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Raft recently launched its latest stablecoin, R, which is pegged to the U.S. dollar and backed by a sole crypto asset: Lido's staked ether (stETH), a prominent player in the liquid staking industry.

The stablecoin, which commenced trading on Monday, employs a combination of hard- and soft-peg mechanisms to ensure its price remains close to $1, as stated in the protocol's documents. The hard peg relies on arbitrage to sustain a stable value, while the soft peg encourages users to act in anticipation of the peg being upheld in the future.

Raft’s stablecoin is “the first stablecoin collateralized by Lido Staked Ether (stETH),” according to a statement.

While the largest stablecoins in circulation, namely Tether's USDT and Circle Internet Financial's USDC, maintain their stability by being backed by traditional assets like U.S. Treasuries, those reliant on cryptocurrency assets have experienced varying degrees of success. For instance, MakerDAO's DAI, which utilizes a combination of Ethereum-based tokens, stablecoins, and real-world assets such as U.S. government bonds as collateral, has achieved a substantial market capitalization of approximately $4.6 billion. In contrast, Do Kwon's UST, which was supported by his LUNA token, suffered a spectacular collapse a year ago.

Both DAI and the new R product distinguish themselves from Kwon's expensive experiment in that, although they do not possess traditional bonds, their assets are issued by separate entities, whereas Kwon's experiment involved his own token.

After the U.S. banking crisis in March, which caused several stablecoins, including Circle's USDC, the second-largest stablecoin by market capitalization, to lose their peg, numerous crypto protocols have prioritized avoiding fiat assets as collateral. This strategic approach aims to protect against ongoing regulatory pressures and reduce exposure to banks.

Raft’s deployment of its lending protocol allows users to deposit stETH and borrow a minimum amount of $3,000. "This strategic design choice is not only about attracting larger players in the liquid staking ecosystem, but it also ensures a healthy balance in the protocol, providing adequate incentives for coverages in the rare event of a position requiring liquidation.” said Raft’s Head of Marketing Tony T., in an exclusive interview with CoinDesk. He declined to give his last name.

Source Coindesk