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Reflexer Labs

A decentralized and non-pegged stable asset that defies fiat currencies
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Finance
Blockchain
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Ethereum
Currency
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FLX, RAI
Publisher
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Reflexer Labs
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What is Reflexer Labs?
GEB is a framework for deploying systems that can issue stablecoins. Stablecoins don't look like this (that's a pegged coin), but rather like this. Stablecoins are a great collateral source for other DeFi protocols (compared to ETH or BTC) and are also a store of value with an embedded funding rate.

This documentation is meant to explain all the components behind GEB. Before diving in the docs, we recommend reading our original whitepaper.

GEB is a modified fork of MCD that has several core differences:
Variable names you can actually understand
An autonomous feedback mechanism that changes the incentives of system participants
The possibility to add insurance for SAFEs
Fixed and increasing discount auctions (instead of English auctions) used to sell off collateral
Automatic adjustment of several parameters in the system
A set of contracts that bound control over parameters that are governed in the long run
The possibility to send stability fees at once to multiple addresses
The possibility to switch between surplus auctions and other types of strategies meant to remove surplus from the system
Two prices for each CollateralType: one used for generating debt, the other one used exclusively when liquidating SAFEs
A stability fee treasury that can pay for oracle calls or other contracts that automate the system

Overview
The FLX token has two main functions inside the RAI protocol:
Backstop mechanism: FLX stakers are the first line of defense in case the RAI protocol goes underwater. The second line of defense is with debt auctions that mint new FLX and auction it in exchange for RAI Ungovernance: once governance minimization is finalized, FLX holders will be able to remove control from any remaining components in RAI or, if needed, continue to manage components that may be challenging to ungovern (such as oracles or any other component interacting with other protocols)

RAI Resource Flow
Before the protocol is governance minimized, RAI will be set up so that stability fees (borrow rate charged to Safes that mint RAI) flow in three places:
The stability fee treasury, which is a smart contract in charge with paying for oracle updates or any other contract meant to automate RAI parameters
FLX stakers, which are the first line of defense for the protocol
Buyback and burn, which is meant to auction RAI in exchange for FLX which is subsequently burned In the case of FLX stakers, the RAI that accrues for them is auctioned in exchange for FLX. The FLX proceeds from the auction are then sent to the staking pool.

As for buyback and burn, RAI is first accrued in the protocol's balance sheet. Once there's enough RAI in the balance sheet, the protocol can start to auction some of it in exchange for FLX that is then burned.

Unique Money Markets
If Alice pays 5% per year to borrow RAI from a money market and the RAI redemption rate is -10% per year, she is effectively earning 5% year. This is because of the expectation that RAI's market price will go down by 10% in one year. On the other hand, Bob might be lending RAI at 4% per year, but if the redemption rate is -10%, his net rate is -6%.

There's the other scenario where Bob is lending RAI at 4% per year and the redemption rate is 10% per year. In total, Bob is earning 14% annually on his position (assuming that RAI will appreciate in value by 10% in the next year). Meanwhile, Alice, who's borrowing RAI at 5% per year, is paying a total of 15% (5% as the money market borrow rate plus the expected 10% appreciation in RAI's price over one year).

Stacked Funding Rates
If an exchange or protocol decides to offer RAI perpetuals, they will essentially allow traders to stack funding rates on top of each other.

The redemption rate is similar but not identical to a funding rate. The net funding rate on a RAI perpetual is a combination of the funding rate on the platform/exchange that lists the perpetual and the redemption rate. RAI is the first asset ever created that allows this.
Information
Type
Automated Market Maker
Blockchain
Ethereum
Currency
FLX, $RAI
Platform
Windows, macOS
Publisher
Reflexer Labs
Version
v3
FAQ
Reflexer is a platform where anyone can use their crypto collateral to mint stablecoins. Stablecoins, as opposed to fiat coins, are not pegged to anything, very similar to how the US Dollar is not pegged and it is still considered stable.
RAI is an ETH backed stablecoin with a managed float regime. The RAIUSD 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.

The supply and demand mechanic plays out between two parties: SAFE users (those who generate RAI with their ETH) and RAI holders (those who hold, speculate on or use RAI in other protocols and apps).

Compared to protocols that try to defend a fixed exchange rate between their native stable asset and fiat (DAI/USD, sUSD/USD etc), RAI's monetary policy offers a couple of advantages:

Flexibility: the protocol can devalue or revalue RAI in response to changes in RAI's market price. This process transfers value between SAFE users and RAI holders and incentivizes both parties to bring the market price back to a target chosen by the protocol. The mechanism is similar to countries devaluing or revaluing their currencies in order to combat a trade imbalance. The 'trade imbalance' in RAI's case happens between RAI and SAFE users

Discretion: the protocol itself is free to change the target exchange rate to its own advantage. It can attract or repel capital whenever it wants.
The long term price trajectory of RAI is determined by the demand for ETH leverage. RAI tends to appreciate if SAFE users deleverage and/or RAI users long and it depreciates in case SAFE users leverage and/or RAI users short.
No. The protocol doesn't change the amount of tokens you have. Rather, it changes the target (or redemption) price that the protocol wants RAI to have on the secondary market (on exchanges).
The Reflexer app is free to use. However, you will need to pay transaction fees when you interact with the protocol’s smart contracts and, depending on the features you use, fees associated with RAI itself such as the Stability Fee and/or the Redemption Rate.
The redemption rate is similar, but not identical, to an interest rate. Its role is to devalue or revalue RAI in response to market forces.
The stability fee is an interest rate charged to users who deposit collateral and mint RAI. The fee is used to incentivize external parties to maintain the protocol as well as build a surplus buffer meant to settle bad debt.
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