The Reserve Protocol allows for the permissionless creation of asset-backed currencies. Its core objective is to end hyperinflation in a decentralized and scalable manner, utilizing cryptocurrencies like Bitcoin and Ether as well as yield-bearing collateral. The protocol is permissionless, enabling anyone to deploy a Reserve stablecoin (RToken) with their chosen collateral basket, governance model, and revenue distribution approach. ^[1]

Overview

Deployed in 2023, Reserve enables the creation of asset-backed currencies, known as "RTokens," backed by baskets of ERC-20 tokens on Ethereum, Arbitrum, and Base. Once deployed, RTokens can be minted by depositing the entire basket of collateral tokens and redeemed for the same or with zap mint and redeemed from one asset such as USDC. ^[1]

This ensures that an RToken's value mirrors that of its backing basket. RTokens are 1:1 backed and over-collateralization of RTokens is provided by Reserve Rights (RSR) holders, who stake their RSR to provide a buffer against collateral defaults. Revenue generated by RTokens serves as an incentive for RSR holders to stake, with governance dictating the allocation of this revenue. Each RToken operates under its governance system, which may evolve based on the decisions of its governing body. Governance also defines emergency collateral to mitigate defaults, with collateral assets exchanged to the emergency basket in case of a default event. ^[1]

Reserve Rights (RSR)

Reserve Rights (RSR) functions as the governance token within the Reserve Protocol ecosystem, allowing staking on any RToken for participation in governance, earning staking fees, and contributing to over-collateralization. Reserve Rights (RSR) is an over-collateralization mechanism to safeguard RToken holders in the event of a collateral token default. RSR holders can stake on one or multiple RTokens or refrain from staking altogether. Stakers receive a share of the revenue from the specific RToken they stake on, with higher returns expected as the market cap of the RToken increases. When RSR is staked on an RToken, it's deposited into a dedicated staking contract, and stakers receive an ERC-20 token representing their staked RSR position, which is transferable and fungible, allowing for trading or transferring to others who may choose to un-stake it. ^[2]

Tokenomics

Reserve Rights (RSR) has a total fixed supply of 100 billion tokens, with 50.6 billion in circulation at launch. The remaining 49.4 billion tokens are held in the Slow and Slower Wallets. The Slow Wallet, controlled by ABC Labs supports RToken adoption initiatives with a hard-coded 4-week delay on withdrawal transactions. Organizational restructuring in January 2024 introduced Confusion Capital, overseeing funding for the Reserve Ecosystem, including Best Friend Finance and ABC Labs. Managing the Slower Wallet, Confusion Capital imposes stricter withdrawal restrictions, maintaining the 4-week delay and limiting withdrawals to no more than 1% of the total RSR supply every four weeks. This adjustment aims to minimize reliance on Confusion Capital's trustworthiness. ^[2]

RTokens

An RToken is a currency created on the Reserve Protocol, fully backed by a combination of ERC-20 tokens and shielded from collateral default through Reserve Rights (RSR) staking. Anyone can deploy a new RToken by interacting with the Reserve Protocol's smart contracts. ^[3]

This deployment process can occur directly through the Reserve Protocol's smart contracts or user interfaces built atop the protocol. Alongside facilitating RToken creation, this interface offers tools for exploring usage and statistics, minting, redeeming RTokens, governance, RToken earn opportunities, and staking RSR. RTokens deployers must specify the initial configuration, determining the assets backing the RToken, their respective weights in the basket, governance mechanisms, and various other parameters. ^[3]

Governance

Most RTokens use Governor Alexios, a governance system for RTokens, which is based on the OpenZeppelin Governor. Governor Alexios enables RSR holders to make protocol decisions through proposal submission, voting, and execution. Using a delegation mechanism, RSR holders can assign voting authority to other addresses, facilitating streamlined participation and enhancing voter engagement.^[2]