Getting Started with 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.
The Core: VaR Oracles
RAVA's VaR Oracles sit between protocols and settlement, computing Value at Risk continuously and outputting two key values:
Haircut:Always applied during clearing. Determines margin requirements and collateral value.
Discount:Only applied if settlement fails. Determines execution price under forced exit.
This separation is fundamental. Haircuts protect the system before problems occur. Discounts protect the system when problems have already occurred.
When Haircut vs When Discount
Haircut: The Normal Case
The haircut is always applied as part of clearing. Even for a simple T+2 token, a haircut is needed because a two-day settlement window creates price, delivery, and operational risk. The haircut determines how much margin must be posted and how much exposure can be safely supported during the settlement period.
Collateral Value = Market Value × (1 − Haircut)
Discount: The Failure Case
The discount is NOT applied upfront. It only becomes relevant if settlement fails and the clearing system must replace, finance, or exit the position before delivery. In normal conditions, no discount is realized.
Execution Price = Market Value × (1 − Discount)
The haircut exists to ensure that IF the discount becomes relevant, losses are absorbed without breaking settlement.
Haircut is insurance you always pay. Discount is the cost you hope to never realize.
Why This Matters
DeFi lending protocols use static parameters: loan-to-value ratios, liquidation thresholds, and liquidation bonuses set through governance. These parameters are calibrated for expected conditions but do not adapt when conditions change.
This architecture works adequately for highly liquid assets with continuous pricing and atomic settlement. It fails progressively as assets become less liquid, less frequently priced, or harder to exit.
RAVA solves this by computing risk continuously. Haircuts adjust as conditions change. Capital efficiency improves without sacrificing safety.
The Pricing Uncertainty Spectrum
Not all assets are equal. The reliability of risk estimates depends on data availability, liquidity, and exit mechanics. Both haircuts and discounts scale with uncertainty:
Highly Liquid Assets:Continuous pricing, deep order books, instant exit. Haircuts: 1-5%. Discounts: 2-7%.
Credit Instruments:Daily or weekly pricing, variable liquidity. Haircuts: 5-15%. Discounts: 8-20%.
Structured Products:Periodic valuation, limited secondary markets. Haircuts: 15-30%. Discounts: 25-45%.
Private Assets:Quarterly valuation, month-long exit windows. Haircuts: 30-50%. Discounts: 40-60%+.
The gap between haircut and discount widens as liquidity decreases. For liquid assets, execution costs are minimal. For illiquid assets, forced sale conditions impose significant additional costs.
Products Built on VaR Oracles
RAVA's VaR Oracles enable multiple products:
Collateral Posting:Protocols use haircuts to safely accept tokenized assets as collateral, enabling lending against previously unmarginable assets.
Standing Bid:RAVA provides guaranteed liquidity at the discount price, ensuring there's always a buyer when settlement fails.
Overnight Repo:Continuous repricing of credit terms based on daily haircut adjustments.
Documentation Structure
Understanding RAVA
- The Problem:Why static LTV models fail
- VaR Oracles:The core infrastructure
Haircuts & Discounts
- Haircut:Always applied during clearing
- Discount:Only if settlement fails
- Private Credit Example:Concrete walkthrough
Products
- Standing Bid:Guaranteed liquidity
- Collateral Posting:Lending against tokenized assets
- Overnight Repo:Continuous credit repricing
Integration & Reference
- Protocol Integration:How protocols consume RAVA values
- The Core Idea:On-chain clearing mechanics
- FAQ:Common questions and answers
- Whitepaper:Complete technical specification
Static LTV vs Continuous Clearing
| Characteristic | Static LTV (DeFi Today) | Continuous Clearing (RAVA) |
|---|---|---|
| Risk Measurement | Ex ante calibration | Continuous VaR estimation |
| Outputs | Fixed LTV ratio | Dynamic haircuts + discounts |
| Adjustment Speed | Governance (weeks/months) | Continuous (minutes) |
| Liquidation | Discrete events at threshold | Gradual margin tightening |
| Capital Efficiency | Worst-case parameters always | Adapts to current conditions |
Next Steps
Continue reading to understand:
- The Problem: static collateral models
- VaR Oracles: the core infrastructure that outputs haircuts and discounts
- Private Credit Example: see how gated assets become marginable
- Whitepaper: complete technical specification