This blog post was produced from a transcript of our live AMA with Stefan from Reflexer. To participate in future AMAs, please join our Discord and follow us on Twitter.

Can you tell us a bit about yourself and how you came to be involved with Reflexer?

I’ve been in the Ethereum ecosystem since late 2017 when everyone was printing ICO money around me and I had no idea what was happening. I spent my time on scaling solutions and fintech + Ethereum apps until late 2019.

At that point I got the chance to enroll for a Binance X grant where I could research stablecoins. I started to dive into Maker & DAI, did that for about 6 months until Black Thursday hit and realized DAI is still missing a component that’s been pretty much forgotten for years.

That component is the PI/D controller that makes RAI, Reflexer’s stablecoin, special.

Right after Black Thursday I met Ameen over Telegram. He introduced me to Nikolai Mushegian who used to be lead tech dev at Maker and that’s how it all started

Can you give a brief intro to RAI for those who are unfamiliar with it?

RAI is a real stablecoin that’s only backed by ETH. I say real because other “stablecoins” on the market are simply pegged assets. Don’t know when or why crypto people suddenly gave a new name to that asset class.

RAI has 2 types of actors: minters and holders. This is very similar to DAI where you put ETH in the protocol and mint DAI. Instead of having a fixed target price (peg), RAI’s target is always fluctuating. It does this using a funding rate (a term borrowed from perpetual swaps). 

If the RAI market price on Uniswap is below the current target price:

The funding rate is positive and this makes the RAI target go up. A positive funding rate means that value is transferred from RAI minters to RAI holders. This is because each RAI borrowed by minters becomes more expensive inside the protocol (because target go up) and more expensive debt costs more to repay.

If the RAI market price on Uniswap is above the current target price:

The opposite happens. In this case the funding rate is negative, meaning that RAI holders lose value (they expect the RAI market price to fall and go to the target) and RAI minters can enjoy cheaper debt (the value of one unit of RAI debt becomes cheaper).

This game of moving the target price and changing the incentives of minters and holders makes RAI stable. When debt becomes more expensive for minters, they are compelled to repay some of it. This means they burn RAI supply.

On the other hand when debt becomes cheaper, it’s more convenient to mint more or wait until later to repay. This means the RAI supply may expand, which is what’s needed when the RAI market price is above the target: people have to sell RAI.

What about the Negative Funding Rate?

It’s what’s missing in Maker and all other pegged coins. It’s also why many pegged coins today choose to be backed by USDC. You’re suddenly so stable – no more being traded above the peg for months like what happened in 2020 with DAI following Black Thursday.

In a few words, explain the advantages of this stablecoin model against the pegged model?

There are a couple of ways to explain this:

  1. We can automate and remove governance from the system. There won’t be USDC involved so no custodial risk for you.
  2. Similar to perpetuals, you can play the funding rate game and capture the transfer of value.
  3. If the market is imbalanced (price above/below target), you know there’s the funding rate that puts a price on keeping the imbalance, which is good if you want more certainty that the price will return to target.

Depending on who you are, you can pick your favorite explanation.

A close friend of mine once said: “RAI’s stablecoin model is brilliant, but I think the world is not ready for it yet.” What are your plans to help reduce the psychological barrier for adopting a non-pegged stablecoin?

Videos and me going on more AMAs like this one and being persistent.

A couple of months ago I really had to face the question of why do I continue with this instead of going to my old days of being a degen. It’s because I think it’s important.

To that end I’m happy that we started to open-source our research. Whatever happens with RAI, someone can pick up the material and improve it.. We will have a short and sweet video explainer about RAI coming in October.

One more thing: We take a lot of criticism that RAI “doesn’t scale” or that “supply isn’t high enough” but if you’re objective and look at what RAI did in the last 7 months vs many other pegged coin systems, I think we’re in a very good position.


More teams should seek to do something for the world/Ethereum community instead of token schemes meant only for number go up. I know too many rich people who regret that they only focused on money their entire lives

You mentioned earlier having some exciting news and integrations, can you share any of those?


  • I think it’s important to make RAI a proper currency so we’re talking with teams like Eidoo to get RAI on their crypto debit card.
  • We had a community member adapt the Curve v1 code so it works with RAI and now we want to post a proposal to see what the Curve team thinks about a RAI Metapool. 
  • Besides Curve, we’re also waiting for the same community member to adapt the mStable code.
  • We’ll soon bridge RAI to Arbitrum and we’re also looking at Avalanche. 
  • Lastly, we’re talking with Opolis so they add RAI as an option for people to get paid with on a recurring basis.

How do you plan to keep RAI stable across L2s? Is that not an issue now that Arbitrum and others are gaining traction?

That’s a tough one. To a certain extent we can rely on the funding rate mechanism to do its job which is working fairly well now that we have RAI on Polygon. On the other hand we will most probably have to look at solutions like Hop protocol to allow people to quickly swap between L2s and L1.

In short, it’s an ongoing effort.

How can people get involved with Reflexer community so they can be part of this exciting roadmap?