Reserve Protocol Review

What is Reserve Protocol?

Reserve Protocol is a project developing a decentralized governed stablecoin. The digital asset developed by the company – Reserve Dollar or RSV is designed to maintain one-to-one parity with the US Dollar. The currency is controlled through a smart contract to guarantee “transparent and efficient monetary policy”. The token is meant to always preserve its value and be free from malicious attacks. 

RSV can be minted on the dApp by depositing three equal quantities of the USDC, TUSD, and PAX stablecoins. The dApp can also be used as a payment system, and the team believes it can be very useful for people and businesses based in high inflation countries.

How does Reserve Protocol work?

Reserve Protocol was mainly developed to provide tools for people living in economies in crisis with high inflation and deep devaluations of their native fiat currency. By using Reserve Protocol, its clients are able to get hold of a stable currency preserving its value and not losing its buying power. The only requirement to use the dApp is to have a smartphone and an internet connection.

At the time of writing, RSV can be exchanged for national currencies in markets like Venezuela, Argentina, and Colombia through the Reserve app. The future plans of the project include expanding this list and including other popular financial applications in it. 

RSV is backed by a basket of collateral assets, held in the Reserve Vault smart contract. This basket is composed of such assets as TUSD, PAX, and USDC (equal parts of each). The token is always redeemable for this basket, therefore its value is directly connected to the already mentioned stablecoins’ value. In the future, the combination of assets used as collateral may be diversified through the governance of the project.

The Reserve Protocol has an Owner, set to an M-of-N multisig account which controls the pausing and continuation of the system, as well as pausing just the token issuance or all transfers of RSV. The multisig account can also upgrade the Manager smart contract, and set authentication permissions on the Vault and RSV. 

With the latest version of the protocol, the team introduced the RTokens concept. RTokens are stablecoins that can be minted by depositing the collateral required depending on the configuration of the asset. All RTokens can be insured, through insurance provided by the Reserve Rights RSR token holders. They may choose to stack their assets on any RToken, and earn revenue, however in cases of default, the staked RSR may be seized.

To begin the new stage of the project, the team created a pure USD coin backed only by USD fiat coins. This product is almost the same as the current RSV token. The second asset created by the Reserve Protocol team was a yield-bearing USD coin, backed by DeFi tokens such as cUSDC, aUSDC, cDAI, and others. Since the collateral of the token generates yield, the value of the token fluctuates.

How to use Reserve Protocol?

The Reserve Protocol app can be used for savings, by converting local currency to RSV tokens which because of their peg to the US Dollar are guaranteed not to lose their value. The platform also provides for sending and receiving money, the transfer of funds is immediate and accessible to people both inside and outside of the country. Businesses can charge their clients using the Reserve Protocol app, thus safeguarding the value of their goods with the stability of the digital asset. Besides that, businesses can use RSV to transfer payments to international suppliers.

To issue new RSV tokens, users need to interact directly with the protocol by locking up collateral in it and minting the new tokens, and the redemption of the asset happens in the opposite way. Token holders can submit proposals to the Reserve Manager smart contract and rebalance the composition of the collateral in the vault. 

The proposals users can submit are of two types – Weight Proposals and Swap Proposals. The weight proposal consists of a list of token addresses and a list of “weights”, while the swap proposal has a list of token addresses, a list of quantities, and a list of Booleans disclosing the quantity to be removed or added from the Vault. 

Anyone can issue an RToken on Ethereum through the factory smart contract, in a similar fashion to deploying a new Uniswap trading pair. The deployer of a new token decides on its governance and can choose to give the control to a DAO, multi-sig, or a single wallet address. The governing body may be replaced at any point with different mechanics.

RTokens holders can earn from fees Reserve Protocol generates from each RToken transaction. The fees don’t need to be a fixed amount or a single percentage, and any computationally efficient function can be specified. 

The RSR token

RSR is the governance token of the protocol. It is mainly used to govern basket-backed stablecoins built on the platform and can be a backstop to make RSV holders whole in the event of a collateral token default.

The asset has a fixed total supply of 100B tokens, approximately 85.5B RSR tokens are currently locked, out of them 49.4b belong to the Slow Wallet – locked and controlled by the project used to fund RToken initiatives such as listings, partnerships, and other marketing incentives, 16.6b are owned by seed investors and strategic partners, while 19.76b belongs to the team members and their advisors.

Since the community expressed concerns about the unlocking schedule set at the beginning of the project, the team added a new option available to RSR holders. The option includes unlocking tokens linearly since January 2022 over the course of six months. However the tokens cannot be fully controlled by their owners yet, they first need to submit a request to sell their tokens, and can only do so through one connected OTC desk. The OTC desk matches sell orders with OTC buys and limits selling on exchanges to about 3% of the real daily trading volume, limiting the impact on the price of RSR. Following six months. All RSR holders choosing this option will directly receive all their tokens which they plan not to sell.

The original option which is still available for choice includes 10% of the holders’ locked tokens being unlocked at once, while the remaining are distributed linearly over the following six months.

RSR holders can stake their tokens on any RToken if they choose to do so. When they do that, the tokens are deposited into a staking contract specific to the RToken of choice, while the staker receives an ERC-20 token representing their staked RSR position to that particular RToken. The interest-bearing tokens are transferable and fungible with other staked RSR for that RToken.

Staked RSR earns rewards based on the amount of revenue generated by the RToken, the portion of the revenue that has been directed to RSR stakers by governance voting, and the user’s position of the total RSR staked on that RToken.

Is Reserve Protocol safe?

The Reserve Protocol team is divided into subgroups named tribes, guilds, and squads. It is claimed that because of this type of organization, the team can work together with clear leadership, better coordination, and coaching in a creative environment. 

The tribes are the lowest level of organization and provide context and vision to the guilds and squads, as well as define priorities for the whole team. Tribe leaders are chosen after they propose the vision and general strategy of the structure they are part of. 

The guilds are the next level of the team, and their leaders work closely with tribe leaders, they are responsible for organizing and generating good practices, training, and teaching the core principles behind the protocol to the squads during their weekly joint meetings.

The squads represent the central form of organization within guilds, and may have a temporary life span. These groups are responsible for allocating resources. Each squad has a leader and is formed by members of various guilds. 

The Reserve team has a diverse set of backgrounds and comes from various parts of the world. Because there was a goal set not to let economic or cultural differences affect the way the team worked together, everyone keeps their anonymity and uses an avatar as a profile picture.

Reserve Protocol audit can be found in the protocol dashboard on this webpage.

Partners

Reserve is backed by angel investors and many prolific crypto investment funds. Some of the backers actively participate in the project and work closely with the developer’s team. These investors include Sam Altman, Coinbase, Peter Thiel, Crypto Lotus, Refractor Capital, Jack Selby, Matt Brimer, James Glasscock, and many others. 

What's next?

Currently, the team hasn’t released a public roadmap but claims to be working on expanding the markets in which RSV operates as well as including other popular financial applications to the token and adding a cryptocurrency exchange functionality. 

Links:

https://reserve.org/app/about_app/

https://reserve.org/protocol/