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Unlike UST/LUNA, there's no scenario in which more ETH will be minted to support the price of RAI.
by DennisP 4y ago
Unlike UST/LUNA, there's no scenario in which more ETH will be minted to support the price of RAI.
- fshbbdssbbgdd 4y agoCorrect, but the mechanism of safe liquidation could look kind of like minting in the right context. Suppose RAI became dominant. Then the old safes of ETH locked away could become really large. In theory, they could even be larger than the ETH float. Increasing ETH prices would fuel lots of RAI withdrawals. But then if the price of the limited amount of floating ETH dropped, suddenly these safes would be forced to liquidate. This liquidation would release a lot more ETH, further depressing the price and driving increasingly larger liquidations. Of course this is pretty unlikely, because RAI is peanuts compared to ETH.