How does Rand generate yield?
Rand Network is a personal finance booster that helps you pay for all your monthly expenses on autopilot. Rand invests using stablecoins in automated on-chain structured products that produce high yields, keeping you invested and earning.
Together Rand Network can generate yields far greater than you could by yourself. But how does Rand produce this yield using structured products? Let’s go into more detail about why we use stablecoins, how yield aggregation works and the benefits of using structured products for our network.
Why stable coins?
When you open your account with Rand and deposit your money, it is converted into stable coins (like USDC or aUSD for example). Using stable coins has two main benefits for users and Rand Network.
Firstly, unlike volatile crypto currencies, stablecoins are designed to hold their value through being pegged to a nearly 1:1 FIAT ratio, for example a USDC is pegged to one US dollar. Secondly, this value peg removes volatility and protects user deposits in Rand. The beauty of stablecoins is that they allow for interoperability as well as stability across blockchains and different money markets.
Because stable coins can operate across blockchains, they can be used as collateral for many different on-chain/off-chain structured products. This allows Rand to build yield strategies that take advantage of DeFi’s yield generating money markets.
DeFi automates liquidity
Liquidity is what makes markets work. Liquidity allows for supply and demand to balance and for transactions around orders to be fulfilled. Without it, markets slow down and sometimes freeze up, which causes huge swings in price and makes settlement difficult. Markets need liquidity in order to process transactions in a timely and orderly manner. Liquidity is what allows for market-making and order book transactions to be seamlessly fulfilled in traditional money markets and in DeFi.
DeFi automates money market liquidity by creating liquidity pools built around stablecoin pairs. These pools are built on a number of different blockchains and ecosystems including Ethereum, Acala on Polkadot, Moonbeam, and Terra to name a few.
For example, these liquidity ‘pools’ are where Rand could invest stablecoins (like USDC) as part of a USDC currency pair. This means that Rand would loan stablecoins to third parties in order to increase the number of stablecoins in their pools and the borrowers pay a percentage fee for using these coins for a fixed period. When the fixed period ends, the original stable coins loaned would be returned with the additional fees paid for borrowing them. The yield plus the original amount invested would then be returned to Rand automatically and this would be distributed back to the vaults as yield. The beauty of stable coins is their interoperability and stability across different blockchains and money markets.
“Is this safe?”
Like any investor, Rand allocates funds invested to diversify yield generation and to take advantage of the best yield strategies available across DeFi money markets. This also means that Rand’s exposure to risk is reduced by having yield strategies built across different ecosystems.
The Yield Aggregator is where all the magic happens at Rand. This mechanism combines the deposits from all vaults in the back-end and automates the process of investing these stablecoins by collectively distributing them to a number of different blockchains and DeFI ecosystems through smart contracts.
Smart contracts execute transactions automatically using programmable coded instructions which are audited for code security and tested for points of weakness to prevent theft. The Yield Aggregator runs these smart contracts automatically to deliver and lock funds invested to third party networks and return them plus yields when the fixed time period ends.
To learn more about Rand’s yield aggregator, check out this section of our whitepaper: https://rand-network.gitbook.io/rand-network/protocol/yield-aggregator
Security of users’ deposits is our #1 priority at Rand. Our ecosystem has been designed with security as its backbone to ensure our users will never lose their money, but stay invested and earning. Make your money work harder with Rand.