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How RD stays near $1

RD aims to trade near $1. Its market price can still move above or below that target. The protocol uses three mechanisms that give people reasons to bring it back; none promises an instant or guaranteed $1 sale.

Redemptionsupports RD when lowBorrow rateresponds to market priceParbackstop for lasting stress
Three different mechanisms support one target: RD near $1.

Redemption supports RD when its price is low​

An RD holder can redeem RD for a basket of collateral. The collateral is valued using the protocol's internal price, called par (normally $1), with fees deducted. If RD trades at a large enough discount, buying RD to redeem it may be profitable. That buying creates demand for RD, while redemption removes RD from circulation.

parredemptionfloor≈ par − feemarket pricearbitrage buys the discountRD market price over time →
The green line approximates redemption value after fees, shown with par at $1. When RD trades below that value, buying RD to redeem it can support its market price. This is an incentive, not a guaranteed hard floor: redemption limits and market conditions matter.

Redemption is unavailable during the first 14 days after launch and is subject to a quota and other conditions. See Redemption for what a holder receives and when.

The borrow rate responds to market price​

When RD trades below $1, the protocol can raise the borrow rate. This encourages borrowers to repay RD and can increase RD interest earned by Stability Pool depositors. When RD trades above $1, a lower rate makes new borrowing more attractive and reduces interest flowing to Stability Pools. That can increase RD supply while making RD less attractive to hold for yield.

RD above $1Controller lowers the rateSupply ↑cheaper borrowingmore RD minted & soldDemand ↓thinner SP yieldless reason to hold RDdownward price pressureRD below $1Controller raises the rateSupply ↓costly to carry debtborrowers repay, buying RDDemand ↑richer SP yieldmore reason to hold RDupward price pressure
In its usual rate-response mode, the controller can affect both supply and demand. Above $1, a lower rate can encourage borrowing and reduce Stability-Pool yield. Below $1, a higher rate can encourage repayment and increase that yield. These are pressures toward $1, not guaranteed price moves.

The rate changes gradually, using market readings from the RD trading pools. Borrowers should expect their rate to vary over time; see Borrow rates.

Par is a backstop for lasting stress​

Par is the protocol's internal value for RD, not its market price. It is normally $1. Only a prolonged imbalance can cause the controller to move it slowly. Changing par can strengthen redemption incentives or make more borrowing possible, depending on the direction of the imbalance. RD's target remains $1.

For the practical effects on holders and borrowers, read When RD moves off $1. The exact controller rules, par limits, and market-oracle checks are in Peg control and RD Market Oracle.