Reserve is a cryptocurrency project. We want money that doesn’t inflate like USD, but isn’t volatile like Bitcoin. Our approach is to bundle stocks, bonds, gold, real estate and more into an index, and use that as money. Imagine buying a bag of groceries and paying with a tiny slice of all the world’s assets!
But we aren’t building that currency directly; we built the Reserve protocol, which lets anyone create a token backed 1:1 by a collection of other tokens in a few minutes, without writing any code. Deciding what you want to back your RToken with is the hard part, and it costs a few hundred dollars in transaction fees to create one. This hassle and cost can be worth it, since you can turn a profit by creating, governing and promoting RTokens.
Until all real world assets (RWAs) are tokenized – which we hope will happen but has many regulatory hurdles standing in the way – the protocol is best used for rolling DeFi assets together to create yield-bearing USD stablecoins and other composite assets. As more assets are tokenized, we envision many competing asset-backed currencies, with some actually being used as money. If the world really likes asset-backed currency, perhaps it could replace the fiat standard.
So far the protocol has been implemented in Solidity and deployed on layer 1 Ethereum and the Base L2. You can learn all about it on this website!
The Reserve protocol lets you deploy a token on Ethereum that’s issuable and redeemable for a basket of any other tokens.
These “RTokens” are a new form of asset-backed currency and you can make money deploying, governing, and promoting them.
RTokens are the next stage in our vision for a global, secure, and stable monetary system. We imagine RTokens backed by a mixed basket of assets like an index of the entire global economy.
This depends on the tokenization of everything, after which the protocol can be used to construct asset-backed currencies that are mostly or fully independent of fiat money.
Assets launched on the Reserve protocol are called “RTokens.”
Creating an RToken is surprisingly easy; you can do it without writing any code. Once you create one, anyone can mint it by depositing the basket of ERC20 collateral tokens you’ve defined. RTokens are fully redeemable for their underlying collateral at any time.
The long-term goal behind the RToken design is to be able to create stable asset-backed currencies independent of fiat money.
Mint and redeem on-chain 24/7.
RTokens are redeemable 1:1 for the assets that back them. Their collateral assets are held by smart contracts, which don’t take vacations. You don’t need to wait until Monday or worry about bank holidays, everything is available 24/7, when you need it.
Many useful collateral assets are, however, backed by off-chain assets and come with their own caveats. But the RTokens themselves and all of their on-chain collateral are visible at all times, so no proof of reserves is needed on the RToken layer.
RTokens can be governed however their creators choose, but the Reserve protocol includes a default token-voting-based option called Governor Alexios.
Governance defines the asset basket and an ordered list of emergency collateral that can be adopted in the case of a primary collateral asset defaulting. When governance updates a basket or in the case of a default, the protocol makes on-chain trades to reach the new basket composition.
RTokens are designed to be overcollateralized, which means that if any of their collateral tokens default, there's meant to be a pool of value to preserve the expected value for RToken holders. RToken overcollateralization is provided by the Reserve Rights (RSR) holders who chose to participate on each RToken, and the amount varies.
An RToken’s collateral can generate revenue, and it can direct a portion of that revenue to RSR stakers. This can incentivize RSR holders to stake, and thus provide overcollateralization.
Governance determines how the protocol distributes revenue generated from the underlying collateral between RToken holders, RSR stakers, and any arbitrary ethereum contract or address.
Some RToken governors may choose to send most of the revenue to RToken holders, growing the RToken’s value and incentivizing a higher RToken market cap. Other RToken governors may choose to pay RSR stakers more in order to incentivize more overcollateralization.
Even more creative revenue sharing might include chosen charities, contributing organizations, platforms that support use of the RToken, or entrepreneurs who launched the token initially. The system is built with flexibility in mind.
In the rare case that an RToken's collateral defaults, staked RSR can be seized in a process that is entirely mechanistic based on oracle price-feeds, which does not depend on any governance votes or human choices.
Since RSR stakers take the first loss and are typically the decision makers for what backs an RToken, their incentives are typically aligned with RToken holders to choose safe backing.
Liquidity is hard to grow in defi, especially in the competitive stablecoin space. The Reserve Project has built up governance power in the CurveDAO to incentivize liquidity of safe projects in the Reserve ecosystem.
This Curve voting power can leverage the built-in incentives of the largest stablecoin DEX to deepen RToken liquidity and make it easier for anyone around the world to access RTokens.
One risk of using or staking on RTokens is the chance of a bug in the smart contracts that would allow an attacker to steal the funds. General defi contract exploits are tracked in real time on defillama.com/hacks
Other risks include governance attacks, exploits in the front-end software you use to access the protocol, and extreme volatility in collateral assets or RSR.
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