Why RAMM
RAMM is a platform for real yield creation powered by a general and decentralized risk pricing mechanism.
Last updated
RAMM is a platform for real yield creation powered by a general and decentralized risk pricing mechanism.
Last updated
This Documentation explains the fundamentals of the RAMM Protocol. Also, our team and community are available on our community Discord server and Twitter.
You can also go to our RAMMLend docs to view our lending product
RAMM is a yield-unlocking protocol powered by a novel decentralized underwriting mechanism. Using this mechanism, we make any instruments that are inherently non-trivial to gauge risk-reward into passive and protected yield sources with transparent risk-reward profiles as assessed by the managers.
RAMM does this by offering users the infrastructure by which they can permissionlessly spin up their own capital markets or investable strategies, and underwrite & invest & distribute value accordingly. In the process, we unlock new crypto native yield sources and make the most complex strategies investable passively, in an incentive-compatible manner.
An easy way to think about how RAMM works is, think about the age-old banking model in traditional finance, where there are finance-savvy money managers tasked to invest depositors' money in exchange for a fee. RAMM follows this general structure, but where instead smart contracts ensure their incentives are aligned with that of LPs.
Our underwriting mechanism is a new DeFi primitive that enables pricing the risk of any asset to enable the creation of clearly risk-defined yield sources.
RAMM can create new passive yield sources and expands the universe of investable assets. An investor would only supply his capital to an investment if its risk-reward is sufficiently gauged. By using a decentralized mechanism to price risks, RAMM can open up set-and-forget liquidity provision opportunities for arbitrary assets, in a manner that aligns incentives between managers and investors.
RAMM's participants fall into three main categories
(1) Passive Investors or suppliers(Liquidity Providers) who earns higher risk-adjusted yields
(2) Managers to earn amplified yields than those earned by Liquidity Providers for their underwriting work.
(3) Liquidity Utilizers(e.g borrowers, strategists)propose investments and utilize capital at a fair market-priced cost.
Liquidity suppliers will only supply to assets where their risk-adjusted returns are properly gauged. Every investment has a risk-reward profile, which means every investment has a price tag for capital(potential returns i.e interest). A market cannot exist without prices.
RAMM's goal is to place this price tag for all possible assets in a decentralized manner, to create grounds for capital supply to better meet demand, thereby creating new yield sources and investment opportunities for even non-native DeFi users.
Examples
You as a lender will not lend to a borrower if you don't know how likely or unlikely it is the borrower will repay. You first need to assess the borrower's creditworthiness or collateral to sufficiently price the interest rate that acknowledges the discovered risk, before you decide to lend.
You as an investor will not buy an asset if you have no idea how the asset will perform. You first need to assess how much you can possibly lose by buying this asset and how much can you can possibly gain by risking that amount. After this assessment, as a (rational) investor, you will only buy if you think the odds are in your favor.
