A Guide to RAI Finance – Is This the Future of Cross-Chain Trading?

Project Reviews / 15.03.2021

The decentralized finance sector continues to expand and produce new and interesting protocols every day. However, the niche struggles with the same problems that inhibit the entire crypto industry from progressing at lightning speed.

DeFi sees its progress striving to solve problems like scalability, liquidity, and asset diversity. Fortunately, there are projects with million-dollar plans to eradicate these issues. One of them is RAI Finance, a decentralized cross-chain exchange growing on Polkadot just as fast as the DeFi boom of 2020.

RAI Finance has made the journey from a Polkadot parachain to a DAO in less than six months. In this short guide, we take a closer look at its trajectory and predict its immediate future.

What is RAI Finance?

RAI Finance is a decentralized cross-chain exchange that aims to deliver a versatile suite of financial solutions to DeFi protocols. Meanwhile, it has already partnered with Polkadot, Chainlink, and Tidal Finance to provide liquidity to an ever-increasing audience of distributed financial ecosystems.

Like many other DeFi projects, RAI Finance plans to make digital asset creation easy and accessible across many protocols. By combining its developing structure with Polkadot’s cross-chain technology, the protocol should solve some of the biggest problems that DeFi faces at the moment:

  • Scarce liquidity
  • Limited scalability
  • Reduced diversity of available assets
  • High network fees

Some of the solutions that RAI Finance proposes for these issues include:

  1. The implementation of Zero-Knowledge Protocol/Proof (ZKP) to improve off-chain transactions.
  2. The increase of supported assets and their trade across chains through a parachain on Polkadot.
  3. The development of unique assets tokenized trading strategies and yielded generating tactics.

At the moment, RAI Finance operates on only one layer. However, by introducing layer 2 scalabilities in the future, the protocol should improve asset swapping and automated market strategies. Additionally, with the recent introduction of its native token, RAI, the DEX should offer DeFi protocols with more liquidity and asset swapping options.

As mentioned above, RAI Finance is not the only DeFi protocol looking to solve the DeFi issues. However, this project prides itself on a rare technical advantage. That is to say. RAI Finance functions as an Automated Market Marker (AMM) and a Decentralized Exchange (DEX) on the same platform.

RAI Finance operates on a parachain and is integrated into the Polkadot ecosystem. The project chose an open-source sharding multichain protocol after researching the industry for three years. Finally, Polkadot had the best support for its goals to solve scalability and sustainability. Also, Polkadot has made the most promising advances in blockchain interoperability so far.

RAI Finance will use the Polkadot support for cross-chain operations to boost liquidity and asset options. Furthermore, they are already connected with other projects and communities in the DeFi sector. As a result, RAI won the support of prestigious industry players, such as DEXEOS, the world’s first DEX built on EOS, and Alphabit, a company specializing in investments in blockchain and distributed ledger technology projects.

A Brief History of RAI Finance

In October 2020, the RAI Finance whitepaper saw the light of day. By then, its developers had already settled on Polkadot as support for cross-chain interoperability. Also, they had established the next events in the roadmap to take place until the end of 2021.

A team of crypto experts and experienced crypto traders are behind RAI Finance. Among them is CEO Kevin Lee, a former research analyst at Honestfund, and CTO Minkyu Cho, the co-founder of a top social trading platform, League of Traders.

The developers chose to name their project after the Rai stones, which were large stone wheels that the Yap island inhabitants used as currency.

At the time of writing, RAI Finance is less than six months old. Still, in this short time, the project managed to strike important collaborations, such as:

The integration of Chainlink Price Feeds gives users, and developers access to safe price oracles when swapping assets in the project’s upcoming AMM-based decentralized exchange.

The launch of the Korean Polkadot Alliance in February 2021. This non-profit consortium combines the forces of industry-leading Polkadot-based projects like RAI Finance, STP, and Cobak. Their mission is to “facilitate and accelerate the development of the Polkadot ecosystem in Korea.”

A collaboration with Tidal Finance to enhance security on the platform. Tidal Finance will give RAI Finance users access to customizable smart contract cover solutions.

A strategic partnership with Decentralized Vulnerability Platform (DVP) to build a secure, cross-chain liquidity aggregator and expand the ecosystem.

A partnership with Darwinia Network to consolidate cross-chain transactions. Darwinia is compatible with the Ethereum Virtual Machine (EVM). As a result, RAI Finance users will access swap transaction services for assets in the Ethereum ecosystem.

RAIFinance has recently combined Bounce Finance forces to provide users with IDO (Initial DEX Offering) solutions.

How RAI Finance Works

RAI Finance aims to break all the barriers and limitations that could impend total freedom for crypto users in decentralized finance. This ambitious goal requires complex computation and speedy architecture development. As such, DeFi provides multiple services through its DEX that centralized exchange platforms cannot sustain, including:

Secure Off-chain Transactions

By using Zero Knowledge Proof, RAI Finance could improve scalability and ensure secure off-chain transactions. This process would support trustless cryptographic computations. In turn, the level of safety for transparent and private transactions would increase. Furthermore, as most of the transactions would occur off-chain, every operation’s cost and time would decrease significantly.

Cross-chain Asset Support

As an integral part of the Polkadot ecosystem, Rai Finance would provide users with access to a wide range of assets and tokens. As the platform grows larger, users can use smart contracts to integrate unique assets and non-fungible tokens (NFTs). As a result, the protocol would support an ever-increasing number of assets in the long-term.

What is the RAI Token?

RAI Finance is steadily becoming a decentralized autonomous organization (DAO). And a clear sign of this transformation is the release of the RAI token.

RAI is an ERC-20 token that RAI Finance released in a sale event on January 13, 2021. The event lasted only one minute and saw the project raise 647,666.93 USDT.

As of now, RAI has three uses on RAI Finance:

Transaction Fees

The protocol takes a small RAI fee from every transaction. The rest of the transaction charges are equally divided between the other entities taking part in it.

Asset Creation

Users have to stake RAI when creating new assets or trading as part of their yield strategies.

Governance

In the future, when RAI Finance will be a full DAO, RAI holders will be able to vote on various protocol functions and changes.

Network Incentives

In the future, participants on the RAI Finance platform will receive RAI whenever they provide liquidity to the protocol.

The Bottom Line – A Guide to RAI Finance

As we mentioned before, RAI is not even six months old, and it is already making waves in the DeFi sector. Almost every week, we see the project leaders announce new features and collaborations. So, we’re not rushing when we say that this protocol has a bright future.

With powerful backing from Polkadot, Chainlink, and Alphabit, RAI Finance has the attributes to grow quickly and easily into a powerful DeFi cross-chain exchange and DAO.

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A creative writer in the field of content writing for the past 7 years. Iulian is passionate about his work and his interest in areas such as technology, travel, sports, literature and gastronomy have aided him to the research quality in articles that reflect these themes. Recently, he discovered the Bitcoin and the blockchain technology and he’s a big fan now.