About Reserve Protocol
The Reserve protocol is the first platform allowing the permissionless creation of asset-backed, yield-bearing & overcollateralized currencies. Reserve’s mission is to increase the adoption of and access to stable, long-lasting, inflation-resistant currency.
The Reserve protocol — available on Ethereum, Arbitrum, and Base — is entirely permissionless, meaning anyone can deploy an asset-backed currency (“RToken”) with their preferred collateral basket, governance system, and revenue distribution.
This works similarly to how anyone can create a new trading pair on Uniswap. The protocol has a system of factory smart contracts allowing users to deploy their smart contracts by interacting directly with the Reserve protocol’s smart contracts or any user interface built on top of it.
Users also get such data as usage and stats related to RTokens, RToken minting & redeeming, and RSR staking.
About RTokens
RTokens are stablecoins, flatcoins, or indexes created on top of the Reserve protocol. RTokens are fully asset-backed by any combination of ERC-20 tokens and can be protected against collateral default by Reserve Rights (RSR) staking.
The Reserve protocol allows users to create novel tokens backed by baskets of ERC-20 tokens on Ethereum, Base, and Arbitrum chains.
RToken’s Key Features
Source: Reserve Protocol Docs
- RTokens can be minted by depositing the entire basket of collateral backing tokens and redeemed for the entire basket. RTokens can be traded at the market value of the entire basket that backs it, depending on its proportions.
- RTokens can be overcollateralized. If any of RToken’s collateral tokens defaults, a pool of first-loss capital is provided by RSR stakers to make up for the loss.
- Staked RSR can be seized in the case of a collateral default. This process is entirely mechanical based on on-chain price feeds, and does not depend on any governance votes or human choices.
- RTokens generate revenue from yield-bearing tokenized assets such as stablecoins in lending protocols or liquid staking solutions like Rocket Pool and Lido.
- RTokens can generate and share revenue. This revenue is the incentive for RSR holders to stake. Revenue can come from yield from lending collateral tokens on-chain or revenue shares with collateral token issuers.
- Governance can direct any portion of an RToken’s revenue to RSR stakers, to incentivize RSR holders to stake and provide over-collateralization. If an RToken generates no revenue, or if none of it is directed to RSR stakers, it probably won't have any RSR staked on it, and thus won't be protected by over-collateralization.
- Each RToken is governed separately, so each can have a completely different governance system.
RTokens: Use Cases
Some of the primary use cases thus far are:
1. a more decentralized USD-backed coin, which reduces dependence on any one fiat coin issuer;
2. a single, simple USD-based coin that packages the yield of DeFi protocols.
Tokens deployed on the Reserve Protocol promise the following perks for the deployers:
Source: Reserve Protocol Docs
Is the Reserve Protocol Safe?
Audits
Reserve protocol builds a safe and stable asset-backed currency platform. Thus, the Reserve Protocol team prioritizes security by undergoing numerous audits conducted by the leading security firms.
Smart contract security audits:
Auditor | Date | Report Link |
Trails of Bits | Aug 2022 | Report |
Solidified | Oct 2022 | Report |
Ackee | Oct 2022 | Report |
Halborn | Nov 2022 | Report |
Code4rena | Mar 2023 | Report |
Code4rena | Jun 2023 | Report |
Code4rena | Jul 2023 | Report |
Trust Security | Feb 2024 | Report |
Solidified | Apr 2024 | Report |
Source: Reserve Protocol Docs
Bug bounty
The Reserve Protocol team wants to motivate the community to undertake their audits and will reward users for any vulnerabilities they find.
Bug bounty: $5,000,000.
See additional details of the program, or report any findings here.
Reserve protocol risks
The interaction with the Reserve Protocol has some risks. However, warning - means armed. The protocol does its best in outlining risks and empowering users.
The Reserve Protocol is built using smart contracts. Any undiscovered bugs or vulnerabilities in those contracts lead to the loss of user funds. Although the protocol's contracts have undergone many security audits, they can’t guarantee complete security.
Smart contract-related risks can manifest in a variety of ways. Find the whole list in the Reserve Protocol docs.
Q & A
- What are RTokens and how do they differ from USDT to USDC?
“RToken” is the generic name for an asset-backed currency that gets created on top of the Reserve protocol. RTokens may comprise any combination of ERC-20 tokens and can be protected against collateral default by Reserve Rights (RSR) staking. Each RToken is governed separately. While RTokens may contain USDT and/or USDC, they differ in that they’re entirely decentralized, permissionless, and overcollateralized.
- What is ETH+?
ETH Plus (ETH+) is a safety-first diversified ETH LST index with up to 4% APY to holders. ETH Plus’s asset basket comprises yield-bearing Staked Frax ETH (sfraxETH), Lido Wrapped Staked ETH (wstETH), and Rocket Pool ETH (rETH). ETH+ is available on the Ethereum mainnet and can be bridged to any blockchain. More information on ETH+ TVL, asset-backing, and over-collateralization on app.reserve.org.
- Does Reserve publish reports about RWA that back RTokens? Where can they be found?
Thanks to the decentralized and permissionless nature of the Reserve protocol, information about RToken backing assets is available transparently 24/7 on-chain. This info is presented in a human-readable format on each RToken’s page on the Reserve Register app. On the ETH Plus page, for example, users can see that its basket comprises 33% Staked Frax ETH (sfrxETH), 33% Lido Wrapped Staked ETH (wstETH), and 33% Rocket Pool ETH (rETH). RToken collateral baskets are decided via governance by the respective RSR stakers following the RToken’s mandate.
- RSR made a sharp increase against the dollar in 2021 and then bounced back. What was the cause?
Rather than spending time analyzing market actions, we’re focused on building out the protocol and ecosystem. In short, more RToken adoption = more opportunities for RSR governance and over-collateralization.
- What is the Reserve’s roadmap soon?
Understandable that people would be interested in a public roadmap with deadlines and promises like a web2 company. We don’t do this because future promises can invite nefarious exploitation and — more importantly — legal risks! Instead of roadmap things, we tend to focus on on-chain data as the main storytelling device, as well as a track record of activities in the ecosystem — like the fact that RTokens have amassed $200M+ market cap.
Don’t think of “Reserve Inc” (which actually does not exist), think of the Reserve ecosystem, which includes core contributors like MobileCoin, UglyCash StakeDAO, Aerodrome, Beefy, Curve, Convex, Concentrator, and many others.
In terms of what’s important in 2024:
More RToken deployers + more RToken integrations (aka use cases) = RToken adoption. Super basic formula.
More RToken adoption = more opportunities for RSR governance and over-collateralization.
- Will Reserve run any incentive or airdrop campaigns soon?
There never has been and never will be an airdrop from the Reserve protocol. Information about DeFi earn opportunities is published regularly on the Reserve 𝕏 (formerly Twitter) account as well as https://app.reserve.org/earn.
- In which jurisdiction is the Reserve located?
Reserve isn’t a company but rather an ecosystem consisting of many companies and people from around the world
Final Thoughts
The Reserve protocol seeks to increase the adoption of and access to stable, long-lasting, inflation-resistant currency. The protocol gives freedom in creating a stablecoin for any user who is interested in it.
The mission of de-dollarization and de-risking can play a crucial role in supporting decentralized stablecoins. The Reserve Protocol’s model can help with the inflation issue which is one of the most severe problems in nowadays economics.