TLDR: RAI is the future.
From the perspective of a business, it's hard to use crypto to price things. The volatility makes basic things hard, like pricing a salary or projecting costs of goods sold.
Stablecoins solve the predictable value problem, but introduce entanglement with the concerns of governments, and no one wants that. To complicate things further, there's a scale of purity associated with how the stable value of that dollar coin is achieved.
In order of garbage to easily understandable and robust, I rank them like this:
- Tether
- USDC
- DAI
- LUSD
- RAI
Reserve Claim Coins
Tether and USDC both claim legitimacy through some kind of a 1:1 reserve claim. They claim to have assets to support the value of all the coins they issue, but under scrutiny this gets weird. There's tons of articles questioning the validity of this 1:1 reserve claim for both, but probably 10x the number of negative articles for Tether, which is headquartered on some island and lazily backs up its reserve claim with "commercial paper" which is short-term unsecured debt.
USDC is at least backed by a US company that has theoretically put in more leg work to operate above board with regulators. But still, there's questions out there about how robust their reserve claims are.
Overcollaterized Cryptonative Coins
Next in line is MakerDAO and the DAI. DAI is the oldest crypto native dollar stable coin originally backed by Ether, but it has long since evolved into a multi-collateral system that allows you to mint DAI against a ton of different crypto assets, including, unfortunately, USDC and Tether. Arguably, DAI takes on some of the systemic risk posed by the "reserve claim" stables, thus taking away some of its cryptonative purity.
Liquity
Quickly becoming my favorite stablecoin option in recent months is LUSD and the Liquity Protocol. In this case, what makes it good is that it is a simplified version of MakerDAO. It is governance minimized, and the only form of collateral in the system is Ether.
It has already survived a couple major downturns since its creation just a few short months ago, and it has a ton of TVL despite its newness. This leads me to believe that if it were going to be successfully flashloan attacked or hacked, we would have seen it happen already.
Since it's not pioneering anything new, it's a little more trustworthy out of the gate. It's just Maker with fewer moving parts and stakeholders.
Another little thing I like is that its peg seems to hover at or above peg by a couple cents. I've only seen 99 cent LUSD for a couple hours here and there.
RAI. Max Purity. Entanglement Solved.
No matter how you solve the problem of giving a stablecoin value, if that source of value is still the US dollar, there's a problem. You're hopelessly entangled with the somewhat arbitrary monetary policy moves of the US government and the Federal Reserve.
In this regard, the lone project I see in the landscape that solves all the problems is Reflexer and the RAI.
Instead of relying on the dollar for its peg, the RAI relies on an industrial control system concept to directly resist volatility–the PID controller.
PID stands for Proportional-Integral-Derivative. For those not up on their calculus or without a vague recall of how integrals and derivatives could form a solution here, I'll hazard an explanation by analogy.
Integrals and derivates are all about understanding the attributes of some function–how much and how fast it's changing.
In industrial systems, let's say you have a metal chamber that has some chemical reaction going on inside of it. Temperature and pressure inside the chamber change frequently while the reaction is occurring. Let's also say that this process goes better if pressure can remain at exactly 4 atmospheres.
Well a PID controller and sensors could be engineered to measure the pressure inside that chamber, and sense how much it's changing, and then oppose that change by adding or removing air to maintain the 4 atmosphere target pressure.
The same thing can be done in code for asset values.
It's possible to write code that takes the attributes of asset price–whether it's increasing or decreasing and how fast–and oppose that change using automated interest rate policy. And that's exactly what Reflexer's contracts do to maintain the price of the RAI coin. There's a continuous feedback loop sensing the changes in the market price of RAI and nudging the target price (Redemption Price) up and down to encourage arbitrage and resist volatile price movements.
Getting back to the stablecoin purity discussion, RAI basically does all the things. It's crypto native, it maintains a stable value, it's not pegged to some hostile sovereign's medium of exchange, and it relies on simple overcollateralization to make sure the RAI has value. At this point, the only thing RAI is missing is more TVL and pervasiveness, in my opinion.