The Upside of Un-pegged CurrenciesAug 19, 2021
RAI by Reflexer has been gaining traction as concerns of centralized stablecoin reserves like Tether being revealed to only have 2.9% of reserves in Cash and 49.6% in Commercial Papers, an unsecured short-term debt. This means the risk of holding Tether may be higher than the market perceives. Regulators too have been starting to discuss regulating stablecoins and may categorize them as a security, commodity or derivatives that will be subjected to their respective laws.
Investors now look for an alternate stable asset as even DAI, a ‘decentralized’ stablecoin has ~63% exposure to USDC. RAI tries to fill the decentralized stablecoin gap through the use of only ETH as collateral.
RAI is a non-pegged stablecoin backed by ETH with a managed float regime, which tries to stabilize its price through constant devalue or re-valuing of redemption price. To keep the price of RAI/USD stable, it relies on arbitrageurs to take advantage of RAI’s market price difference and its redemption rates.