What are the competitive advantages of RAI Finance as a Polkadot Ecosystem?
While RAI Finance uses Polkadot’s cross-chain technology to solve scalability and performance issues, it also creates new products such as AMM and order book two-way interactive DEX and cross-chain asset transactions.
Written by: Dexter
The 100,000 USDT quota was sold out within 1 minute. South Korea’s first Polkadot ecological project, RAI Finance, held its first round of public offerings on January 13th, which attracted a lot of attention from the market and reflected the fact that cryptocurrency investors have just entered the global market value of RAI Finance. The fourth is Polkadot’s eager anticipation of the DeFi protocol prospects.
In the twelve years since the birth of Bitcoin, the blockchain industry has been questioned. The outbreak of DeFi last summer seems to have finally brought enough attractive application scenarios for this emerging technology. While the Bitcoin price achieved a historic breakthrough, the entire cryptocurrency market also ushered in a new round of bull market. Bitcoin, Ethernet Square, and other low Polkadot chains in public to attract more outside funding, performance upgrades, driven by the evolution of interoperability to strengthen innovation and so on, will get rapid development. The industry is also expected to usher in a more diverse, more energy change.
In this context, RAI Finance chose to combine with Polkadot’s cross-chain technology to establish a DeFi-based digital asset trading protocol and platform and provide liquidity to the distributed financial ecosystem. It has received strategic investments from blockchain investment institutions NGC Ventures, and Alphabit.
Why choose Polkadot instead of Ethereum?
Why did RAI Finance not choose Ethereum, where the current DeFi protocol products are concentrated, but Polkadot, known as the “Ethereum Killer” in the industry? Minkyu Cho, RAI Finance development team member, said in an interview that it is mainly because they believe that the Ethereum DeFi project has four difficult to solve pain points:
- Scalability and cost: The lack of scalability and high transaction costs of the Ethereum network have become the biggest pain point for current DeFi users. Minkyu Cho believes that Ethereum 2.0 may not be the correct solution for network overload transfer fees (Gas). Although Vitalik Buterin emphasized the use of Layer 2 to improve scalability, not only does it technically require a lot of time to update the network, it is also expected to take more time to activate the network. Considering that each update takes at least 6 months, it takes more than a year to upgrade the network and widely use it.
- Speed and stability: In a decentralized transaction, the token itself must be bound to a smart contract. Even if the structure and code are complete, it is difficult to guarantee the transaction's real-time performance due to the delay of block creation and confirmation time. Also, when the DeFi service runs on the blockchain, block synchronization may become a problem, and sometimes the node is disconnected due to network problems. According to Minkyu Cho’s decentralized service operation experience in the past two years, lit is not as easy to operate as a stable node as imagined.
- Liquidity: The current demand for DeFi mainly comes from the flow of tokens for initial issuance projects and arbitrage transactions with existing trading platforms. As far as the first token circulation is concerned, even for DEX like Uniswap, it is difficult for many project teams to promote their projects, attract many users, and generate token demand. Second, arbitrage trading requires minimal risks.
- Continuous supply of potential products: Since the current Ethereum-based DeFi has been developed for many years, it isn't easy to distinguish new projects from existing projects. Even for loan products that provide high-interest rates, once the relative advantage of profitability (called Beta) disappears, it is not easy to continue to provide higher interest rates. To solve these problems, we need new options to expand the DeFi market and liquidity, not only based on Ethereum but also on other platforms, and find new Beta.
- Minkyu Cho believes that Polkadot is an excellent underlying public chain platform and ecosystem. Its biggest advantage is that it solves the most pressing interoperability problem faced by blockchains-each blockchain. Independent Data islands make it almost impossible to use the information owned by other networks. Polkadot eliminates these concerns by integrating various proprietary technologies and transmits information, data, and value between different blockchains.
Besides, Polkadot has entered a new era of scalability, interoperability, and security. Polkadot's flexible and adaptive Substrate framework helps developers develop next-generation applications and can use cross-chain data. The application of Polkadot technology in the DeFi field can expand the liquidity of multiple blockchains and improve asset access, liquidity and innovation. This is why Polkadot attracted the core team to develop RAI Finance.
Four innovations connect different blockchains
The naming of RAI Finance is inspired by Rai Stone, the ancient stone currency of Yap Island in Micronesia. It is hoped that this DeFi protocol built on Polkadot can connect various digital assets in different blockchains supported by Polkadot.
According to the roadmap, after RAI Finance completed the public offering, its products will be announced in the first and second quarters of 2021. However, at the beginning of the design, RAI Finance established the following four technological product innovations:
- Two-way interactive product platform: RAI Finance plans to provide digital asset users with greater freedom. Based on the order book, DEX is slow but very accurate in trading, while AMM (automatic market maker) is too simplified but fast. Given these pros and cons, RAI Finance will develop AMM and DEX products simultaneously and integrate the two products, and complete two-way interaction in the future so that users can enjoy the benefits of the order book and AMM transactions.
- Secure off-chain transactions: RAI Finance improves the scalability of automated market-making and revenue strategies through secure off-chain transactions. Using zero-knowledge proofs for trustless computing and the use of cryptographic accumulators for immutable data storage can provide a layer 2 solution that supports scalability, transparency, and privacy in transactions. Currently, Bellman based on Rust is being used Library and Groth16 set up the system for development.
- Cross-chain asset capabilities: To reach a wider range of asset types, RAI Finance will be launched on the parachain and integrated into the Polkadot ecosystem. This allows the protocol to increase the number of assets supported by leveraging the Polkadot relay chain's cross-chain compatibility.
- Designed to support unique assets: RAI Finance aims to support the creation of unique assets that do not currently exist in the liquidity pool. These include but are not limited to tokenized trading strategies, digital asset mining strategies, and investment strategies.
- RAI Finance uses Polkadot to solve scalability and performance issues, and business issues. For example, various AMM methods to solve liquidity problems, to find the best solution. RAI Finance is trying to apply and improve various algorithms of CFMM (Constant Function Market Makers) or LMSR (Logarithmic Market Scoring Rule).
Team exchange experience becomes RAI Finance’s core competitiveness
The core team members of RAI Finance have all worked in the crypto industry for more than 3 years and have gone through a complete market cycle. Before founding RAI Finance, they all established and operated Layer 1 Protocol, a decentralized exchange, and a public chain, the industry’s top consulting company.
The projects similar to RAI Finance in the Polkadot ecosystem are Zenlink, Polkastarter, and Polkadex. However, although most competitors provide one-way interfaces, RAI Finance focuses on providing both AMM Swap and order books to increase end-users' benefits, which is a point of difference.
After establishing RAI Finance, Wizpace, the technology partner of DEXEOS and League of Traders, has now become a technology partner of RAI Finance. With previous experience, Social Trading, which is becoming more and more popular with users, has also been introduced into RAI Finance’s product portfolio.
On centralized trading platforms such as eToro, social trading is prevalent. It integrates communities where specific assets and markets are traded and learned. It provides a channel for amateur traders, allowing them to trade stocks, precious metals, and even cryptocurrencies like more professional traders. In the DeFi field, Set Protocol has also launched similar products, but unlike eToro, Set Protocol allows traders to follow the most popular cryptocurrency investors in a non-custodial manner.
RAI Finance plans to launch social trading in the fourth quarter of 2021. Users will be able to certify traders' activities, which can be withdrawn or exchanged for legal tender or other cryptocurrencies. Also, users and traders can pledge RAI Finance’s native token RAI to show their confidence in a particular strategy.
Minkyu Cho, RAI Finance development team member, said that various innovative financial products would be provided for users to choose from in the future, including tokenized arbitrage and NFTs (non-homogeneous tokens). It is challenging to develop cross-link access and liquidity between heterogeneous blockchains, and it will be a long journey. However, RAI Finance will continue to develop on Polkadot to provide optimal liquidity for various assets in the future.
RAI Finance team stated that RAI Finance has started to develop in a different blockchain language, including code libraries written in Solidity and c++, and is currently discussing with potential partners how to bridge these code libraries naturally. On Substrate. The team is also closely observing the hot market's expectations before the Polkadot slot auction. DOT has accumulated more than 20% of funds in the current fundraising stage. Therefore, considering the future parachain crowdfunding and other alternatives (integration into Kusama, as Parathread integration, integration with other parachains that have previously won slots), there will be challenges to the upcoming processes and challenges of the Polkadot ecosystem in the future. Sufficient ability to cope.
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About RAI Finance
RAI Finance is a protocol designed to provide DeFi with a wider range of assets, a higher amount of liquidity, and a diverse set of financial use cases. When this feature set is combined with the Polkadot ecosystem's cross-chain compatibility, it eliminates fragmentation across the existing DeFi ecosystem by bringing a complement of new assets and a higher amount of liquidity to decentralized finance.