Ethereum’s new stable RAI hopes to be a savior for the DeFi sector by offering a stable, truly decentralized alternative.
Developed by blockchain startup Reflexer Labs, RAI is not tied to any fiat currency, and its monetary policy is governed by an independent chain-linked controller. This is a fork from Maker’s DAI. RAI co-founder Amin Soleimani explained:
“RAI is an asset supported solely by ETH, a microcosm of control, and programmed to maintain its price stability without being tied to external price targets such as the US dollar.”
Suleimani believes that RAI, which he called “The Money of Money”, has much more potential than just improving the DeFi sector, adding:
“However, our ambitions for RAI are deeper – if RAI achieves its DeFi goal and expands globally, it could prove to be a viable solution to the Triffin Dilemma’s dilemma and provide solid neutrality to manage a stable world of reserve assets.”
The Triffin dilemma consists of the potentially paradoxical incentives that arise when an asset, such as the US dollar, acts as national currency and international reserves.
The asset was announced today on the Ethereum blockchain and is available via Uniswap v2, with the extraction of liquidity mines in the coming weeks. In the face of the strong liquidity run-up, the team admitted that “the observer will be weaker than usual.”
Although stable, it does not correlate with the value of the US dollar and will initially set the RAI rate of return at $ 3.14. The team expects that one option for immediate use of decentralized financing, or DeFi, is one way to avoid liquidation due to strong price fluctuations for Ethereum and other cryptocurrencies.
How is RAI different?
Stable currencies such as Tether (USDT) are centralized currencies and are pegged to the US dollar, while DAI Maker accepts USDC key stable currencies as collateral. This makes real decentralization finance assistants wonder about the possibility of monitoring central coins. RAI only uses ETH as security.
RAI’s ability to maintain a stable price despite fluctuations in the cost of supporting ETH is due to the PID controller, a control loop mechanism similar to the cruise control of a car.
The asset has two prices: the redemption price and the market price. When the market price deviates from the refund price, Ethereum players are determined to counteract the price action by encouraging users to return RAI to the target price.
Soleimani, who is also CEO of the encrypted camera website SpankChain, explained that it “works like a spring: the more the market price of RAI deviates from the target price, the higher the interest rate, the greater the incentive. bring RAI back into balance. ”
Suleimani added that the retracement price, also known as the original target price, does not really matter because “RAI is only interested in relative stability.”
During the test phase conducted during 2020 using Proto RAI tokens, the asset price was able to maintain volatility of 4% or less with an average price of about $ 2. During the same period, the price of ether increased by more than 250%.
Reflexer Labs last week announced a $ 4.14 million round of funding led by Pantera Capital and Lemniscap. This round began with an investment of $ 1.68 million in August 2020 led by Paradigm.