Home Coins Reserve Rights Token (RSR) Reserve Protocol Community AMA #7 | by Reserve Protocol Community | Reserve...

Reserve Protocol Community AMA #7 | by Reserve Protocol Community | Reserve Currency | Nov, 2020

1.1 Community

For anyone not familiar please tell us the short version of what Reserve is doing?

Nevin Freeman (CEO of Reserve Protocol)

Reserve has built a censorship resistant fiat-backed stablecoin, and has released an app in Venezuela and Argentina for using that stablecoin (RSV) as a means of savings and payments. The app is still in closed beta, and there are a lot of improvements the team is working on for it.

Long-term, Reserve is meant to be a universally accessible and stable form of money that is independent of the US dollar.

1.2 Community

What is the function of the RSR token?

Nevin Freeman (CEO of Reserve Protocol)

RSR is a governance token and transactional currency within the protocol. After an upcoming protocol upgrade, you will be able to use it to perform arbitrage under some circumstances in order to help stabilize RSV. The more it’s used for arbitrage, the more the supply will tend to go down.

1.3 Community

What in your opinion is the biggest obstacle for Reserve to overcome?

Nevin Freeman (CEO of Reserve Protocol)

Crafting the platform (which is the broader term than “app” and refers to the app and likely future webapp and desktop app) to be an all-encompassing financial account that you can use to run your whole business or your whole life, and getting it right so that it’s a joy to use, is the main challenge we are attempting to handle in the near to mid term.

In the long term, assuming that works and we get millions of users, I worry more about making sure that platform is censorship resistant enough that it thrives under 100% of circumstances around the globe.

1.4 Community

Can you tell us about the success Reserve has had so far in Venezuela?

Nevin Freeman (CEO of Reserve Protocol)

You can see our community at a glance by looking at our LATAM Twitter profile: https://twitter.com/holareserve.

Our app in Venezuela is still in beta, and we have amassed a small hardcore group of users and a growing waitlist of users waiting to join. (We need to make certain processes more scalable before opening the waitlist.)

Over the months, we have seen trust in the app grow, and users start to keep their money in their Reserve account. It functions as a way to save money that is protected from devaluations, as well as a way to convert money from one account type to another — we allow you to move money in or out from many top Venezuelan banks, as well as other accounts like foreign USD bank accounts, Argentinian peso accounts, Colombian peso accounts, etc.

1.5 Community

How many man hours would you say are being put in to the project, per week, on average?

Matthew Gertler (General Counsel of Reserve)

I think we have about 25 full time people. Assume each one works 40 hours per week and you’d have an estimate. There are also other contractors who don’t work full time.

2.1 Community

When mainnet? What does it depend on? Are there any milestones you want to accomplish before you press the button?

Nevin Freeman (CEO of Reserve Protocol)

I anticipate sometime next year. We are intending to do the mainnet launch once RSV is entering a nice upward trend of adoption that will get it a lot of attention. I can’t tell the future, but I think we can make that happen throughout next year.

2.2 Community

Can you explain the assumption of the 2–5% annual burn rate or RSR? In what circumstances would we have RSR issuance and how does that net off with the 2–5%?

Nevin Freeman (CEO of Reserve Protocol)

There are four known revenue mechanisms we see for the Reserve protocol. We will build in one or more as the core team, and perhaps the other two will end up being explored by protocol governors in the future as the project becomes more decentralized.

(There’s no particular requirement for them to be implemented by the community and not the core team, this is just the timeline I myself anticipate, as we are less revenue focused now, and in the long term if we have already grown a ton it will be more natural to focus on revenue.)

Option 1: Off-chain yield on the collateral. For example, if we are in a positive interest rate environment, then e.g. USDC generates a yield on the USD they have in bank accounts. The more USDC there are, the more money they make. So at large scales, they have an incentive to pay a portion of that yield to anyone who increases the number of USDC. So, if there are 100 billion RSV, and by being a part of the basket USDC could have e.g. $5 billion more in deposits, they should be willing to offer an interest rate to the protocol to get that portion of the basket. I anticipate a competitive marketplace, where the Reserve protocol governors will pick the highest paying tokenized currencies.

Option 2: Collateral appreciation relative to RSV, or reduction in redemption value in terms of the collateral basket. Suppose we have a diversified basket of assets backing RSV which on average appreciates a bit in real purchasing power over time. Suppose it appreciates at 1% per year in terms of the number of houses, hamburgers, corn, etc. you could buy. Then if you have RSV redeemable for 1% less of the collateral assets each year, that means RSV has a stable purchasing power, and the protocol has generated 1% in revenue.

Option 3: Transaction fees. Pretty simple — RSV users could be charged a transaction fee. I think there may be reason to be pessimistic about this option, as digital currency will be a competitive marketplace. I also have never really loved the idea of charging a transaction fee — if it could be totally free to hold and send, that just seems better. But, maybe the market will settle on stablecoins charging transaction fees at scale, so maybe RSV will too.

Option 4: On-chain overcollateralized lending, like we see in defi. The collateral tokens themselves could be lent out algorithmically, with the borrowers posting overcollateralized positions in more volatile assets like ETH etc. This is a little like Maker, except the coins you would be borrowing would be asset-backed themselves, so they have independent value regardless of their use for paying back the loans. Hence, a bit more like Compound etc., with the loans coming from the collateral basket itself. This could generate high yield, but we prioritize safety first, so would need to be done with likely more conservative margins than existing defi protocols. Also, I anticipate that RSV users would need to opt in to using a version of RSV that worked this way, and would earn a cut as well.

The 2–5% is a vague estimate. You can see from the set of options above that there is uncertainty in how the protocol will be monetized, and how much the yields / fees / etc. will be. The 2–5% estimate does not have anything to do with the scenario where RSR would be minted to handle defaults. For now you’ll have to make your own estimates of the likelihood of collateral depreciation or defaults. Maybe over time there will be a more thorough community-generated knowledge base on this. I would probably contribute if someone made that.

2.3 Community

So, how exactly do RSR holders get profit?

Matthew Gertler (General Counsel of Reserve)

Here is another brief overview of how RSR arbitrage trading works: when RSV is trading above $1.00 on exchanges, any excess RSV tokens in this pool can be purchased from the Reserve smart contract by RSR holders exclusively for $1.00 worth of RSR.

For example, say RSV was trading at $1.02. In this scenario, participants could buy $1.00 worth of RSR on an exchange. If there is excess RSV in the Reserve vault, RSR holders could then use the $1.00 worth of RSR to purchase the stablecoin through Reserve’s smart contract. Once in possession of RSV, these token holders could go back to an exchange and sell the RSV at market price, making a profit of two cents per token.

2.4 Community

The Ethereum network is stupidly expensive at the moment , to the point that there must be many who refuse to make any transactions. How can RSV work on such a ridiculously expensive network when we are targeting people to whom paying a 5 to 10 dollar transaction fee would be be a useless loss of their of their capital, potentially negating the point of them using RSV. How can Reserve even exist if they continue to use Ethereum?

Nevin Freeman (CEO of Reserve Protocol)

Right now the app works like a centralized exchange — we hold the tokens, users transact for free.

We are working on a side-chain approach for when we launch the version of the app where users transact with tokens directly. We are probably going to use the ZK Sync chain created by the Matter Labs team, pending final due diligence.

2.5 Community

Beyond your side chain solution for scaling on eth, do you have plans to expand RSV support to as many Layer 1s as possible? Imo, it’s totally necessary to maximize the crypto side adoption of RSV, as you can see the other top stablecoins are being integrated in every layer 1 that’s decent.

Nevin Freeman (CEO of Reserve Protocol)

Yes, though we are going to be patient and do it with trustless bridges at that tech is worked out, rather than building bridges that require 3rd party trust.

2.6 Community

I’ve read the Reserve whitepaper but I’m not understanding how Reserve intends to move off the U.S dollar as a peg i.e the independent phase. Is anyone out there able to provide me more details on how this will work?

Nevin Freeman (CEO of Reserve Protocol)

In the long term, the intention is to back RSV with a basket of many different tokenized assets. For example, the protocol governors could include tokenized gold, government bonds, various fiat currencies, other commodities, and maybe even low-risk equities.

If you have a basket like this, and you make RSV redeemable for the whole basket, you are no longer dependent on just the dollar for stability. The protocol could also implement a “crawling peg,” where it’s redeemable for a slightly smaller quantity of the assets in the basket over time, with the excess assets providing a yield for the protocol overall.

2.7 Community

How will arbitrage take place at the last stage, when the token is not pegged to the dollar?

Nevin Freeman (CEO of Reserve Protocol)

Same as when it is pegged to the dollar — if 1 RSV is trading for more or less than it’s worth on secondary markets, you can mint or redeem it (or buy it from the protocol with ≈1 RSV worth of RSR) and then buy it or sell it for a profit on the secondary.

2.8 Community

Any plans on being able to buy RSR in PayPal?

Nevin Freeman (CEO of Reserve Protocol)

Nothing concrete on the horizon. We are in touch with them, but I think they are going to move pretty slowly. Also, no guarantees it will ever happen.

3.1 Community

I was wondering how investors will be involved in marketing of the App once Reserve is out of beta and ready for mass adoption.

Nevin Freeman (CEO of Reserve Protocol)

I don’t anticipate that our seed investors will have a big impact on our local marketing in Venezuela and Argentina, as they are not generally well known there.

To understand our marketing approach, I suggest checking out our Twitter LATAM and Tik Tok LATAM accounts.

3.2 Community

Can you give me specific examples of what mass adoption means?

Nevin Freeman (CEO of Reserve Protocol)

10M+ people using Reserve as their main financial account.

3.3 Community

When will the iOS version of the app be released?

Nevin Freeman (CEO of Reserve Protocol)

We just got our Apple developer account ready, but we still have it on hold while we are focused on other priorities. I don’t know for sure, but I anticipate early next year we will decide to add iOS support.

3.4 Community

How are the Zelle transactions going regarding speed of execution? I know the team were experimenting with different methods.

Nevin Freeman (CEO of Reserve Protocol)

We have decided to retire Zelle outgoing transactions, since the volume limits were getting in the way of scaling. We will still accept incoming Zelle transactions, and will do outgoing USD transactions via ACH transfer and bank wire. Both of these are non-instant mechanisms, so unfortunately speed won’t be as fast as we would like. However, users can send RSV back and forth instantly, so as our user-base grows, more and more transactions will happen that way.

3.5 Community

Why don’t you guys have something like TransferWise that provides bank accounts across the globe and you be sending and receiving funds in most of the countries locally with local charges

Nevin Freeman (CEO of Reserve Protocol)

We are doing something like that, but instead of doing it as one organization, we are assembling it out of independent payment processors. This is what allows us to operate in places like Venezuela, where Transferwise cannot.

3.6 Community

Do u have an estimate on how many transactions occur on a typical day within the Reserve App?

Nevin Freeman (CEO of Reserve Protocol)

We have precise stats, but for now we are not sharing them. We don’t want to inspire competition for the time being.

3.7 Community

How many active users does Argentina have? When will the automatic transfers be made without intermediary people?

Nevin Freeman (CEO of Reserve Protocol)

We still aren’t sharing user numbers for the time being. We are about to roll out the first level of automation in Argentina, which will match the level we have with Venezuelan banks. That means you won’t interact over a chat during transactions. But there will still be some manual processes in the background, so transactions will still often take ≈5 mins.

We are looking into full automation to get transactions down to < 30 sec each. This first improvement is in QA now, will roll out any day now.

3.8 Community

What is the difference between RSV and the current in-app currency?

Nevin Freeman (CEO of Reserve Protocol)

The in-app currency (which we usually call “Reserve Dollars” — or ‘Dolares Reserve” in Spanish — for simplicity and understandability to our users) is like having an RSV balance in an exchange account. You can send your balance back and forth within the app ecosystem with no on-chain transaction necessary. You can also withdraw RSV on-chain, which we think people will have reason to do more and more over time, but for now most of our beta users don’t have a need to do that.

3.9 Community

People buy RSV in the app. Instead, they give away their national currency. What’s going on with this mass of money? I want to understand how this economy works. Still, it’s my investment. I see serious support for people suffering from hyperinflation. But who will pay for it?

Nevin Freeman (CEO of Reserve Protocol)

Our payment processors accept local currency in exchange for RSV and vice-versa. They charge a different exchange rate in each direction, thus earning revenue. The revenue they earn more than offsets their exposure to volatile local currency. The risk management for this task is complicated — don’t try this at home! Money has sometimes been lost.

3.10 Community

So when someone buys RSV in app, they will pay 1 USD and gets issued 1 RSV from the vault?

Matthew Gertler (General Counsel of Reserve)

The RSV they buy is already RSV that we’ve minted and hold ourselves. We mint new RSV whenever the amount in the app is approaching the amount we hold. We currently custody the app’s users’ RSV. This will change in future versions of the app.

3.11 Community

In what ways do you see Reserve branching out or adding additional complimentary pieces to the business model which encompass more than what it currently does, over the coming years?

Nevin Freeman (CEO of Reserve Protocol)

We are already getting requests to add payroll functionality in Venezuela, that’s an example of something we want to support as soon as we get the time.

3.12 Community

Reserve is already live in several LATAM countries. How long do you think it will take to penetrate the remaining countries in the region? How will Reserve expand after?

Nevin Freeman (CEO of Reserve Protocol)

I think it will be broken down by language. You have to have a whole support staff language-by-language. So e.g. Brazil will not be nearly as easy as Mexico.

Also, you need a leader and team that understand each region. Our LATAM leadership is near-perfect (they deserve so much more credit than they currently get, since they are anon and I am in public) and they have built a great team. So in part, it will depend on when we encounter excellent leaders like this in other regions.

4.1 Community

What is Reserve’s strategy for minimizing regulatory risk related to US sanctions programs?

Nevin Freeman (CEO of Reserve Protocol)

We run very careful checks on each user to make sure they are not a sanctioned person or entity. The heavy lifting was in understanding the sanctions executive orders, which we did with help from some of the people who wrote such sanction orders in the past as well as a prior head of the department that enforces sanctions.

4.2 Community

What are you expecting from FinCen new regulations?

Matthew Gertler (General Counsel of Reserve)

This is something that I would expect will take years to happen. I’m optimistic that the rules will be clearer as they relate to FinTech, but I’m not expecting changes that would cause significant hardship on us. If anything, I’m cautiously optimistic that they’ll be better than they are now.

With regards to the timeframe, I previously analyzed how long it has taken FinCEN to make rule changes in the past and all substantive changes I reviewed took a minimum of 1 year and I think I saw one in the 5–7 year range. Although FinCEN can move more quickly if it wants, I don’t expect them to.

4.3 Community

At this time, the team seems to be issuing RSV to select banks as liquidity providers. If one of the banks runs into operational trouble, will the tokens they were issued be recovered, frozen, or burned?

Matthew Gertler (General Counsel of Reserve)

We’re not issuing RSV to banks, but to liquidity providers. The tokens are our property, so the provider can’t use them for its own purposes, only what we tell them to do. If the provider was to go rogue, it’s hard to know what the correct action would be without knowing the facts and circumstances of the situation.

4.4 Community

Is Venezuela blocking access to Coinbase a cause for worry?

Matthew Gertler (General Counsel of Reserve)

If Venezuela was able to block our app from being downloaded, perhaps there might be an issue. RSV is an ERC20 token, so theoretically Ethereum wallets can be a backup option.

4.5 Community

At some point the protocol is expected to hold assets outside of American ones. Given that it is decentralized, what law will apply if the team stops actively managing them?

Matthew Gertler (General Counsel of Reserve)

I would probably say that the law of whatever country where people are transacting. The law is generally not applied to technology but how the technology is used. If people are selling RSR or RSV as a business, this implicates the laws of where the people are. If we’re not transacting, it is unlikely that the law would be applied to us.

4.6 Community

Would a “true” DAO fall into the realm of corporate law at some point, requiring registration in a country to operate?

Matthew Gertler (General Counsel of Reserve)

I don’t believe a true DAO would need to register. It would be impossible to know which country to register in and even if a country was mad at the DAO, who would they go after? I’ve always wondered what would happen in a truly decentralized exchange that traded security tokens where the identities of the creators are unknown. If there is no one to go after and no way to shut it down, what can the securities regulator actually do?I don’t believe a true DAO would need to register. It would be impossible to know which country to register in and even if a country was mad at the DAO, who would they go after? I’ve always wondered what would happen in a truly decentralized exchange that traded security tokens where the identities of the creators are unknown. If there is no one to go after and no way to shut it down, what can the securities regulator actually do?

4.7 Community

Do you see any legal challenges on RSR to get listed on Coinbase?

Matthew Gertler (General Counsel of Reserve)

The main legal challenge is whether Coinbase’s legal department has any concerns. According to their blog post, RSR is a token under consideration, but until we’re actually asked by them specific questions, it’s hard to identify the legal challenges.

5.1 Community

Reserve is such a great project that can solve a real world issue of hyper inflation. I am wondering why there is not much coverage in mainstream media such as Bloomberg, Forbes, and such. Is the team purposely keeping it low profile until the mainnet is launched?

Nevin Freeman (CEO of Reserve Protocol)

Yes, we turn down a fair number of interview requests. We will focus a lot more on promotion once we feel we have solidified our position.

5.2 Community

When do you project an increase in mass marketing of the project? Would this include highlighting of investor base to suggest project creditability?

Nevin Freeman (CEO of Reserve Protocol)

Around mainnet launch most likely. And yes, we will likely highlight investors to some degree at that time.

5.3 Community

There’s a photo alluding to Mexico in the list of countries for support staff — is that just where they can be based or is that forward thinking?

Nevin Freeman (CEO of Reserve Protocol)


5.4 Community

Will the US market require the same market development strategy currently in use (Market Leader/Market Team)? What are your initial ideas on uncovering US market potential?

Nevin Freeman (CEO of Reserve Protocol)

The US is where a lot of people around the world want their money to land and be stored. So first off we are focused on allowing you to convert your RSV into USD in American bank accounts (and back again), as a non-US person.

5.5 Community

Are there any non developer jobs available at Reserve? What are you guys looking for?

Nevin Freeman (CEO of Reserve Protocol)

We are seeking senior (10+ years experience) devs who have owned a dozen or more projects on their own and had to make a lot of architectural decisions on their own.

We will likely announce some other roles soon.

5.6 Community

What news can we expect by the end of the year?

Nevin Freeman (CEO of Reserve Protocol)

I don’t think there will be any earth-shattering news by the end of the year. We are working hard to improve our app technology for scaling, so that we can let many more users join. We have a long waitlist of people who would really like to use the Reserve app and our focus is serving those customers, in Venezuela and Argentina mainly.

5.7 Community

Coinbase listing will soon??

Nevin Freeman (CEO of Reserve Protocol)

Together Coinbase RSR listing I believe, when.

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