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How it stays stable

RD targets $1. The protocol's job is to keep RD's market price close to $1, and it has three mechanisms to do that.

1. Redemption is the price floor​

Anyone holding RD can exchange it for collateral at $1, minus a small fee. So whenever RD trades below $1 on the open market, an arbitrageur can buy RD cheap, redeem at $1, and pocket the spread, which pushes RD back up.

This is the everyday mechanism. It does not require the protocol to do anything; it requires only that someone, somewhere, is willing to take the trade. See Redemption.

2. Interest rates adapt​

Independent of redemption, a controller adjusts the system-wide borrow rate based on RD's market price. Both the borrower side and the holder side respond:

  • RD trading above $1. The controller lowers the borrow rate. On the borrower side, cheaper borrowing brings new borrowers in to mint fresh RD and sell it, which expands supply. On the holder side, a lower rate flows through to less RD entering the Stability Pool as interest, so SP yield drops and holding RD looks less attractive, which softens demand. Supply up, demand down, price falls toward $1.
  • RD trading below $1. The controller raises the borrow rate. On the borrower side, carrying debt becomes expensive, so borrowers repay (buying RD off the market), which contracts supply. On the holder side, the higher rate flows through to more RD entering the SP, lifting SP yield and making holding RD more attractive, which increases demand. Supply down, demand up, price rises toward $1.

The rate moves slowly. The controller's job is to dampen pressure smoothly, not whipsaw rates. Borrowers feel this as gradual changes in APR, not sudden shocks. See Borrow rates.

The "market price" the controller reads is a TWAP of the median RD/USD price from a curated Balancer pool, not a spot price from any single venue. See The RD Balancer pool for how the price is constructed and why it can't be manipulated in a single block.

3. Par​

The protocol has a third mechanism for the rare case when redemption and adaptive rates aren't enough on their own: an internal price called par.

Almost always, par is exactly $1.00. Under sustained stress the controller can adjust par within a bounded range of $0.85 to $1.20 to make redemption arbitrage more attractive, which widens the redeemer's spread per RD and accelerates the closing of the imbalance. Par cannot move faster than $0.001 per hour, and the adjustment is gated by dwell timers so it can't fire on short-lived noise.

For most users, most of the time, par is just $1. The detail lives at Peg & PI controller and How RD stays near $1.

And alongside the three: the Stability Pool​

The Stability Pool is a solvency mechanism rather than a price mechanism, but it also produces a meaningful demand effect on RD that's worth noting alongside the three.

Each branch has a Stability Pool. Depositors hold RD in it. When a trove is liquidated, the pool auto-liquidates the debt: it burns RD equal to the trove's debt and absorbs the collateral, paying depositors a slight discount-to-oracle spread on the collateral they receive.

Without the pool, the only way to clear a bad trove would be for an external buyer to acquire RD on the open market and then call liquidate. That arbitrage profit motive translates directly into market-buying pressure on RD, lifting the price every time the system has bad debt to clear. The Stability Pool captures that profit motive internally: depositors are already holding RD, ready to absorb. So the system runs with a standing buffer of RD demand, instead of pushing each round of bad-debt clearance through the open market.

If a pool is empty, liquidations fall back to redistributing the bad trove across remaining troves on the same branch. See Stability Pool and Liquidation paths.

Where to dig deeper​