Summary of the STP x Reserve AMA with Nevin Freeman

Summary of the informative STP Network Live AMA session with Reserve Co-Founder & CEO, Nevin Freeman.

About Reserve Protocol:

They are building a universal store of value. The Reserve project aims to introduce a stable, decentralized currency that can’t be abused by a government because it is globally distributed outside of anyone’s control, and thus nearly impossible to shut down. Reserve Protocol is a decentralized stablecoin system that scales supply with demand and is built to maintain 100% or more on-chain collateral backing.

Let’s start with the questions!

Nevin Freeman @nnevvinn; ”Hi everyone! Nice to meet you. I’m Co-founder and CEO of Reserve. We’re working on building a decentralized stablecoin to fulfill the original vision of Bitcoin and serve as a world currency. I’m glad to be here and will try to answer your questions as best I can!”

Q: Is RSR token planning to be a stablecoin in the future?

A: Our protocol is confusing 😅, let me try to clarify the tokens:

RSV is the stablecoin — backed by collateral tokens that represent real-world assets like USD.

RSR is the protocol token — it’s used by users who want to help perform the trades that keep RSV stable.

The more RSV there is, and the more it is trasnacted, the more supply of RSR goes down.

RSR has economics that are somewhat similar to the MKR token. Broad market forces within the Reserve network can impact its value, so there are some incentives to hold it.

Q: What is the difference between Reserve and Maker Dao, USDT, TUSD, PAX, etc?

A: Great question!

USDT, TUSD, and PAX are all what I would call “Centralized Stablecoins”. The fundamental model involves holding USD in a bank, that is trusted, and minting tokens on-chain at a 1:1 ratio. This works quite well for keeping the price stable at $1. Why would you need another stablecoin, then? In my view, centralized stablecoins will eventually face regulatory pressure. Right now, token supply isn’t large enough to stir up a government response. But in the long-term, I definitely think governments are likely to come after centralized stablecoins.

MakerDAO is interesting and quite different. One easy way to understand MakerDAO is that it uses the demand for leveraged positions on collateral to create stablecoin. It’s quite creative, and I’m actually a bit of a fan. That said, it does have its problems. Since MakerDAO relies on demand for CDPs (Collateral Debt Positions), the supply of DAI cannot scale as easily as it ought to. I think this will lead to MakerDAO failing to satisfy the full demand for stablecoin.

Reserve is similar to MakerDAO in the following ways: Reserve is also decentralized, and it also uses a volatile-priced token that sees a reduction in supply when the network grows in size. The main difference is that Reserve is scalable, because users are not required to maintain CDPs. Instead, Reserve stablecoin supply grows whenever collateral tokens are traded to a smart contract. This mechanism for growth more straightforwardly ties the issuance of stablecoin to the demand for it. In economics terms, this makes the stablecoin “highly elastic”.

Q: Hi @nnevvinn can you eli5 the Reserve Protocol. Its hard difficult to understand the economic incentive to hold RSR. I read the wp but kinda technical. Also i heard there is a third token in play in the Reserve ecosystem?

A: I totally understand. Let me try to explain it.

First, there are 3 types of tokens in the Reserve system:

  1. RSV: The Stablecoin
  2. 2. RSR: The Volatile token
  3. 3. Collateral tokens: These are tokenized assets such as government debt, commodities, and currencies.

Reserve is backed by collateral tokens at 100% backing. This means that for every RSV in circulation, the smart contract must hold at least $1 of collateral. What happens when collateral tokens decrease in value? This is where RSR comes in. When the collateral falls below 100%, RSR is minted and sold to re-capitalize the lost value.

But doesn’t this increase the supply of RSR? Yes it does. In order to incentivize people to purchase RSR when it is minted, the Reserve protocol allows RSR holders to trade their RSR for excess RSV, when there is excess RSV in the system. When RSR is traded back to the protocol, it is burned, reducing the supply.

How does excess RSV accumulate in the system? Two ways:

  1. If the collateral tokens are chosen appropriately, then while they may undergo periods of decreases in value, we can expect it in aggregate to trend upwards. This means that overtime, excess collateral accrues in the smart contract. When this happens, RSV is minted and placed into the smart contract.
  2. 2. Transaction fees on RSV transfers remove RSV from circulation and place them into the smart contract.

Hope that answers your question!

Q: why rsr want ama on group stp?

A: As you can probably tell, we’re quite interested in asset tokenization projects. In fact, our design relies on them! We’re looking forward to a world where it is as easy to hold traditional assets on-chain as off-chain.

Q: @nnevvinn How will you guys drive adoption in countries such as Venezuela and Angola which are two countries that you are starting with?

A: This is a great question.

We are currently actively conducting go-to-market research efforts in Columbia with Venezuelan refugees. We have built an android mobile app that we are using to gauge the demand for stable currency. So far, it seems people are quite excited! We hope this will allow us to gather feedback quickly and spot any unknowns that may otherwise present significant challenges.

Q: @nnevvinn when the staking will start.any time frame..

A: There is no staking in our protocol

Q: So how the holder will benifit..

A: Supply is reduced when RSR is burned.

Q: @nnevvinn Do you believe there is room for many different stablecoins. Also Facebook and others seem to enter that space. Is that something that is a bit of an issue for Reserves potential succes , mainstream adoption , if the amazons, facebook and googles of the world decide to their own thing?

A: It’s pretty interesting to see Facebook and others entering the space. I think a useful question to ask is, “Why is this and how does it relate to their business model?”

I think big tech companies like Facebook are creating stablecoins primarily not to extract value from transaction fees or appreciation of the collateral, but rather that they are interested in capturing more user data around behavior. Imagine what you could do if you knew exactly what your customers wanted and what they bought! It’s very enticing.

I do believe there is space for other stablecoins. In particular, decentralized stablecoins like Reserve have a fundamentally different value proposition, and I expect them to be much more successful in the long-term as a world currency.

Q: is there no mainnet plan?

A: We definitely have a plan for mainnet! Check out our site at https://reserve.org for more information.

Q: There was talk of RSR token burn. What percentage of your RSV revenue will be used to burn RSR?

A: All of it. We believe in decentralization and benefiting the individual.

Q: @nnevvinn If the government can comes after centralised stable coins, why can’t the government comes after reserve? Is anything that prevent government to act on reserve?

A: This is a great question and one we’re actively researching solutions to.

One important property for the portfolio of collateral tokens to have is that it must be diversified across issuers and jurisdictions. That’s why it’s so important that projects like STP see success in the long-term, in order for the crypto market to reach its full potential.

Another idea we like is the idea of making protocol decisions tied to a multi-sig wallet with keys held in many different jurisdictions. This helps prevent any single government from taking action against the protocol.

Q: Collateral other than us dollars such as stocks, bonds, etc during bad market, it can lose a lot of value, like what happened in the past during USA black Friday. If that happens, your collateral value will lost a lot resulting your stablecoin intrinsic value reduced significantly. Then you use rsr to rescue? Rsr is tied to your stablecoin, its value also will be reduced significantly. How you solve this problem.

A: You’re right, if the collateral value falls significantly, then we can expect RSR to fall in value too. This makes it difficult to re-capitalize.

We currently have two solutions to this:

  1. Our portfolio expert is developing a portfolio designed to minimize maximum drawdown. The important consideration here is to compose a portfolio that is historically anti-correlated. That is, when one asset goes down in value, there should be another asset that tends to go up in value. While this does not guarantee we will not see signficant drops in collateral value, it does mitigate it.
  2. 2. We have a fallback emergency mechanism that is designed to ensure the system never collapses. In the case of a truly catastrophic event, the smart contract puts itself at risk by defending a $1 peg when it has less than 100% backing. In this instance, the protocol will drop the peg of the stablecoin to the collateralization ratio. This prevents a run-on-the-bank style attack where everyone is incentivized to redeem their stablecoin for collateral before the collateral runs out.

Q: @nnevvinn When RSD will launch.

A: We are targeting a mainnet launch in 2020.

Q: But in your whitepaper can see Launch of the reserv doller in Q2 2019.

A: Ah, yes, let me clarify. I was hoping not to confuse people by introducing RSD, but it seems it is time…

We are also launching a centralized stablecoin (like USDT/USDC/Paxos) called the RSD, in Q2 of 2019. This will use the standard approach of backing the token with dollars in a trust. We think it’s important to release this token in order to enable us to do high-quality go-to-market research. Also, it’s likely we’ll start rolling out the full decentralized protocol by placing RSD into the smart contract as the first collateral token.

Q: How big is the team working on Reserve and are they all US based?

A: We are located in Oakland, California, right outside San Francisco. Not all of the team is US based, but most are. In particular, we think it’s important to have on-the-ground knowledge in the countries we are targeting for go-to-market.

Q: @nnevvinn what is the partnership between. Coinbase and RSR.

A: Coinbase ventures was a seed-round investor.

Q: @nnevvinn And can we expect Paypal to be involved in your journey since one of the co-founder invested in Reserve.

A: Many of the founding members of Paypal are actively advising us.

Nevin Freeman: Alright folks, thanks for the questions! This was great, it’s heartening to see such high-quality questions. Unfortunately that’s all I have time for at the moment so I’ll have to leave it at that. Thanks everyone! 👋

--

--

--

A Layer 2 Sidechain Optimized for DAOs

Recommended from Medium

Trump Builds A Wall To Stop Immigrants, Refugees And Remote Workers, Bitwage Is Building A Bridge.

TOKENOMICS BREAKDOWN

Crowdfund Insider teams up with Draper Goren Holm for industry education; Ireland imposes KYC and…

Cryptototem Helps Investors Stay Up to Date on ICOs, Token Sales, and Crypto Crowdsales

Luna Crash: Tossed the Baby Out with the Bath Water

How Cronos Chain is Reforming the Blockchain Business in 2022

More than two smart guys — the vision and background of Contract Vault’s founders

Why all cryptocurrency providers need to be preparing for regulation

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
STP

STP

Core Contributor of Verse Network

More from Medium

Post II: Evaluating An Article

How to Create MetaMask wallet? Step by step guide!

Millimeter and EYES Protocol

GALAXYBLITZ AMA RECAP✍️