What is Rain.fi?
Rain.fi is a peer-to-peer lending protocol built on the Solana blockchain that enables users to borrow and lend both cryptocurrencies and NFTs without the risk of price-based liquidations. Launched to provide flexible financial solutions in the DeFi space, the platform has processed over $45 million in lending volume across more than 86,000 loans. With approximately $11.63 million in total value locked as of November 2024, Rain.fi has established itself as a significant player in Solana's lending ecosystem.
The protocol addresses a critical gap in decentralized finance by offering instant liquidity for NFT holders and token owners who need access to capital without selling their assets. Unlike traditional lending platforms that employ automatic liquidations when collateral value drops, Rain.fi uses a duration-based lending model that provides borrowers with more flexibility and control. This innovative approach has made it particularly popular for NFT financing, where the platform enables "buy now, pay later" functionality for high-value digital collectibles.
Rain.fi's ecosystem is designed for efficiency and inclusivity, catering to both individual users seeking liquidity and projects wanting to offer lending services to their communities. The platform has been audited by FYEO in June 2023 and offers white-label integration options that allow other platforms to incorporate Rain.fi's lending module in as little as five minutes.
Key Features
- No Price-Based Liquidations: Unlike traditional DeFi lending protocols, Rain.fi eliminates the risk of automatic liquidations due to price fluctuations, giving borrowers peace of mind and more time to manage their positions.
- NFT Buy Now, Pay Later: Users can purchase NFTs by making a down payment of approximately 25% and borrowing the remaining amount, essentially creating NFT mortgages on the Solana blockchain.
- Custom Lending Pools: Lenders can create their own pools with customized lending strategies, interest rates, and loan-to-value ratios, allowing for tailored risk management and yield optimization.
- Token and NFT Collateral: The platform supports borrowing against both fungible tokens and NFTs, providing flexibility for users with diverse crypto portfolios including support for tokenized real-world assets.
- Leverage Trading: Rain.fi enables leveraged trades up to 13x on various Solana tokens without liquidation risk, allowing users to create dynamic long and short positions.
- White-Label Integration: Projects can integrate Rain.fi's lending module into their own applications within minutes and earn 30% of platform fees generated by their users.
- Duration-Based Loans: All loans operate on fixed durations with options for extensions, giving borrowers predictable terms and the ability to plan their repayment strategy.
- Droplets Rewards Program: Active users earn platform points called Droplets through various activities, incentivizing participation and community engagement.
How It Works
Rain.fi operates as a peer-to-peer marketplace where lenders create pools with specific lending parameters and borrowers access liquidity by collateralizing their assets. When a user wants to borrow, they select an available lending pool, deposit their collateral (either tokens or NFTs), and receive the loan amount directly to their wallet. The entire process takes just seconds and is executed through smart contracts on the Solana blockchain.
For NFT borrowing and the buy now, pay later feature, users make a down payment on the desired NFT and borrow the remaining amount from available lending pools. The NFT is locked in a smart contract during the loan period, attributed to the borrower's account but not fully accessible until the loan is repaid. Borrowers can choose to repay the loan at any time within the duration, extend the loan period, or even sell the NFT to settle the debt. This flexibility makes it possible to speculate on NFT price movements with leverage.
Lenders benefit from earning interest on their deployed capital and can manage their pools through either Lite Mode for simplified management or advanced settings for granular control. They can adjust parameters like annual percentage yield, loan-to-value ratios, and accepted collateral types to optimize their lending strategy. The platform provides detailed analytics showing pool performance, utilization rates, and projected returns, helping lenders make informed decisions about their capital deployment.
Supported Networks
Rain.fi is built exclusively on Solana, leveraging the blockchain's high-speed transactions and low gas fees to provide an efficient lending experience. The platform takes full advantage of Solana's throughput capabilities to enable instant loan origination and settlement.
Fees and Costs
Rain.fi charges interest fees on loans, with rates determined by individual lending pools based on the parameters set by pool creators. According to DeFi analytics data, the protocol generates approximately $2.57 million in annualized fees, with the platform retaining roughly 27% of total fees as revenue while the majority goes to lenders.
Platform fees are embedded in the interest rates borrowers pay, and there are no separate origination fees or hidden charges. Lenders who create pools can set their own interest rates to remain competitive while maximizing returns. Users integrating Rain.fi's white-label module receive 30% of fees generated by their referred users.
Standard Solana network transaction fees apply to all interactions with the protocol, though these are typically minimal, usually costing fractions of a cent per transaction. The platform does not charge withdrawal fees for removing funds from lending pools, making it cost-effective for lenders to manage their capital.
Security and Audits
Rain.fi underwent a comprehensive security audit by FYEO in June 2023, which examined the platform's smart contracts for vulnerabilities and coding best practices. The audit aimed to enhance the security and integrity of the protocol before public launch.
The platform acknowledges in its terms and conditions that despite security audits, smart contracts may contain bugs or vulnerabilities, and users accept all risks associated with smart contract interactions. While the protocol has implemented various security measures, including partnerships with reputable security firms, no decentralized system is entirely immune to exploits.
Users should note that Rain.fi has not disclosed any major security incidents or exploits since its launch. The protocol's code is partially open-source, with repositories available on GitHub under the Rain Foundation organization, allowing for community review and transparency.
Use Cases
NFT Collectors and Traders: Individuals looking to acquire high-value NFTs from collections like MadLads or DeGods can use Rain.fi's buy now, pay later feature to purchase without paying the full price upfront, enabling speculation on NFT price appreciation.
DeFi Traders Seeking Leverage: Traders can use Rain.fi to gain leveraged exposure to Solana tokens up to 13x without facing liquidation risk, creating dynamic trading strategies that combine different tokens as collateral and borrowed assets.
Liquidity Providers and Yield Seekers: Users with idle crypto assets can deploy capital into lending pools to earn interest, with the ability to customize risk parameters and choose from various collateral types including NFTs and tokens.
NFT Projects and DeFi Platforms: Projects can integrate Rain.fi's white-label module to offer lending services to their communities, creating additional utility for their NFTs or tokens while earning a share of platform fees.
Real-World Asset Token Holders: Users holding tokenized real-world assets on Solana can use these as collateral to access liquidity, bridging traditional finance with decentralized lending.
Risks to Consider
As with all DeFi protocols, Rain.fi carries smart contract risk. Despite the FYEO audit conducted in June 2023, vulnerabilities could exist in the code that may be exploited by malicious actors. Users should only deposit funds they can afford to lose and understand that smart contracts are not infallible.
Market volatility presents another consideration, particularly for lenders. While Rain.fi doesn't employ automatic liquidations, this means lenders bear the risk of under-collateralized loans if asset prices decline significantly. If a borrower's collateral loses value and they choose not to repay, lenders may receive collateral worth less than the loan amount. Additionally, the platform's focus on NFT lending introduces unique risks related to NFT illiquidity and price volatility.
Platform-specific risks include the relatively nascent nature of the protocol and its concentration on the Solana blockchain. Solana network outages or technical issues could temporarily prevent users from accessing their funds or managing positions. The protocol's tokenomics and long-term sustainability model are still evolving, and the lack of price-based liquidations, while borrower-friendly, creates a different risk profile that lenders must carefully evaluate when deploying capital.
