Ethereum co-founder Vitalik Buterin attracted attention with a recent altcoin transaction. The name behind the second largest network made a profit of $92,000 from this transaction. Here are the details…
Vitalik Buterin closes short position in this altcoin
Ethereum co-founder Vitalik Buterin has closed a short position on the RAI “stablecoin” where he earned $92,000 from the trade. Ameen Soleimani, who helped found the RAI, used the trade to support her claim that her current design was somewhat flawed, but offered a possible fix. Ethereum co-founder Vitalik Buterin closed a seven-month short position in the alleged unpegged stablecoin RAI, making a net profit of $92,000, according to on-chain records.
Buterin borrowed 400,000 RAI in May and June and sold it for $1.2 million in DAI, a US dollar-pegged stablecoin. This created an effective short position in the RAI against the US dollar. Buterin closed the position on January 22 by selling $1.13 million in DAI and ETH for RAI. According to the statements of researcher Kyoronut and on-chain records in Buterin’s Ethereum wallet, the famous developer earned $ 92,000.
What is RAI?
As we reported on cryptokoin.com, RAI created by Reflexer Labs is an experimental “stablecoin” that is not pegged to any specific token or fiat currency, but is backed by ETH. Those who want to print RAI must lock their ETH as collateral and pay a 2 percent fee. RAI uses an algorithmic approach to stay stable. This design has an impact on the supply and demand of the token and helps reduce its volatility without being pegged to any particular asset.
Due to its design, RAI is not pegged to the US dollar and fluctuates over time. Over the past year, its price has dropped from $3.07 to $2.79. However, it has remained much less volatile than most free-floating cryptocurrencies, including ether used as collateral. Ameen Soleimani, co-founder of Reflexer Labs, who is now the co-founder and CEO of SpankChain, cited Buterin’s trade to support RAI’s claim that the current design is flawed. “ETH RAI only was a mistake,” he said on Twitter.
How to solve the defect in RAI?
Soleimani argued that there is an opportunity cost to minting it, as RAI holders do not benefit from staking the yields of ETH used as collateral. As a result, he argued that the RAI repayment rate, keeping the RAI constant, should always be negative. This means that the algorithm that should keep the RAI flat will instead give it a slight downward trajectory. This is not ideal because the whole point of the token was to try to keep it as stable as possible.
He said the way to solve this would be to use stETH as collateral. This is a liquid staking token that receives ETH staking returns. If this is used, the collateral backing the RAI will increase in line with the stock return, benefiting RAI holders and eliminating the opportunity cost of printing it. There is only one problem. When the RAI was created, the founding team essentially threw the keys. Unlike many Ethereum projects that have admin keys and give them the ability to upgrade their protocols, RAI has chosen not to. So the protocol is currently “unmanaged” and the CEO takes responsibility for it.
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