Add Market: RAI Reflex Index

With all of the talks of regulation, specifically, stablecoin regulation, I believe it is time to start supporting stablecoins that are not pegged to the USD.

USD-backed stablecoins have great centralization risks. While they provide great utility in terms of liquidity and while they fuel the growth of the ecosystem, the US government has an awful lot of power over them. Additionally, they have larger attack surfaces with owner accounts being able to mint, freeze, transfer, or burn the stablecoins their contracts control (depending on the stablecoin).

While DAI is a great stablecoin without the centralization concerns of fiat-backed stablecoins, it has two primary drawbacks.

  1. It’s pegged to the USD and the US government may try to regulate it because of this.
  2. It’s unable to use negative interest rates as a tool to stabilize its price.

This is where Rai Reflex Index comes in. It is backed solely by ETH and it utilizes positive and negative interest rates to keep the price stable. Furthermore, it uses a PID controller to stabilize the price. For those of you who don’t know what that is, it’s the same integral-calculus-based mechanism cars use to ensure that all the tires provide the same velocity, ensuring the car always goes straight forward when the wheels are pointed straight. PID controllers are very effective at providing stabilization.

With a trading volume of only $5M and a TVL of only $96M, the PID controller is doing an excellent job of stabilizing the price of RAI - currently floating around $3.

Adding RAI to Compound will give it greater strength and legitimacy. The more people using RAI and the more liquidity of RAI within common DeFi protocols, the more stable its price will be.

Furthermore, adding RAI to Compound will help in reducing centralization risks of USD-backed stablecoins, giving users an alternative in addition to DAI.

While RAI’s controller is currently controlled by a multi-sig, there are plans in motion to drastically minimize governance.

Let’s get the discussion going!

Links:

3 Likes

Thanks Tyler for posting this!

I wanted to mention that Reflexer is aware RAI is still in its infancy and adding it to any new market means it will need to have a 0% collateral factor.

2 Likes

I think this could be a great inclusion and not too much risk with a zero CF.

3 Likes

I am totally for this! Reflexer is great asset to reduce the risk of stabelcoin regulation. The PID theory is a proven one.

DAI is these day backed by 60% USDC. What if regulators demanded that Circle blacklisting USDC inside collateral DAI.

So we must adopt to very quickly changing environment.

1 Like

Supportive of adding RAI as a decentralized non-pegged stable asset! More decentralized stablecoins on Compound will help reduce regulatory risk throughout the DeFi ecosystem and provide more liquidity and optionality for users

2 Likes

Don’t think RAI has the maturity to be considered at the moment. Just my thought

Don’t think RAI has the maturity to be considered

What kind of risk does immaturity bring?

Is there high liquidation risk for users?

And, what risks would not be solved by a 0% collateral factor?
Is there a brand risk?
Does it add any regulatory risk?

It looks like the price oracle provider Chainlink doesn’t have an oracle set up for Rai.

So there may need to be some work with Chainlink to set one up.

Here it is: https://data.chain.link/ethereum/mainnet/crypto-eth/rai-eth

Note: That website is using the wrong logo but the price feed is for RAI Reflex Index.

1 Like