With a major payment company introducing new stablecoins, now is a great moment to rethink currency designs.
Today, we'll discuss @reserveprotocol, which enables permissionless creation of resilient and sustainable asset-backed currencies.
Let's dive into this together! ๐งต
Disclaimer:
Please note that this thread is solely intended for the purpose of sharing information and should not be interpreted as financial advice. It is advisable to conduct your own personal research.
Disclosure:
This thread created in collaboration with @reserveprotocol
TL;DR ๐ต
โข Stablecoins often lack resilience due to design flaws, risking depegging or collapse.
โข @reserveprotocol aims to solve this through permissionless creation of asset-backed (Rtokens), backed 1:1 and overcollateralized with $RSR with revenue sharing features.
Table of Contents
๐ต Design Problems
๐ต RTokens
๐ต $RSR Tokens
๐ต The Dynamics
๐ต Revenue Distribution
๐ต Peg Mechanism
๐ต Statistics
๐ต Comparison
๐ต SVB Run Stress Test
๐ต Design Challenges
Stable assets such as stablecoins often encounter diverse issues due to their flawed architecture and unsustainable incentives model.
Consequently, it's imperative to establish a new paradigm and design to tackle this concern.
๐ต RTokens
@reserveprotocol address problems by enabling creation of 1:1 asset-backed currencies via compatible ERC-20 tokens called RTokens.
These currencies can peg to units like fiat, ETH, CPI Index, or asset bucket NAV. RTokens overcollateralize and share revenue.
๐ต RSR Tokens
Reserve Rights (RSR) is the governance token of @reserveprotocol and also functions to safeguard RToken's peg.
RSR Stakers (stRSR) participate in governance and provide overcollateralization to protect RToken holders in the event of a collateral token default.
In return for securing RTokens, RSR stakers can receive a proportional share of revenue from the corresponding RToken they've staked.
If a collateral token defaults, the protocol uses staked RSR to reduce losses and maintain the RToken's value.
๐ต The Interplay
In the graphic below, you can observe a simplified Rtokens structure and the interactions among collaterals, RSR, and revenue.
It's important to highlight that higher revenue attract greater interest from RSR stakers for overcollateralizing the RTokens.
๐ต Sharing Revenue
Revenue generated by Rtokens is distributed to both RToken holders and RSR stakers.
This is accomplished through minting and trading surplus collateral, enhancing the value of both RSR and Rtoken.
๐ต Peg Mechanism
In case of an RToken collateral default, emergency collateral will be employed to stabilize the peg in the basket.
RSR will be liquidated to address any discrepancies and obtain emergency collateral, leading to rebalancing and stabilization of Rtoken's peg
๐ต Statistics
The three primary Rtokens, eUSD, ETH+, and hyUSD, also exhibit substantial TVL along with respectable APY through revenue sharing.
The significant revenue originates from yield-bearing assets utilized as collateral and strategic rewards compounded techniques.
๐ต Contrasts
In the graphic below, we can assess how Rtokens outshine conventional stablecoin designs.
With asset-backing, overcollateralization, and enduring incentives for Rtoken/ RSR holders, this propels us toward a novel paradigm, a new kind of primitive.
๐ต RToken Resilience
Amid the SVB run, one result was $USDC's depegging.
This systemic impact decreased the value of several $USDC derivatives, including one used as eUSD collateral. However, recollateralization mechanism stepped in, returning eUSD to its peg.
Not only that, this mechanism enables stRSR holders affected by a liquidation event to recover their impermanent loss through revenue sharing a few months after the event.
Further event details are available in this @Blockworks_ article:
app.blockworksresearch.com/research/reserve-protocol-decentralizing-the-creation-of-money
๐ต References (Link in ALT)
Tagging Fellow #DeFi Educators
- @rektdiomedes
- @JiraiyaReal
- @blocmatesdotcom
- @NickDrakon
- @crypto_linn
- @Dynamo_Patrick
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- @stakedqueen
- @crypthoem
- @ayyyeandy
- @Slappjakke
- @CryptoShiro_
- @DeFiMinty
- @Flowslikeosmo
- @poopmandefi
Tagging Fellow #DeFi Educators (2)
- @schizoxbt
- @rektfencer
- @0xCrypto_doctor
- @2lambro
- @louiscooper_
- @CryptoStreamHub
- @CryptoKoryo
- @0xsurferboy
- @DAdvisoor
- @stacy_muur
- @WinterSoldierxz
- @jake_pahor
- @Hercules_Defi
- @VirtualKenji
- @arndxt_xo
You can read the unrolled version of @reserveprotocol thread here: typefully.com/eli5_defi/yXB1Tso