Reflexer Labs Raises $4M to Build Out ETH-Backed Stable Asset, RAI

Pantera and Lemniscap have led a $4.4 million round for Reflexer Labs, the creator of a new gentlecoin, one that follows ETH’s price, minus the volatility. Several backers from its prior round followed on.

If a purely crypto token had an easily conceivable value relative to real products (for example, one token consistently equaled, say, four Snickers bars), that would meet the test of a “unit of account,” something that could be used to assess the value of goods.

“Unit of account” is one of three facets of the traditional money definition that major cryptocurrencies fail to meet due to their volatility. That’s what Reflexer is going for: a crypto-native unit. 

The new round comes ahead of its announced launch of its RAI token by early March. RAI tracks longer term gains and losses of ETH without the gigantic movements by taking advantage of control theory from traditional engineering.

“You don’t need to peg to anything in order to be stable,” founder Stefan Ionescu told CoinDesk in an email. “The most important thing to understand is that DeFi can and should be detached from the fate of the US Dollar. RAI is a first step in that direction.”

Reflexer Labs ran a demo test of its system from October to January, called Proto RAI. It was largely able to maintain a stable price relative to ETH but with a small amount of gain. The company compares its approach to central banks’ use of the managed float, where exchange rates look for general stability over time, despite occasional short-term tumult.

Stablecoins that trace the U.S. dollar have been wildly successful; most agree their success was a necessary ingredient in establishing decentralized finance (DeFi) as Ethereum’s killer feature.

“Many stable assets in use today are pegged to fiat currencies, a design with many limitations. These networks have limited economic incentives that can be used to influence the market price of their native stablecoins,” Paul Veradittakit, partner at Pantera Capital, said in a press release.

Roderik van der Graaf, founder of Lemniscap, said in the release, “Reflexer is opening up a completely new design space in the realm of ‘stable’ cryptoassets.”

The company has work on its user interface and educational materials to do ahead of the release of RAI. A governance minimized crypto asset, it has also published a timeline for winding down parameters that the community can change.