Why Real Estate Works for Lending and Borrowing in DeFi

In the decentralized finance (DeFi) world, opportunities to earn higher yields compared to traditional finance are vast and significant. The difference in yield levels is staggering by any metric, driving DeFi adoption for those seeking to maximize returns. However, in this pursuit, one principle seems to be overlooked in DeFi: diversification—often called the only “free lunch” in investing. Diversification spreads risk, ensuring that not all assets move in the same direction, particularly during market downturns. Yet, in DeFi, such asset diversification is often missing, leaving portfolios vulnerable to volatile swings.

The Challenge of Price Volatility in DeFi Collateral

Price volatility is one of the most significant risks for DeFi users. Anyone who has participated in DeFi understands that crypto assets can experience massive price fluctuations in short periods. While volatility can create opportunities for profit, it can also wreak havoc on collateralized loans, particularly when used for borrowing strategies aimed at maximizing yield. When the value of collateralized assets drops sharply, users face the risk of liquidation, which can result in substantial losses.

The stability of collateral is critical for reducing the stress of liquidations. A stable collateral asset provides a safeguard for DeFi users, allowing them to borrow against it with confidence and reducing the risk of forced liquidations. This creates a more positive and stress-free borrowing experience for users. In search of such stability, one asset class stands out: Real Estate.

Why Real Estate Works as Collateral

Real estate has long been considered a stable asset class, with historical price stability and a tendency to appreciate over time. This makes it an ideal asset to use as collateral for borrowing strategies in DeFi. Unlike crypto assets, which can experience wild price swings, real estate tends to follow more predictable value trends. By leveraging real estate-backed NFTs (Non-Fungible Tokens), RAAC provides DeFi users with access to this asset class, bringing much-needed stability to collateralized borrowing.

RAAC’s Real Estate NFTs: Powering New Opportunities in DeFi

RAAC has designed a system where real-world real estate is tokenized as NFTs, unlocking a new world of borrowing capabilities for DeFi users. Each NFT is tied to a specific real estate asset, recording its ownership, metadata, and value on-chain. This system unleashes the potential of real-world assets (RWAs) within the DeFi landscape, allowing users to collateralize real estate for borrowing.

By offering real estate as collateral, RAAC opens up a broader market and enhances on-chain activity. Real estate-backed borrowing provides a secure, stable option for users looking to minimize risks associated with more volatile crypto assets. With the introduction of these NFTs, DeFi participants can unlock new capital by borrowing against their digital assets, increasing both liquidity and participation within the ecosystem.

This increased activity will fuel the adoption of $crvUSD, RAAC’s native stablecoin, designed to support the ecosystem’s lending and borrowing needs.

Borrowing at Competitive Rates: Maximize Your DeFi Yields

The math behind borrowing strategies in DeFi depends heavily on low borrowing costs. RAAC’s platform is designed to offer the most competitive rates in DeFi, allowing users to maximize the yield differential between the cost of borrowing and the returns from the strategies.

With access to low-cost borrowing, DeFi users can implement more profitable strategies, earning higher yields on their assets while maintaining stability through real estate-backed NFTs. This positions RAAC as a leader in providing secure, high-yield opportunities for sophisticated DeFi users.

Auto-Compounders: Maximizing Yields Automatically

One of the most appealing aspects of DeFi is the ability to compound earnings over time. However, this process can require attention and management, which may deter more passive investors. To address this, RAAC introduces auto-compounders—automated strategies that take the yields earned from borrowing or lending and reinvest them, continuously compounding user earnings with minimal effort.

RAAC’s auto-compounders offer sophisticated strategies that automatically manage borrowings, reinvest profits, and ensure users take full advantage of the yield differential between borrowing costs and earning potential. This approach allows even the most passive DeFi users, or so-called “couch potato yield farmers,” to maximize returns without constantly managing their positions. With just one click, users can set their strategies to auto-compound, streamlining their DeFi experience.

Chainlink-Powered Data for Real-Time Price Feeds

RAAC’s lending and borrowing platform leverages Chainlink’s decentralized oracles to ensure real-time, accurate pricing data for all collateralized assets, including real estate. This data is crucial to maintaining accurate lending and borrowing calculations, allowing users to safely manage their borrowings while minimizing the risk of under-collateralization or liquidation.

Liquidations: Stability without Real-World Disruption

RAAC’s real estate-backed borrowing system also provides an innovative approach to liquidations. In many DeFi platforms, when collateral falls in value and users fail to repay their loans, the collateral is automatically liquidated to cover the debt. In a volatile market, this process can cause significant losses for borrowers.

However, with RAAC’s system, liquidations don’t directly affect the underlying real estate. When a borrower’s position is liquidated on the RAAC platform, the digital asset representing the real estate (in the form of an NFT or token) is liquidated, not the physical property itself. The real-world asset remains intact, ensuring that its value is preserved and continues to generate income.

Upon liquidation, RAAC issues an index token backed by the liquidated real estate in the system. The real estate continues to generate rent or other revenue streams, benefiting token holders while minimizing the impact of DeFi liquidations.

Conclusion: RAAC’s Vision for the Future of DeFi

By integrating real estate into the DeFi ecosystem, RAAC provides a more stable and secure platform for borrowing and lending. Real estate’s historical price stability, combined with RAAC’s innovative auto-compounders and liquidation mechanisms, ensures that users can maximize their returns with minimal risk. Whether you’re an active DeFi strategist or a passive yield farmer, RAAC offers the tools and opportunities to enhance your DeFi experience and capitalize on real-world assets.