RAI – A Low Volatility Trust-Minimized Stablecoin
Decentralized stablecoins have long been regarded as a fundamental building block for the decentralized web. The first ground-breaking project in this area is Maker with their stablecoin DAI. Multiple ideas existed for how Maker should evolve and the path Maker chose was to add multiple types of collateral and rely on governance input to maintain stability. Over time, the vast majority of Maker’s collateral came to be represented by USDC, a centralized stablecoin issued by regulated US institutions.
Rai Reflex Index (RAI) decided to fork Maker and choose a path favoring trust-minimization over faster scaling. Unlike with Maker, only ETH is accepted as collateral and a different mechanism is used to maintain low volatility that doesn’t rely on governance input. We were joined by Reflexer Labs’ co-founder Ameen Soleimani to chat about the philosophical differences to Maker, the mechanisms used to ensure the stability of RAI, the threat of regulatory intervention for DAI and how we can create truly trust-minimized stablecoins to ensure the resilience and neutrality of DeFi.
Topics discussed in the episode
- Ameen’s background and the vision behind Reflexer
- How RAI differs from Maker
- The problem with DAI becoming multi collateral and adding more governance control
- RAI’s stability mechanism
- The function of the redemption price
- Who holds RAI and how stable is it?
- FLX governance
- How decentralized stablecoins can scale
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