Sirwin
Sirwin
RAMP & rUSD - Sorting Out My Misunderstanding

rUSD and RAMP: Sorting Out My (Mis)Understanding


RAMP (https://rampdefi.com , https://www.coingecko.com/en/coins/ramp) is a cryptocurrency ecosystem that operates on the Ethereum, BSC, and Polygon chains, with more to come. It has been around since October 2020 and provides the ability to stake various cryptocurrencies and borrow against them, and then restake, for good reward APR/Y. The RAMP token itself has been in a bearish pattern since April 2021 and was recovering nicely until the sudden downturn in the market in late Nov 2021. I have been trying to find out how this token actually works and why it has not gained as much popularity as some others despite attractive and compelling features, which I'll lay out here. Maybe some other people can contribute to mutual understanding.

Bearish:

rUSD, the system's stablecoin, has not hit its dollar peg since July.


rUSD is minted when users borrow against their staked assets. Depending on the amount, they can mint rUSD and borrow it at a 3-5% interest rate minus a small fee to the protocol. This rUSD can then be put back into the protocol for more rewards, or swapped right in the RAMP app, PancakeSwap, or other places. I am not familiar with other protocols that allow minting a stablecoin based on collateral, and this is a great feature as theoretically, you are not borrowing an asset which could rise in value too much and thus put you at risk for liquidation.

RAMP DeFi Staking & Minting

I am not confident of the mechanisms that keep rUSD pegged to the dollar, and indeed, history has shown that the mechanism is suffering a bit. The value has been as low as 88 cents. rUSD has a small relative market cap so unlike something like Tether or USDC this has not thrown the crypto markets into chaos. And indeed the peg is getting closer, reaching almost 98 cents this week (Dec 08). I suppose that more demand for rUSD keeps it moving up closer to the peg but I honestly can't picture what "demand" means, if that means more is being minted and kept on the platform, vs it being sold perhaps for other stables like BUSD or USDC, or even other cryptos. It is possible the protocol is not attracting users because of this lack of confidence in rUSD, which could be alleviated with greater adoption. This is an ancient problem in economics in general... you have to get more users to grow but users are skeptical because you're still small!

RAMP rUSD Stablecoin price chart, from coingecko

RAMP price chart, from coingecko

Bearish:

Lack of standout marketing.

There is nothing terrible about RAMP's communication and branding. The team is public and their papers and articles are all competently written and demonstrate sound mathematics. But there is a chance they are too technical for the average user (including myself) to pique their real interest. If we compare them with a project like Wonderland Money, say, or Trader Joe, there is much less of an emphasis on a general theme. Wonderland Money clearly has an Alice in Wonderland vibe going on, even in the names of its tokens. Trader Joe looks like a farming game and even has comic strips interspersed throughout their documentation. While this is all unnecessary to support the core financials of the project, it definitely is an attractor, in that, all things being equal, people like using something "fun", and if using something fun keeps them engaged enough to learn about the project, and understand it and trust it, they're more likely to use it. Even look at PancakeSwap, with its cartoon bunnies and its emphasis on big fat pancakes. In any industry, be it Defi, Travel, or Mobile Phones, functionality is important, but so is mood. Marketing and branding matter.

DeFi Branding

Simply stated, there just isn't as much talk about RAMP out there compared to other cryptos. The team does give YouTube interviews, and write on Medium, and they provide whitepapers, and as far as I can tell their intentions and abilities are all above board. But it just may be too... straight ahead. Perhaps older projects like Aave don't need better, cooler branding because of their more established reputation. The new ones have more competition.

Bullish:

What the RAMP ecosystem actually does.

As stated above, you can deposit common LP assets into the RAMP ecosystem for very good rates. Rewards for this liquidity are paid out in the LP token staked. This is different than, say, PancakeSwap, where you may deposit BUSD-BNB but will earn rewards in CAKE. Using RampDeFi, you can earn more BUSD, and more BNB. You can even deposit stablecoin LPs, and thus earn in those stablecoins for even more security than you would earning CAKE, that can fluctuate in value much more. Even if one of your stablecoins is rUSD, with its less than perfect peg to 1 USD, it is still a peg that has never deviated more than 13%.

You can also mint (borrow) rUSD, and redeposit it in the protocol, where borrow interest rates are easily offset by the supply rate (for now).

And then there are ways to actually use the fluctuations of the rUSD to your advantage in terms of arbitrage. I'll leave that to you, but it's basically like selling any other asset high after buying low, or borrowing high and paying back low.

In sum, I like RAMP, and despite the price drop of its main token, my holdings' value has remained pretty much even because the high APY's have offset the losses. The main risk as I see it is that if it cannot attract the audience it needs, the protocol will eventually lose liquidity, and the token price would drop low enough that it couldn't sustain the rest of the platform. I'm not worried about this in the short term. For now the rewards are great... it is still small and young, and if it can start to gain momentum, with all its positive features, transparency, and financials, the upside likely is worth the investment. I'd love to hear what other people think, especially in explaining how the rUSD peg works.

Lastly, A Hint:

I discovered when using rampdefi's built-in DEX to swap between rUSD and BUSD on the Binance Smart Chain, that the fee was a little higher than on PancakeSwap. What was happening in fact was that the gas price in Metamask was set a little higher in RAMP than on PancakeSwap. I don't know if this is something programmed into the respective DEX UI's or Metamask or a combination. In any case, you can edit it, but it is something to take note of if you don't need an extra fast swap transaction on RAMP.

Metamask gas fees

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