Let’s Get HAI: A New Milestone in Stablecoin Innovation

The cryptoverse welcomes a new addition to the pantheon of money gods — HAI, pronounced “high.”

Launched on June 9th, HAI is a fresh force, set to redefine the dynamics of stablecoin architecture in Decentralized Finance (DeFi).

TL;DR

• HAI is an over-collateralized CDP-minted stablecoin
• HAI uses a PID controller to induce stability (like RAI!)
• HAI will likely have a diverse collateral base including LSDs and other DeFi-native tokens
• HAI is launching on Optimism’s L2, so expect everything to be faster and cheaper

HAI and Collateralized Debt Positions

HAI adopts a mechanism familiar to stablecoin protocols; it is minted from over-collateralized debt positions (CDPs). In essence, every HAI token in circulation corresponds to a greater amount of collateral locked by individual protocol users, also known as “minters”. These minters can generate or annihilate HAI, depending on their collateral’s value. This approach aligns with systems employed by other cryptocurrencies like DAI, RAI and many others.

Go With the Flow: Innovating with Control-Theory

HAI utilizes control-theory, a concept pioneered on-chain by the Reflexer Finance team, to dynamically adjust the protocol’s pricing of HAI. Stablecoin protocols such as MakerDAO have shown relative success in keeping their debt token, DAI, pegged to one USD. However, they’ve experienced shortcomings, as seen in 2020 when DAI’s market value exceeded one USD due to market forces and protocol structural issues.

In response to these challenges, DAI opted to accept new types of collateral, such as USDC, to enhance efficiency. This decision introduced new risks and fragility into the system, which many have derided as untenable (e.g,. USDC is centralized and has black-list abilities).

Reflexer Finance took a different approach by introducing a Proportional-Integral-Derivative (PID) controller that autonomously adjusts the protocol price of their debt token, RAI. This adjustment allowed for unique incentives to “close the gap” without introducing undesirable/centralized collaterals.

Get HAI with Frens: The Advantages of Diverse Collateral

HAI goes a step further than its precursor, RAI, by enabling (and encouraging!) minters to use a diverse array of collaterals. HAI pays homage to RAI as its spiritual predecessor through the use of a PID controller, but the advent of Ethereum liquid staking derivatives (LSDs) has altered the dynamics of Ethereum capital deployment. A decentralized stablecoin that accepts diverse collateral types is inevitable.

As LSDs become less risky, their substitution or fungibility with other LSDs (and Ether itself) will drive demand for collateralization. The rise of popular LSDs across DeFi protocols already showcases this adoption trend. Moreover, as DeFi matures, many projects have established themselves as blue-chip protocols, earning them the right to be recognized as suitable collateral for HAI (e.g., UNI, OP, etc.). However, the final decision regarding supported HAI collaterals will always be dictated by governance.

Get HAI Fast and Cheap: Optimism Labs’ L2 Scaling Solution

HAI is taking a significant leap by launching on Optimism Labs’ advanced Layer 2 (L2) scaling solution. This strategic move offers numerous benefits, including high speeds, low transaction costs, and increased efficiencies.

For users, these advantages translate to significantly reduced “protocol friction.” They’ll enjoy lower minimum debt limits, lower costs to add or remove collateral, lower expenses to mint or burn debt, and an easier experience using HAI in smaller amounts across platforms.

For the protocol itself, the reduced costs will lead to lower protocol expenses (e.g., keepers), and a decrease in the requirement for market participants to induce system stability. In simple terms, actions that were neither profitable nor unprofitable on Layer 1, such as closing a $0.01 spread in prices, are likely to become profitable on Layer 2.

With these unique features and strategic enhancements, HAI is positioning itself as an innovative player in the DeFi space. As the landscape of decentralized finance continues to evolve, it’s exciting to see how HAI will shape its trajectory and push towards the future of sovereign finance humanity deserves.

HAI is currently on Testnet on Goerli Optimism!

Stop by our site to test it out, and join our Discord if you need any help.

Website: https://letsgethai.com/

Discord: https://discord.gg/W9cKcN9zzV

Twitter: https://twitter.com/letsgethai?s=20