Could the "stable volatility asset" RAI created by Reflexer Labs be the perfect collateral?

Editor's Note: This article comes fromChain News ChainNews (ID: chainnewscom), by Donnager, published with permission.

Editor's Note: This article comes from

Chain News ChainNews (ID: chainnewscom)

Chain News ChainNews (ID: chainnewscom)

Reflexer Labs, co-founded by Ethereum community veteran Ameen Soleimani, has secured a $1.68 million seed round led by Paradigm for its low-volatility collateralized infrastructure project RAI, with participation from Standard Crypto, Compound founder Robert Variant Fund, a new crypto VC firm founded by Leshner and former a16z partner Jesse Walden.

The project was first made public in early February of this year, and Ameen Soleimani announced the full details in the Ethereum Research Forum. At that time, the project was called MetaCoin. The main feature of this decentralized stablecoin solution is minimal governance, because Soleimani believes that the current MakerDAO system is too complicated and may cause a single point of failure.

In May, MetaCartel Ventures, a decentralized autonomous investment institution, announced its investment in MetaCoin. At the same time, it also disclosed that the team name was Reflexer Labs. This was the first investment of the investment institution, but the specific amount was not disclosed. MetaCartel Ventures stated that they believe that DeFi needs stablecoins that are resilient, secure, and have minimal governance, and Reflex Bonds (reflective bonds) are the first step towards this vision.

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How DAI Ensures Price Stability

The current decentralized stablecoin DAI project Maker is to mint a stablecoin DAI anchored to the value of the US dollar by mortgaging the native asset ETH of the Ethereum network and several other types of assets. However, due to the large fluctuations in the value of ETH itself, the Maker protocol has set up many corresponding mechanisms to reduce the volatility of DAI prices. Especially when the price of ETH drops sharply, the liquidation auction process will start.

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ETH->RAI does not call itself a stable currency, but a solution to reduce or delay asset volatility, so as to provide other DeFi protocols with such low-volatility assets as the underlying underlying assets. Stefan Ionescu, another co-founder of Reflexer Labs, made an analogy: "You can think of RAI, a system that can create bonds, as a "washing machine", but it is not used to wash clothes, but to temporarily "wash out" Collateral is volatile.”

Because of the above attributes, they believe that the reflective bond RAI can better take on the role of stablecoin collateral, especially compared to high-volatility assets such as ETH, the overall risk exposure of the system will thus be improved. Better control.

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Remove volatility -> provide for other protocols

What else is RAI good for?

Reflexer Labs is creating a new asset rai (RAI) that slowly tracks the price of Ethereum, providing DeFi with a price-stable and decentralized collateral asset. The generation of RAI is very similar to dai (DAI), that is, users mortgage ETH to the system. Reflexer's product will use oracles to track the price of RAI and ETH. If the RAI does not match the target price, the system can fine-tune the amount of RAI needed to repay the debt.

The essential reason why RAI can reduce asset volatility is that reflective bonds do not have a fixed redemption price, unlike DAI. The redemption price of DAI is pegged at $1, no matter what premium or discount there is for DAI in the market, DAI is considered to be $1 in the system. The redemption price of RAI is not fixed. Through some feedback and buffer mechanisms set by this system, the redemption price of RAI will be adjusted with low volatility according to the value of the collateral.

• Therefore, after reducing volatility, RAI can also be used as a hedging mechanism to partially hedge the risk of market decline.

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• Is RAI trustless?

• In order to realize the trustless system of RAI, it actually needs many parts, including:

• A reliable oracle system that continuously provides price data for bonds and collateral;

an interest rate setter that changes the redemption rate;