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.

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.

Anyone can redeem 1 RD for $1 of collateral (the multi-collateral basket priced at par), minus the fee. So whenever RD trades below that, buying the discount and redeeming is free profit — arbitrage buying lifts it back. That sets a floor at roughly par − fee. There is no matching ceiling; above-peg pressure is the interest rate's job.

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.

One system-wide borrow rate, set by the market price. Below $1 the controller raises the rate — borrowers repay (supply down) and richer Stability-Pool yield draws holders in (demand up). Above $1 it lowers the rate and the mirror image plays out. The rate rides its 2% bias at par and moves slowly, bounded to 0.25%–50% APY.

Last Resort: Par Adapts

For the rare case when redemption and adaptive rates aren't enough on their own, the protocol keeps one last lever in reserve: 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 $0.75 to $1.30 to make redemption arbitrage more attractive, which widens the redeemer's spread per RD and accelerates the closing of the imbalance.

For in-depth details, visit Peg control and How RD stays near $1.

Par is the slow lever. Until a deviation leaves the ±1.0% band and persists for 24 hours, par simply holds at $1.00. Under sustained below-$1 pressure par climbs, richening redemption arbitrage; sustained above-$1 pressure eases it back down. Par never moves faster than $0.001 per hour and stays inside $0.75–$1.30.

Redemption settles at par, so the redemption floor sits a fixed fee below it: floor = par − fee. As the controller nudges par up and down over time, the floor tracks it, staying one fee lower the whole way. Par itself only moves in the bounded $0.75–$1.30 range, at most $0.001/hour.

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 liquidatedtrove 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 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 liquidated debt clearance through the open market.

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

Where to dig deeper

• Redemption and Redemption mechanism for the price floor in detail.
• Borrow rates and Interest model for how the adaptive rate works.
• Peg control for the full controller, including par.
• The RD Balancer pool for how the controller's market price is constructed.