The DeFi sphere has seen different stages as a volatile market that is exposed to all types of risk. Users commonly face the risk of lack of regulation, susceptibility to error, hacking, pricing variations, and their ineligibility to fulfill the criteria to opt for loans. This deficiency results in why users don’t want to advent into the crypto market, and some are unable to get hold of their desired cryptocurrencies.
These inefficiencies give rise to an ultimate tool that analyzes all the risks in advance to prevent such events from taking place. This AI-decentralized financial tool RAROC (Risk-Adjusted Returns On Crypto) grew in popularity through the simple rule of thumb “the higher the risk, the higher the return.” Using this risk-return spectrum, users were able to aim for higher returns, but they had to bear with equivalent risk.
TribeOne introduces itself as the world’s first truly AI-powered decentralized financial platform backed with RAROC. RAROC is a profitability measurement framework that analyses risk-adjusted financial performance. It is a modified return on investment (ROI) that takes the element of risk into account.
These are the features of RAROC that TribeOne extensively offers:
- Risk management refers to the practice; of identifying, analyzing, and taking precautionary steps for the potential risk in advance. TribeOne understands crypto’s volatile nature and safeguards the users against all possible risks. This is done by managing the user’s vault and creating a borrower risk rating that provides them eligibility to opt for the loans.
- Performance evaluation of users' repayment history is done against the value of risk undertaken. TribeOne evaluates your performance, i.e., your credit score to grant low to zero collateralized loans. It also evaluates the loan limits for SEM’s after reviewing their portfolios.
- Risk assessment criteria for investments and loans are as follows:
- LTV(Loan to value) of the user, LTV is a ratio that is used to determine how much risk they’re taking on with a secured loan. Repayment history of the borrower due to which the distribution of interest takes place.
- Type of crypto collateral given by the user against the loan requested.
- The loan tenure, which is the period for which the loan amount is sanctioned.
TribeOne’s inbuilt actuary, RAROC, is beneficial due to its features of reduced fluctuation. Whereby there are lesser chances of having your respective liquidity getting blended to prevent investor’s interests. Keeping in mind a simple concept of receiving a standard loan with a normal LTV that might hit the liquidity margin rapidly, we will provide all the users with a lower LTV. This makes them less exposed to the enormous risk.
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