapid growth phase.

3.4.3. Risk of Merger with Fei

Recently, Rari Capital and Fei Protocol initiated a proposal to merge RGT with its governance token TRIBE. The proposal indicates that the main bottleneck for Fuse's growth is guiding the initial liquidity of pools and the oracle price risk of long-tail assets. Fei Protocol stated it could help provide initial liquidity for Fuse pools and could also quickly and cheaply generate deep liquidity through Uni v3 or Balancer v2, helping Fuse obtain an anti-manipulation embedded TWAP oracle. Additionally, Fei Protocol is willing to compensate Rari Capital for losses caused by hacking attacks.

The cost of this proposal is that RGT and TRIBE will be exchanged at a market price of 1:1, and the existing RGT treasury can be covered by the existing TRIBE treasury, with the remainder being newly minted TRIBE. This means that if this proposal passes, Rari Capital's governance token will be absorbed by Fei Protocol's governance token TRIBE, merging the two into one.

This proposal will somewhat dilute the value of RGT tokens, which is not beneficial to the interests of current RGT holders. The merger of governance tokens will cause RGT to lose control over Rari Capital, which exerts downward pressure on RGT's price. The current market price has already reacted negatively, with the price of RGT tokens dropping by more than 20%.

Section 4 Preliminary Value Assessment

4.1. Five Core Questions

4.1.1. What stage is the project in its business cycle? Is it in the mature stage or the early to mid-development stage?

The current project development is in the early to mid-development stage, with B to B business just starting. Many project parties and their DAO organizations are beginning to establish their own Fuse lending pools on the Fuse platform, which can expand the long-tail asset lending market and facilitate better interbank borrowing cooperation. The future business development prospects are promising, although the current lending scale remains relatively small.

4.1.2. Does the project have a solid competitive advantage? Where does this competitive advantage come from?

Currently, among projects in the same sector, Rari Capital is performing the best. It has already established partnerships with multiple projects, including Olympus DAO, Pendle Finance, Vesper Finance, Harvest Finance, Tokemak, BarnBridge, and NFTX, laying a solid foundation for future business development.

4.1.3. Is the project's mid-to-long-term investment logic clear? Is it in line with industry trends?

Rari Capital's development logic is relatively clear and aligns with industry trends, shifting from rough lending operations to more detailed markets, while incorporating credit and enterprise lending forms.

4.1.4. What are the main variable factors in the project's operations? Are these factors easily quantifiable and measurable?

The operational difficulty of Rari Capital mainly lies in risk control and initial liquidity management. The former is difficult to quantify and assess, while the latter is influenced by the team's relational network and market demand. Currently, the team resources are relatively excellent, and market demand is gradually being opened up.

4.1.5. What is the project's management and governance model? What is the level of DAO?

Currently, the team is mainly governed by a DAO, with high community participation and enthusiasm, overall management level is good, and the team's business innovation capability is strong, with good execution capabilities. The team's style leans towards being diligent, with relatively little marketing content. Additionally, the team has a sense of social responsibility, aiming to allocate 50% of protocol earnings for donations.

4.2 Valuation Level

Due to limited access to Rari Capital-related data, it is not possible to conduct valuation comparisons from a PS/PE perspective. Considering that its development stage is still early and that it faces risks such as oracle attacks that cannot be well quantified in the future, the valuation section will be weakened, and the content is for reference only.

This valuation uses the MC/TVL ratio to horizontally compare the valuation levels of similar projects. Comparing the market capitalization and locked volume ratios of Aave, Compound, Cream Finance, and Rari Capital, Rari Capital's valuation is relatively high.

Unit: Billion USD Source: Defipulse and CoinGecko

Compared to other lending platforms, Rari Capital has more potential business growth points in the future, whether in B to B or Dao to Dao business, small credit, and interbank borrowing businesses, corresponding to significant potential for future business scale growth. Although the value capture ability of RGT is currently limited, as long as the business logic is sound and scale growth is good, the governance value of the token will also increase. Considering the numerous oracle risks that Fuse will face in the future, as well as the current high concentration of pools and assets, and that Fuse has been operating for a short time, relevant experience has not yet been well reflected. Therefore, the current market valuation of RGT is not easy to be too high. Overall, the current market valuation is within a rational valuation range, and subsequent market valuation changes will depend more on the actual development of the business.

All views in this article should not be considered as investment advice.

Section 5 References

Fei Protocol and Rari Capital Merger Proposal

https://forums.rari.capital/d/177-feirari-token-merge

Rari Capital Documentation

https://info.rari.capital/

First Class Rari Capital Research Report

https://asset.first.vip/uploads/20210806/Rari%20CapitalELeven_131-21867594.pdf

Rari Capital Goes Vroom Vroom

https://messari.io/article/rari-capital-goes-vroom-vroom?referrer=asset:rari-governance-token

https://tribe.fei.money/t/potential-proposal-putting-some-fei-in-the-Angle-protocol/3612