TLDR
- mStable launches new mUSD/RAI Feeder Pool with a non US dollar pegged asset
- RAI is a decentralised and permissionless stable asset that is not pegged to the US dollar
- MTA rewards start on 6th December and will be capped for the first few weeks to roll out this pool gradually
We are excited to announce the launch of our new mUSD/RAI Feeder Pool. A Feeder Pool is mStable’s Stableswap AMM that is paired with one of our assets such as mUSD and allows for efficient swaps to and from our products (see recap below).
This Feeder Pool is no ordinary Feeder Pool though because RAI is a non US dollar pegged asset. The smart contract has been adjusted to handle Stableswap functionality with one asset having a different price from 1 USD. This new Feeder Pool contract paves the way for other Assets being used on mStable in the future.
This Feeder Pool launches in a guarded manner. MTA rewards start on 6th December and will be capped to 1000 MTA for the first week. Afterwards MTA stakers will be able to vote on the appropriate MTA reward allocation. The deployed Vault supports also rewards with a second token. Reflexer Labs is free to add their own token, FLX, to the Vault to distribute to Liquidity Providers at any point.
What is RAI?
RAI is an ETH backed stable asset. Similar to MakerDAO’s DAI, you can take out a loan against your ETH at a low interest rate and mint RAI. Rather than being pegged to the US dollar like DAI, RAI is pegged to itself. Unlike MakerDAO, RAI is not pegged to the US dollar, rather it’s pegged to itself. At launch, RAI price was set to $3.14 (first digits of π) and trades currently around ~$3.02. The RAI to USD exchange rate is determined by supply and demand while the protocol that issues RAI tries to stabilize its price by constantly de or revaluing it. Read more here
New Feeder Pool contract for non pegged assets
As outlined previously, RAI is no ordinary USD pegged stablecoin. It is a stablecoin that is pegged to itself. Thus, a custom contract was written (funded by a Gitcoin grant) to facilitate its use in a Feeder Pool. This contract supports one asset that is not similarly priced to the other. That means that this could potentially open the possibility for even more assets in a Feeder Pool. Under the hood, it works by updating the price of RAI from the Reflexer Labs contract and uses this price to compute the exchange rate with the amounts in the pool. Beware that because the price of one asset can change, compared to USD, some impermanent loss is possible. However, because the price of RAI does not appreciate or depreciate significantly over the long term, this effect is minor.
A recap on Feeder Pools
To recap, Feeder Pools are composed of a pegged asset (RAI, FEI, GUSD, BUSD, tBTC) and a corresponding mAsset (mUSD, mBTC) in a 50/50 ratio. Their purpose is to serve as an efficient bridge to the main mAsset pool. This provides more opportunities for Liquidity Providers to earn MTA rewards and trading fees.
By contributing liquidity to a Feeder Pool, the liquidity provider will receive:
- Swap fees into and from the basket assets included in that Feeder Pool
- MTA rewards
- Possible interest from lending out Feeder Pool assets (this integration can be deployed in the future)
- Possible liquidity rewards from project’s that wish to incentivise their own stablecoin on mStable
Feeder Pools are separate contracts from the mUSD pool and do not impact its risk profile. This means that any pegged asset can be added without impacting the integrity of mUSD.
Conclusion
Adding RAI to our Feeder Pool is a great addition to the mStable ecosystem since RAI is a fully decentralised asset that is fully backed by ETH. In addition, this Feeder Pool represents the first asset pair at mStable that trades a non pegged asset with a pegged one. This new design open up new asset possibilities for the future.
This collaboration, and the AMA we held with the Reflexer Labs team, tightened the partnership between our projects. Both Teams are aligned to their mission for a more decentralised ecosystem. We are happy to continue collaborating closely with Reflexer Labs in the future.
Get started and add liquidity here.
