Frequently Asked Questions

Common questions about RAVA VaR oracles, haircuts, discounts, and protocol integration.

General Questions

What is RAVA?

RAVA is an on-chain clearinghouse for tokenized assets. At its core, RAVA provides VaR Oracles that transform messy real-world data into clean risk parameters: haircuts for collateral valuation and discounts for execution pricing.

Why do tokenized assets need a clearing layer?

Traditional clearinghouses enable leverage and liquidity by computing risk and enforcing margin continuously. In DeFi, this clearing layer is largely absent. Protocols rely on static LTV ratios that do not adapt to changing conditions. RAVA provides the continuous risk measurement and margin adjustment that traditional finance takes for granted.

Is RAVA a lending protocol?

No. RAVA is risk infrastructure that lending protocols integrate. It does not lend, trade, or take directional risk. Just as price oracles provide spot prices for liquid assets, RAVA provides settlement values for all tokenized assets.

Is RAVA live?

RAVA is currently in development. Launch timeline will be announced as the protocol completes development and security reviews.

Haircut vs Discount

What is the difference between haircut and discount?

Haircut is always applied during clearing. It determines how much margin must be posted and how much collateral value a position has.

Discount is only applied if settlement fails. It determines the execution price when the clearing system must replace, finance, or exit a position.

In normal conditions, no discount is realized. The haircut exists to ensure that IF the discount becomes relevant, losses are absorbed without breaking settlement.

When is the haircut used?

Always. Even for a simple T+2 token, a haircut is applied because a two-day settlement window creates price, delivery, and operational risk. The haircut determines margin requirements upfront.

Collateral Value = Market Value x (1 - Haircut)

When is the discount used?

Only if settlement fails. If everything goes normally, the discount is never realized. It only becomes relevant when the clearing system must exit a position under forced conditions.

Execution Price = Market Value x (1 - Discount)

Why are discounts larger than haircuts?

Discounts incorporate the haircut plus additional execution costs: market impact, time-to-exit risk, adverse selection, and slippage. For liquid assets, the gap is small. For illiquid assets, forced sale conditions impose significant additional costs.

How should I think about haircut vs discount?

Haircut is insurance you always pay. Discount is the cost you hope to never realize.

The haircut protects the system before problems occur. The discount protects the system when problems have already occurred.

VaR Oracle Questions

What is a VaR Oracle?

A VaR Oracle computes Value at Risk for tokenized assets and outputs two values: haircut (for collateral valuation) and discount (for execution pricing). It transforms messy real-world data into clean risk parameters that protocols can consume.

How are haircuts and discounts calculated?

From a VaR-style loss estimate over the margin period of risk. VaR at confidence level alpha is the smallest loss threshold such that losses exceed this threshold with probability at most (1 - alpha).

Haircut = VaR / Market Value Discount = Haircut + Execution Costs

How often do these values update?

Continuously. As market conditions change, haircuts and discounts adjust in real time. This is the key difference from static LTV models that only update through governance.

Why not just use NAV?

NAV is an accounting concept designed for quarterly reporting. It is smoothed, lagged, and not designed for credit decisions. Haircuts and discounts reflect actual risk under current market conditions.

Can haircuts be manipulated?

Haircuts use multiple public market sources with outlier detection. The methodology is transparent and auditable. No single party can manipulate haircut calculations.

Products Questions

What is Standing Bid?

Standing Bid is guaranteed liquidity at the discount price. RAVA commits capital to purchase assets if settlement fails, ensuring there is always a buyer. Standing Bid uses the discount output from VaR Oracles.

What is Collateral Posting?

Collateral Posting allows protocols to safely accept tokenized assets as collateral using the haircut output. Protocols query the haircut, calculate collateral value, and determine borrowing capacity.

What is Overnight Repo?

Overnight repo markets adjust lending terms daily based on current haircuts. Repo rates and margin requirements reprice continuously as conditions change.

Why daily repricing instead of monthly or quarterly?

Continuous repricing eliminates dangerous lags. If market conditions deteriorate, terms adjust immediately instead of waiting weeks or months. This prevents hidden leverage buildup.

Protocol Integration Questions

Which protocols can integrate RAVA?

Any lending protocol, asset manager, or treasury system. RAVA provides standard oracle interfaces compatible with leading protocols.

How does integration work?

Protocols call RAVA oracle with an asset identifier and receive the current haircut and discount. They use haircut for collateral valuation and discount for liquidation pricing.

Do protocols need custom code for each asset class?

No. RAVA provides standardized haircuts and discounts for all tokenized assets. Protocols integrate once and gain access to private credit, real estate, infrastructure, and other asset classes through the same interface.

Can protocols set their own risk parameters?

Yes. RAVA provides haircuts and discounts. Protocols set their own LTV limits on top of RAVA values based on their risk appetite.

Risk Questions

What are the main risks?

Oracle risk: If market data feeds fail or are manipulated, haircuts could be incorrect.

Model risk: VaR models might not capture all risk dimensions perfectly.

Smart contract risk: Bugs in oracle contracts could cause incorrect values to be published.

Governance risk: Future methodology changes could be made poorly.

How does RAVA mitigate these risks?

Multiple oracle sources with outlier detection Conservative haircuts that err on the side of caution Extensive audits and formal verification where possible Gradual decentralization of governance Circuit breakers and pause mechanisms

What happens if haircuts are too conservative?

Borrowers get less leverage than they might from a more aggressive model. This is by design. RAVA prioritizes lender safety.

What happens if haircuts are too aggressive?

Lenders take more risk than intended. Liquidations might not recover full value. This is the more dangerous failure mode, which is why RAVA errs conservative.

Could RAVA cause a liquidation cascade?

Continuous repricing and transparent haircuts reduce cascade risk compared to quarterly repricing with hidden models. Positions adjust gradually as conditions change, not all at once during resets.

Regulatory Questions

Is RAVA regulated?

Clearinghouses, VaR models, and haircut schedules are well-established regulatory constructs. Regulators understand them. Compliance frameworks exist for them. An on-chain clearinghouse aligns with existing regulatory intuition far more closely than static collateral systems.

Are haircuts and discounts considered securities?

RAVA publishes data, not securities. Protocols and users decide how to use that data. Regulatory classification depends on specific use cases and jurisdictions.

Technical Questions

What chains does RAVA support?

RAVA will launch on major networks with plans to expand as demand grows.

How frequently do values update?

Haircuts and discounts update continuously as market conditions change, ensuring real time risk parameters for credit decisions.

What happens if the oracle goes offline?

Protocols using RAVA values should implement staleness checks and fallback mechanisms. RAVA targets 99.9%+ uptime with redundant infrastructure.

Comparison Questions

How does RAVA compare to static LTV models?

How does RAVA compare to NAV oracle providers?

Most NAV oracles just republish quarterly NAV reports. RAVA transforms NAV into haircuts and discounts that adjust continuously based on market conditions. Much more suitable for lending and liquidations.