Rumi Finance is an all-encompassing protocol that provides a complete DeFi asset management solution, catering to the needs of both retail and institutional investors. The protocol encompasses several modules and features that synergistically deliver a cutting-edge DeFi experience.
Rumi Finance's key components include:
- Permissionless Protocol - Vaults
- Prime - Rumi’s Advanced Lending Module
- Sophisticated Yield Strategies
- Strategy design and back testing environment
- Embedded Risk Management
- DeFi Blue - Institutional Investing Add-On
Rumi Delta Neutral Vaults aim to generate yield from providing liquidity in decentralised exchanges while minimising the impact impermanent loss.
The way the strategy works, you invest USDC and earn yield in USDC, while having a long and short position on the volatile asset of the liquidity pool, ETH for example. After you deposit USDC, the strategy does the following:
- 1.Use the USDC to purchase the token pair included in the underlying liquidity pool (always a stable / volatile pair, such as USDC / ETH)
- 2.With the token pair, strategy purchases a liquidity pool token (LP token) (in the case of portfolio vault we purchase more than one) from the AMM, in this case Uniswap V3
- 3.The strategy uses the LP token as collateral and borrows additional 2x money on Rumi’s lending platform, Prime. The strategy uses the borrowed money to purchase additional LP tokens from the Uniswap pool
- 4.Strategy earns the trading fees APR (3x) while it pays interest for the borrowed funds (stable interest APR and volatile interest APR)
- 5.Our algorithm determines the optimal thresholds to rebalance the position and bring it back to delta neutral. In the case of Uniswap V3 pools this also involves selecting the correct upper and lower ticks (price ranges) and rebalancing accordingly to guarantee that the upper and lower bounds are not skewed (deviated from the 50/50 pool symmetry) otherwise the hedge will not be perfect. This process and calculations are completely managed by our technology.
- 6.All the fees generated are compounded into the strategy
The borrowing composition for the Delta Neutral strategies is 75% Volatile and 25% Stable. For example, if one invests $100 in the strategy, the total position will be $300, which corresponds to a 50% or $150 long position on the volatile asset (ETH). The borrowing of total $200 will be composed of $150 (75%) in the volatile asset and $50 (25%) in the Stable asset. As you can see, the $150 borrowing of the volatile asset is effectively a short position, that is exactly the same as the long position, hence achieving neutrality.
At the moment, we use Uniswap V3. We provide liquidity to its most liquid and profitable liquidity pools that have a stable / volatile pairs
UniswapV3 introduces a new concept for Capital Efficiency that does not exist in the V2 version, this introduces new sets of complexity into the calculations as well but also many benefits.
In our case we actively manage liquidity on behalf of the user, this means that we ensure that the upper and lower bounds of the liquidity provision are selected by us and maintained within a certain range that will provide yield generation.
This selection process is handled by a looking forward AI algorithm that we use that helps us predict a range where we need to be located at and also on a level of permitted skewness on the liquidity position selected (upper and lower bound) this is because the Delta Neutral hedge needs a 50/50 liquidity pool and this requires the upper and lower bound selection vs the current price to be symmetrical both upwards and downwards of the price.
The net APY is composed of the income APY that is coming from the fees earned by providing liquidity on Uniswap V3, minus the interest we pay for the borrowing to lever the strategies. Please note that the income APY on your equity is higher because you are effectively getting 3x the APY due to the leveraging.
A Multipool portfolio vault contains more than one strategies in the same vault. In the case of the Arb Multipool portfolio vault, it contains 3 delta neutral Uniswap V3 strategies.
The allocation of each strategy is determined by our quant team, based on the risk and reward profiles of the strategies, always trying to maximise the sharpe ratio. The allocations may change due to changes in these profiles.
Rumi Finance charges a 2% admin fee and a 20% performance fee ONLY on the yield, not on the deposited amounts.
Rumi also charged a 0.1% withdrawal fee, to discourage bad actors
On Arbitrum, the gas spent on deposits for the Multipool portfolio will range $3-$5. This is due to the fact that you are depositing in multiple strategies at the same time.
If you want to capitalise on the superior returns of these yield strategies, we suggest that you leave the investment for at least 2 months. You need to leave the strategy start compounding the yield, the more you leave it, the more it will compound. You should also check the unrealised price impact of the vault before withdrawing, we always suggest you do it when is 0 or positive. If it’s negative allow the mean reversion to happen!
Prime is Rumi Finance’s undercollateralized Lending. It is designed to cater to the needs of both lenders and borrowers (Strategy Investors) by offering undercollateralized leveraged positions.
This allows investors to maximize returns by borrowing funds from Prime to provide leverage and hedging mechanisms to Rumi’s yield strategies.
The module achieves a harmonious balance between the interests of lenders, who seek lower-risk yields, yield stability, instant liquidity, and security, and Strategy Investors, who have a higher risk tolerance and focus on yield maximization.
The supply liquidity is used by Rumi to provide leverage and hedging mechanisms to its yield strategies.
One important thing to note here is that only Rumi’s automated algorithms define and manage the leverage for its strategies, and not individually by the borrowers. This enables additional security and avoid liquidation risk.
The interest earned on the assets supplied is paid by the borrowers who are paying to use the liquidity to lever the strategies.
The interest is constantly changing, depending on the total utilization rate of the assets supplied vs the borrowed amounts.
Rumi will also, in times, incentivise the single asset vaults with Rumi reward tokens.
Single asset liquidity is the safest form of investing in Rumi and offers several advantages to lenders, making it an attractive option for investors seeking a secure and efficient lending platform:
- No Impermanent Loss By investing in single asset vaults, lenders avoid the risk of impermanent loss typically associated with liquidity provision in other platforms. This protection further enhances the security of their investments.
- Lower Liquidation RiskThe optimal leverage management feature ensures that Rumi Finance manages the leverage on all strategies instead of leaving it in the hands of individual borrowers. This minimizes liquidations, reducing the overall risk for lenders.
- Instant LiquidityPrime's innovative instant liquidity mechanism, which combines tapping into the Rumi Reserve and deleveraging strategies, allows lenders to withdraw their funds anytime they desire, even when the utilization rate is at its maximum.
- Insurance Reserve FundRumi Finance maintains an insurance reserve to cover potential eventualities and safeguard user investments. This additional layer of protection gives lenders peace of mind knowing that their funds are secured against unforeseen circumstances.
No, your position can never be liquidated.
Rumi uses the concept of interest bearing tokens, so all the interest is accrued automatically on your position, so no need to claim anything.
The system does it automatically for you. When you withdraw your liquidity, it will include the interest earned.
When Rumi provides additional incentives to single asset lenders in the form of Rumi tokens, the tokens will be available to claim on your portfolio page.
No. Rumi finance does not charge anything to single asset lenders. No hidden fees