Rabbit Finance is a cross-chain leveraged lending protocol，which support deposit tokens to earn interest and leveraged yield farming. Rabbit Finance has launched elastic stablecoin CARROT and the Boardroom. Furthermore, planning to launch Syrup pool, auction platform, NFT, leveraged trading and mortgage loan.
Rabbit Finance launched on May 24th 2021，and has already operated safely for 40 days. What's more, TVL reached $500 million and this high-return farming pool attracted wide attention. Now, Rabbit Finance supports lenders deposit tokens to earn interests and farmers to get more farming returns through 9x leverage farming and better auto compound strategy.
Rabbit Coin (RABBIT) is the utility token of Rabbit Finance. All RABBIT is generated by new block rewards with no presale, its circulating supply is 28587137.53 RABBIT.
Now let's take a look inside the Tokenomics of Rabbit Finance.
Interest rate of Rabbit Finance is determined by the triple-slope interest rate model. Borrowing cost of farmers is between 0-60% according to different Utilization. Interest rate formula shows as follows,
Interest = m ∗ utilization + b
Compared to Project A, lower fluctuation and top limit of debt rate in Rabbit Finance provide more stable and lower cost funds to farmers. And this enables farmers to reduce operations and avoid negative APR in most cases. Next, we will compare data from two actual cases.
Farmers use 1000 USDT as principal, and borrow 2000 BUSD with 3x leverage. The actual borrowing rate shows as follows.
The borrowing rate of Rabbit Finance is 6.37%
The borrowing rate of Project A is 32.53%
Farmer uses 100,000 USDT as principal, and borrow 500,000 BUSD with 6x leverage. The actual borrowing rate shows as follows.
The borrowing rate of Rabbit Finance is 16.21%.
The borrowing rate of Project A is 81.73%.
All leveraged farming protocols will deduct debt rate from principals when auto compounding. So, the proportion of principals to positions will get smaller, increasing debt will lead to higher risk holding the positions. Next, we will analyze borrowing rates of two platforms.
Ultra-low borrowing rate of Rabbit Finance ensures slower growth of farmers' debt
Rabbit Finance could adjust pool allocation points to each leveraged farming pool. Higher RABBIT rewards and lower debt cost lower the risk holding a position and increase the actual return.
The borrowing rate on Project A waved in the range of 0-150%, up to 70% at 6x. What's more, the growth of farmers' debt is higher.
The higher debt rate on Project A increases risk for farmers to hold positions in the long term. Wider fluctuation of interest rate leads to change positions more frequently. Furthermore, there would possibly be negative APR.
Users deposit assets such as BNB, BUSD, USDT into Vaults to get 2 rewards which are, share of interest income of vaults according to proportion of the deposited funds and the time of deposit, and share of RABBIT reward according to proportion of staked ibToken.
Lenders can get higher farming rewards, comparisons of current interest rates as shown below.
Rabbit Finance provides a bigger proportion of RABBIT rewards to lenders, which encourages lenders to provide more assets to farmers. Let's compare data shown on the official documents as shown below.
The pool allocation points of Rabbit Finance is 1,210 (100%), deposit vaults allocates 778 points (64.29%)
The pool allocation points of Project A is 1842(100%), deposit vaults allocates 750 points (40.71%)
Sufficient auto compound reserve and deposit reserve enables sustainably deflation of RABBIT.
Rabbit Finance takes 20% of interest income from depositing tokens as reserve and 30% of MDX and CAKE auto compound income from leveraged farms as reserve. Deposit reserve and auto compounding reserve will be used for RABBIT buyback and burn. More buyback and burn make RABBIT continuously deflate, which achieves deflation empowerment and value improvement.
Cost saved from low borrowing rate is far higher than the autocompoud reserve charged.
With lower borrowing rate and reasonable RABBIT reward, Rabbit Finance achieves higher proportion (30%) of buyback assets return, guaranteed higher leveraged farming return. Current interest rates comparison as follows.
As data shows above, we can see that on Rabbit Finance main trading pairs get higher farming returns compared to Project A while obtaining more buyback funds. This benefits from ultra low rate borrowing interest model and sufficient buyback fund to empower RABBIT with deflation and increase value of RABBIT.
Since launch of elastic stablecoin CARROT on 18th June and the Boardroom, Rabbit Finance started to stimulate user to stake RABBIT to the Boardroom with CARROT inflation rewards and Double-pool Self-motivation model, and reward with RABBIT to liquidity provider of CARROT/BUSD.
Tokens on Project A and many other DeFi projects doesn't have practical scenario. But the Boardroom and CARROT created a new scenario for RABBIT, which achieved value empowerment of RABBIT and circulated deflation of RABBIT.
The Boardroom has launched 2 RABBIT stake pools, X7 and X3. The RABBIT staked in X7 pool will lock 49hr after every inflation, which means users can withdraw only after 4 deflations within 48 hours, while the RABBIT staked in X3 pool can deposit or withdraw any time with no lock up. After inflation, X7 pool shares 70% of CARROT inflation rewards while X3 pool shares 30% of CARROT inflation rewards. From current TVL, more RABBIT Holders choose X7 pool, which reflects consensus from the community.
Through comparison of data, the following conclusions can be drawn, Rabbit Finance attracts farmers with lower borrowing rate, increased utilization of the funds. Returns of leveraged yield farmers provide sufficient funds for buyback and burn , which helps to achieve higher deflation of Rabbit. And Double-pool Self-motivation Model of the Boardroom aggravates shortage of circulating supply of RABBIT.