Most stablecoins have administrators: a team, a governance token, a multisig that can pause the contracts, swap an oracle, or change a collateral parameter. A certain lineage of stablecoins has rejected that design, instead choosing to deploy code that can't be changed and stablecoins that can't be frozen or censored. RAI Dollar (RD) is the newest of these immutable stablecoins, and it fixes specific gaps the earlier ones left open. To understand the gaps, let's start with the previous ungoverned CDP stablecoins.
\nLUSD was the proof that an immutable CDP stablecoin could work. You locked ETH, minted LUSD at a 110% minimum collateral ratio, and the system functioned without admin keys, upgrade paths, or governance. The Stability Pool absorbed liquidations, and anyone could redeem LUSD for a fixed $1 of collateral at any time, a hard price floor.
\nLUSD had no way to steer the cost of borrowing: a one-time fee at mint, then nothing. With no rate to adjust, LUSD couldn't respond to the risk-free rate, so when fiat stables began paying several percent, holders rotated out of zero-yield LUSD. It settled below a dollar, and the only correction left was redemption, grinding against the lowest-collateral troves for months. Borrowers were forced to hold extremely high collateral ratios of 500+% in order to avoid redemption. The protocol simply had no way to adapt to a changing rate market.
\nIn addition to under-peg issues, LUSD's fixed, minimal rate demonstrated the inelasticity of CDP debt to low borrow rates, as it remained over-peg for extended periods. This protracted over-peg state required borrowers to re-buy $1 worth of debt at $1.02, $1.03, etc. when repaying their loan.
\nBOLD improved upon LUSD's design. It added collaterals beyond ETH (wstETH, rETH) and user-set interest rates. Each borrower picks their own rate, which also determines their place in the redemption queue. Paying a higher rate means your trove is less likely to be redeemed against. This created a loose, user-involved feedback loop of low stablecoin prices → redemptions → users raise rates → yield rises → stablecoin price rises. A user manages their rate themselves or pays a 3rd party to manage it. However, a large enough redemption wave can still climb the queue and redeem your trove.
\nBOLD turned redemption into an auction where you bid for an opaque probability of not being redeemed. There is never a guarantee your trove won't be redeemed. Also, BOLD did not provide a resolution for when a single collateral branch produces uncollateralized debt; resolving it requires DAO voting to direct incentives.
\nBOLD mitigates some of the potential over-peg forces, with LSTs offering less opportunity cost for minting and dropping the cost of short-term loans to 7 days of upfront interest charged. However, BOLD did not make major structural changes from LUSD that are meant to address the inelasticity of debt creation to low rates.
\nRAI tackled the part Liquity's floor didn't: actively steering price. The redemption floor is the price where the redeemable value of the stablecoin makes it an attractive buy. In Liquity, the floor defends the coin below a dollar and does nothing above it, and can't adapt as conditions change. RAI adopted the 'governance minimized' ethos and used a PI controller to continuously adjust RAI's redemption price, aka par to lean against price volatility from both sides, making the coin less attractive to hold when the price spiked and more when the price dropped. It worked, and it proved a point:
\nA collateralized stablecoin can be stabilized with an automated par controller.
\nRAI, by design, only guaranteed the market would return to its floating peg, not a fixed $1 price. It was fascinating, but also using a floating price debt instrument was a large mental hurdle for many to overcome.
\nThe lineage has proven three things:
\nYet no single protocol had combined them all for a $1 stablecoin, while also automating borrow rates, addressing undercollateralized debt from a collateral failure and automating the complete incentive pipeline.
\nRAI Dollar is that combination: an immutable CDP stablecoin inspired by Liquity's redemptions and stability pool, steered by a RAI-style par controller, targeting $1, and designed with collateral failure in mind. Further automation of system interest rates removes active management and 3rd party trust, and automation of the fee pipeline keeps the protocol healthy and maximizes revenue to stakers.
\nThe rest of this post walks through each, starting with the main controller.
\nRAI controlled a single knob, the redemption price. RD splits stability across two automatic levers and only turns one at a time. Each answers a failure from the history above.
\nRD's answer to LUSD's fixed fee and BOLD's hand-managed rates is to set one automated system rate which is the basis for all collateral borrow rates. An on-chain PI controller reads a 24-hour TWAP of RD's market price and moves the system-wide borrow rate to hold the peg.
\nThe loop leans about four-and-a-half times harder on the under-peg side (Kp_under = 4.5 × Kp_over), since defending a falling coin is the more urgent job; it's slew-limited to roughly 1%/hour so the rate drifts instead of jumping; and it's bounded to 0.25%–50% APY around a 2% bias. No manual, borrower-managed rates.
The rate handles the everyday tug-of-war. For the rare case where it isn't enough, RD reaches for the thing RAI actually proved: you can move a stablecoin's market price by moving the price the protocol will redeem it at. Shifting the redemption price drags the market to meet it. RAI let its redemption price float wherever its controller pointed, with no target.
\nRD takes the mechanism and keeps it holstered until it's needed. Its internal redemption price, par, sits at exactly $1.00 under normal conditions. Only in a sustained, extreme deviation does the same controller move it (inside a hard $0.75–$1.30 band, no faster than $0.001/hour), and always in the direction that widens redemption arbitrage back toward a dollar.
\nA baton keeps the two levers from fighting: only one is live at a time. Two automatic levers, one fast and one slow, both bounded and both aimed at $1.
\nSwitching modes is not instant: it requires a dwell timer of 24 hours to hand par the baton and 12 hours to hand it back to rate, so a brief spike can't start a mode war.
\nRedemption is what gives RD its price floor, but from the borrower's chair it has a sharp edge. If your trove without Redemption Shield sits near the front of the queue while RD trades below par, redeemers can take some of your collateral and write off an equal amount of your debt. Your ratio barely moves, but your position was partially closed and your collateral reduced on the protocol's timing, not yours.
\nRD turns that exposure into a priced choice. Switch on the redemption shield and your trove is guaranteed not to be redeemed against in normal operation. You pay a surcharge on top of the branch rate, and that surcharge isn't burned: it funds an exactly equal discount to every trove without Redemption Shield on the same branch.
\nWhen the Redemption Shield share is low, protection is nearly free. As that share climbs, it becomes more expensive. Past its 85% kink, the surcharge accelerates and the base discount deepens, as far as −50% APR. A trove's Redemption Shield setting can change at most once per 24 hours, so it's a stance you take, not something easily flipped back and forth to avoid redemption.
\nThe lone exception to Redemption Shield protection is shutdown. A branch being wound down walks troves both with and without Redemption Shield on the same schedule, because all debt needs to be cleared from a shutdown branch. The shield normally prevents redemption; once the branch is settling, troves with Redemption Shield enabled can be redeemed as well.
\nThe Stability Pool is a branch's first defense against collateral price volatility: depositors hold RD, and when a trove is liquidated the pool burns RD equal to its debt and hands depositors the seized collateral, usually at a discount to oracle price. Standard Liquity lineage to here.
\nWhat's different is that a depositor's RD balance grows on its own from fees. A dynamic slice of the branch's borrow interest is routed into the pool and folded straight into each depositor's balance, with no claim, no restake, no separate reward to manage.
\nRD launches on ETH and its liquid-staking derivatives (wstETH, rETH, weETH), BTC (WBTC, tBTC), a yield-bearing stable (sUSDS), and tokenized gold (PAXG).
\nEach collateral is its own branch: its own troves, its own set of contracts (Stability Pool, BorrowerOperations, etc.), its own price feed, its own borrow rate. Collateral borrow rates are determined by branch-level controllers that offset the system rate based on collateral utilization. If a collateral's debt is occupying too much of the global RD supply, the borrow rate is slowly raised. A collateral that is backing too little of global debt will see its borrow rate drop to encourage more minting.
\n\nCollateral shutdown is not an admin or governance decision, but an automatic mechanism whose criteria are fixed in code.
\nA collateral's Total Collateral Ratio (TCR) falls below its Shutdown Collateral Ratio (SCR)
\nA collateral oracle enters a failure state
\nA blacklistable collateral blacklists or wipes the balance of the RD protocol itself
\nIn these cases, anyone can initiate collateral shutdown, removing the collateral branch from the global redemption basket and starting a Dutch auction of that branch's collateral through direct redemption. Pricing opens at a 1% premium and, within the first hour, ramps to a 1% discount; from there discounts ramp up to 5% over the rest of the day for a TCR shutdown, and up to nearly 100% over two weeks for a dead oracle, clearing troves both with and without Redemption Shield until the branch's collateral is gone.
\nRAI Dollar charges continuous, per-second interest to borrower troves. The interest fees are routed by two independent PI loops rather than a brittle, fixed split.
\nStage one lives on each branch's FeeRouter and decides how much of that branch's interest is paid to Stability Pool depositors, the auto-compounding slice above. Stage two is the singleton GlobalFeeRouter, which takes the multi-branch remainder and divides it across LP stakers (a share driven by a PI loop on LP utilization), FEE stakers, and keeper rewards.
SP incentives are tuned per branch because a branch's pool can be thin or flush on its own. LP incentives are tuned globally because there's one canonical market with one liquidity number. The splits move continuously toward wherever the incentive has gone too weak.
\nGlobalFeeRouter, which fans out to keeper rewards, LP staking, and FEE staking. Band widths are illustrative; the actual splits are set by PI controllers within a 10%–60% band. Redemption fees are not shown — they stay with the redeemed trove.Each branch's FeeRouter is a PI controller that measures SP utilization (smoothed by a 72-hour EMA) against the pool's target of 25% of branch debt, sending more interest to a thin pool to attract deposits and less to an oversupplied one. The allocation of the branch's fees is bounded to 10%–60%, with a 50% default and 5% deadband. The pools that most need loss-absorbing capital are automatically the ones paying most to attract it, and the yield lands automatically into RD depositors' positions.
Stage two works similarly, but globally. The GlobalFeeRouter runs a PI controller on LP utilization: the RD Balancer pool's liquidity (a TWAL from the market oracle) over RD total supply, smoothed by a 72-hour EMA and steered toward an 8% target.
When the RD market is thin relative to supply, the controller raises the LP allocation to route a bigger share of the multi-branch remainder to LP stakers and pull liquidity in; when the pool is deep, it lowers it. The share is bounded to 10%–60%, rests at a 50% default near target, and holds still inside a 1% deadband. Deeper RD liquidity means tighter swap slippage, so the protocol buys exactly as much market depth as it needs, and whatever's left flows to FEE stakers.
\nIf a shutdown branch has cleared all collateral from shutdown redemptions but still has debt left, it is deemed undercollateralized. The Aggregator names the undercollateralized branch the bad-debt sink, and the protocol starts diverting fees into it: 50% of the FEE-staker share of interest across the entire system, plus the redemption fees from every healthy branch (which are normally retained, not routed), all flow into the sink branch's payDebt.
LP and SP stakers are never diluted; the diversion falls on FEE stakers, who are the protocol's risk capital by design. There is no MKR-style dilution, no treasury, no vote. The system taxes its own healthy fee flow until the hole is filled, then goes back to normal.
\n\nIf you want to see how the pieces fit, start with What is RAI Dollar and How it stays stable. For the machinery, read the Peg control, Fees, and Collateral shutdown.
", "url": "https://docs.raidollar.tech/blog/introducing-rai-dollar", "title": "RAI Dollar: the immutable $1 stablecoin of DeFi", "summary": "RAI Dollar takes the immutable CDP design from Liquity and the control theory from Reflexer's RAI, and closes their gaps: robust automatic peg defense in all market states, settlement of undercollateralized debt when a collateral fails, and an optimized, closed-loop fee pipeline", "date_modified": "2026-07-21T00:00:00.000Z", "author": { "name": "Bert" }, "tags": [ "Protocol" ] } ] }