Our primary goal with R is to maintain its peg, which ensures the stability and utility of the coin in a plethora of use cases. Recently, R has been trading below its peg, mostly as a result of some large borrowers selling R below $1 to leverage up on their stETH collateral.
This issue, as it currently stands, greatly undermines the potential growth of R, especially in terms of integrating with new platforms and expanding its use cases.
What has been done so far
In our endeavor to stabilize the peg, we have introduced the R Savings Module. This allows R holders to deposit their R in exchange for earning the R Savings Rate – a yield denominated in R.
In addition to this, we are on the verge of launching our new R vaults. These vaults differ from the old ones in their interest mechanism; they charge users an interest rate for the entire duration of the loan rather than imposing a single, one-time fee. This helps subsidize the R Savings Rate for new depositors but there is a huge cost of subsidizing the R minted via the old, one-time fee Vaults.
What is still missing
While the steps we have taken so far are progressive, we recognize there is room for improvement:
The R Savings Rate, in isolation, may not induce sufficient buying pressure on R to rectify the current peg deviation. We will be increasing the yield on the R Savings Rate using incentives, to make it a more competitive offering, which will result in additional buying pressure on R and increase its price.
The new R vaults will present terms for borrowing that diverge from what our current borrowers are accustomed to. This creates an unnecessary rift in the borrowing experience.
Considering these issues, our solution is twofold:
Discontinuation of existing R vaults and migration to the upcoming interest rate vaults: Over the course of the next few weeks, we plan to phase out the current R vaults. As a result, we urge users with open R positions to settle them within this time frame. After the stipulated few weeks, any remaining open positions will be automatically redeemed. This not only creates uniformity among our borrowers but also anticipates generating the necessary buying pressure to restore the R peg.
Drive for more integrations and partnerships: Once the peg is stabilized, we will actively seek new integrations and partnerships, including the ability to use RR (R deposited into the R Savings Rate) as collateral. We are working with Chainlink to obtain a price feed that will enable this. This will enhance the utility of R, ensuring its longevity and sustainability.
Conclusion and Call to Action
We believe that the steps proposed will bridge the gap between our current and prospective R borrowers. In doing so, we aim to create a harmonized environment that benefits both parties and is guaranteed to restore the peg of R to $1.
Your feedback is invaluable to us. We invite you to share your thoughts and concerns, ensuring that the Raft community progresses cohesively.
I understand the reasoning for wanting to migrate the old vaults but the new vault structure is completely different to what was initially launched.
As a borrower, I would prefer a longer time period than a few weeks (?) to allow for the loan to be paid back or for the position to be migrated.
Making such a drastic change in a short time period might help the peg of R short term but we also need to balance that with users generating R losing confidence and going elsewhere.
If you are going to retroactively change old vaults, I’ll just repay and won’t ever use Raft again.
Enjoy your 1$ peg and massive loss of TVL as I’m sure I won’t be alone in my actions.
Top 10 R borrower
this would be going back on the promises of the migration proposal.
even the migration proposal wasn’t accepted overall properly in the forums, imo.
longer and clearer timeframe for phasing out, might be a better option.
I believe that the creators of a protocol born with features such as native leverage looping and the use of a collateral such as steth should have expected massive use of R by users to increase their exposure to LSD tokens. changing the protocol parameters in such a drastic way goes against the users (the majority) who have evaluated and chosen your platform for this reason. many protocols similar to yours have failed precisely because of their obsessive search for the peg when instead they should have looked at the real use by the market. Don’t make the same mistake.
furthermore, the temporary increase in purchasing pressure would be diluted over time by the interest paid by the R saving rates themselves.
Lessons learned:
→ Smart contract immutability is not optional
→ Don’t leverage in central bank enforced low liquidity environment
→ Protocol maturity > protocol innovation ( → invest only < 10% through innovative protocols)
Further thoughts:
→ Might want to leave LSTs early in the bull market next year, due to the potential sell-off and consequently LST depeg at ETH ATH.
→ Until the bull market hits, allocate some portion in yield-bearing stables (potentially DSR or RSM actually )
After all, I am not giving up on the R protocol and honestly, the decisions made are well-reasoned. The one-time fee borrowing in a high-interest environment is just too difficult if not impossible with a stable peg.
As I entered the Raft, it was communicated that it was okay for R to float around $1, but the narrative clearly shifted to the strict $1 peg. R would have found its equilibrium between 2-5% below peg. That’s the price for one-time fee borrowing in a high-interest rate environment. Redemptions should not have been disabled but lowered to 5% below peg probably.
Anyway, keep up the good work. I actually like the Raft vibe and I might come back opening a position once the bull market hits.
What will happen to those of us who used OSL and are underwater right now?
I personally used OSL to leverage up and set the Liquidation level low enough I didn’t worry about it. But now you are going to liquated me below where I bought? I will lose significant $$$.
If you do this, you are making a case for Regulators to oversee for reasons like this.
I closed my position underwater as well. But actually, it doesn’t really matter. Decisions you make today do not take into account actions in the past. In other words, if your position is underwater today, you can’t do anything to undo your mistake today. If you are willing to, you can close your position today and reopen the exact same position on Liquity or Gravita and you will be underwater in the same way you are underwater on Raft. So, really, apart from tx fees involved you won’t be worse off refinancing your leveraged position on another lending protocol.
The new R vaults will present terms for borrowing that diverge from what our current borrowers are accustomed to. This creates an unnecessary rift in the borrowing experience.
The current borrowers (i.e. your early users) took on all the risks associated with interacting with a new and unknown protocol. They helped Raft grow to where it currently is. As a result they benefit from having diverging terms on their current positions for as long as those positions are open. What is the big deal (or rift as you put it) there?
Don’t really see an issue with early users being rewarded with keeping the old terms for as long as they keep their current positions open. Don’t think that a lot of the new borrowers will take issue with this either. Plus over time this will solve itself anyway in a more organical matter, as borrowers close their positions and thus loose those terms.
I understand the reasoning behind launching the new vaults and R savings Module. But disagree with this migration proposal
Actually interesting that Gravita protocol is navigating this high-interest environment exactly opposite to Raft by increasing the redemption price to $0.995 in September and to $1 in October.
I’m really curious how this will work out for them and I will be happily watching these two protocols as they mature into major LST lending protocols.
For OSL, I was happy to sit on leverage and wait for the price to return. And I cannot cash out back to my original position because stETH price is lower. I would come out with less stETH. And no, I can’t take the less stETH to Liquity because they don’t take stETH. The whole point was to deposit interest based collateral which Liquity doesn’t take.
For a loan… I interacted with the Raft Smart Contract to get a 0% interest self-repaying loan. To me that’s the same as signing a loan agreement at a bank. In the real world neither party could legally change the terms.
Now you are asking me to come up with the cash to payback the loan even though I already spent it. I was just going to let it repay itself as advertised. No way I have the cash to pay off the loan.
This was indeed a difficult decision when the project was still in the early stages of development. I have no opinion but please extend the proposal to have time to evaluate
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