The Block: Rari Capital launches a robo advisor for DeFi yield farmers

Decentralized finance (DeFi) users have a new best friend to help them farm yield.

Rari Capital , founded by Jai Bhavnani, Jack Lipstone and David Lucid, hopes to become the go-to robo advisor for users looking to generate the highest return for their deposits.

Prior to starting Rari Capital, Bhavani and Lipstone were working at Ethereum wallet provider MyCrypto. At MyCrypto they noticed an increasing interest among users around DeFi and wanted to build a tool to properly serve that interest.

"The main reason that people are trying to get into DeFi is for these insane yields," Bhavani told The Block. So Bhavani and his two co-founders launched Rari Capital.

Rari Capital's goal is to generate the highest return possible by automatically shifting user-deposited funds through various DeFi protocols. The platform will initially support lending protocols Compound and dYdX with the grander vision of deploying strategies on prediction markets, automated-market makers, insurance platforms and even real estate.

The DeFi robo-advisory space is not without competition, however. Competitors like yEarn and Staked's RAY service offer similar yield optimization products.

Unlike most newly launched DeFi products that attempt to acquire users through token incentives and zero-fee services, Rari Capital is choosing a more unconventional strategy — adding user-friction.

"As with most crypto products, we're in search for product-market fit. We're actually transparent about our search. We don't pretend to show that we have product-market fit as most crypto products do. We're not going to shove token down people's throats and force product-market fit by giving away money," Bhavani explains. "Instead, we're going to add a bunch of friction to the user and see how badly they want to use the product. And that will help us find product-market fit."

The user-friction is seen in the fees Rari Capital charges. While most DeFi products offer feeless services and unlimited deposits, Rari Capital charges a 20% performance fee and limits current deposits to $350.

"We could remove the fee...but for the time being, we want to leave it there to see how desperately users want to use our product," Bhavani says.