The Mission of the rToken Project – rToken-Project
What began as a hackathon idea conjured and developed by Francesco Renzi and Miao Zhicheng in the spring of 2019 became a set of smart contracts built on the Ethereum blockchain that gave people a financial tool that they had never had before — the power to redirect the interest that their assets were earning to whatever destinations they chose.
This new tool, built initially on top of the permissionless stablecoin DAI (built on Ethereum) and the open lending pool Compound, allows users to earn yields on their DAI and redirect that interest as they see fit. This first implementation is called rDAI and is live on mainnet at app.rdai.money. Users can choose to direct the interest to charity, to support open source projects or to save for themselves. At the smart contract level, rDAI is a flexible tool with no fees or costs other than the nominal gas costs that all transactions on the Ethereum network must pay.
The creation and publication of the initial rDAI smart contracts attracted attention from the larger Ethereum developer community, especially those who were looking to build decentralized finance or #DeFi applications. Over the fall of 2019, several contributors joined the rToken-Project as volunteers. These contributors have been coding, discussing and interacting with the community to figure out how to bring the promise of this technology to fruition. On Thursday, November 7, 2019, rDAI went live on mainnet.
Put simply, the mission of the rToken-Project is to provide programmable interest payments to everyone.
Until now, even the wealthiest individuals with access the most sophisticated financial tools did not possess the power to finely direct their interest streams to whatever recipients they wanted. Not only does the rToken-Project make this possible for the first time in history, but it is made available to anyone with an internet connection and an Ethereum wallet.
We see the value of the rToken-Project for users coming from two major benefits.
- Easy Access to Stable, Yield-Bearing Assets
Anyone can purchase and use DAI, a US dollar-pegged stablecoin. It is not restricted to the rich, to customers of specific companies or to citizens of certain countries. It has retained a stable value at $1.00 for over two years, including through a massive boom and bust cycle in the price of crypto assets. And with permissionless lending pools like Compound, anyone that holds DAI can earn interest on it. The annual interest rate paid to DAI lenders as of today is 6.19%. Compare that to an average annual yield of 0.09% on savings account holdings in your bank. Instead of accepting only the crumbs offered by legacy banks (which don’t even come close to keeping up with inflation), with a couple simple clicks a DeFi user can earn meaningful yields on his or her money.
2. Changing the Psychology of Money
Paying with interest feels very different from paying out of pocket. To the recipient it means the same real income, but to the sender it is an entirely different psychological process, largely because paying with interest does not trigger the cognitive biases of reference dependence and loss aversion.
It’s not a stretch to suggest that widespread, easy programmable interest payments will transform the digital economy, generating new payment streams that more closely reflect users’ values. Programmable interest payments could positively affect savings rates, as users recognize the immediate benefits from an increase in their interest-based buying power rather than being asked to delay gratification during decades of slow and steady saving, a well-meaning strategy that has failed to catch on widely.
While we remain excited to build out a robust rDAI infrastructure and evangelize its benefits to the rafters over the coming months, we aren’t called the rToken-Project for no reason. We’ll be deploying additional rTokens beyond rDAI. Other stablecoins with liquid lending pools like USDC are good candidates, but looking a bit further down the road, an rStaked-ETH token may be in the cards after ETH 2.0 launches next year, or perhaps synthetic equities may spawn their own borrowing and lending pools and lead to new rTokens derived from traditional financial sectors. We’ll be watching these developments closely to help people find new ways to make their money (in whatever form) work harder for them.
The point overall is that programmable interest canvas has now been stretched and mounted onto an easel. rDAI is but the first brush stroke on a vast expanse. If you are excited to help explore and define this space, join us!
Say hello on Discord at https://discord.gg/feckRXf and follow us on Twitter @rDAI_DAO.
Published at Tue, 19 Nov 2019 17:04:22 +0000
{flickr|100|campaign}
