Produced by Odaily

Author | Wang Ye

Editor | Lu Xiaoming

Produced by Odaily

Author | Wang YeEditor | Lu XiaomingOn May 13, Huobi Prime announced that its third project is the stablecoin project Reserve, which aims to provide a stable global currency and digital payment system for people and businesses in high-inflation countries. Achieving property protection (moving money out of broken hyperinflationary economies into stable digital currencies), global transfers across borders, and easy acceptance of new payment systems.

Reserve has been awarded by Coinbase,

Peter Thiel (co-founder of PayPal, early investor in Facebook), Sam Altman, Distributed Global, Digital Currency Group, Blocktower, Arrington XRP Capital, Distributed Capital and dozens of investors.

According to media statistics, as of now, 466 billion U.S. dollars of funds are locked in a high-inflation currency system with an inflation rate of up to 20% every year worldwide, covering as many as 300 million people. Reserve aims to create a stable and decentralized currency system that is almost impossible to shut down. It will provide a safe and non-depreciating way of storing money for people in high-inflation countries, and empower people at any time. low-friction cross-border transfers in any location and location.

The Reserve app will be available on the Google Play app store soon.

After downloading the app for free, people in Venezuela will be able to convert their funds into Reserves, protecting their savings and purchasing power. Instead of having to spend the Venezuelan currency on hand immediately to avoid a rapid depreciation the next day, using Reserve will help people store their funds in the form of a stable digital currency to spend when they need it. Reserve is also currently establishing partnerships with merchants in Caracas, making it possible to use Reserve to purchase food and daily necessities directly. In the future, similar cooperation with merchants will gradually expand to more places.

On May 15th, Nevin Freeman, the co-founder of the Reserve project, visited the Odaily Chaohua community to explain the operation mechanism of Reserve and the practical significance of its stable currency RSV.

Nevin introduced that in order to promote the project development step by step, complete the goal of anchoring legal currency assets in the near future, and naturally transform into a multi-asset collateralized stable currency in the future, the team will mainly divide Reserve Protocol into the following three development stages:

1. Centralization stage

At this stage, the centralized US dollar will be used as the collateral asset, and the US dollar will be escrowed in a third-party trust company.

2. Decentralization stage

In this stage, Reserve's collateral assets will be composed of a basket of dynamically changing assets in a decentralized manner, but it will still ensure that stablecoins and US dollars remain relatively stable in price.

3. Autonomous phaseAt this stage, Reserve will no longer anchor the price of the US dollar, but will ignore the fluctuation of the value of the US dollar to achieve the stability of purchasing power. There will be three types of tokens in the entire Reserve system, namely:

1. Reserve Token, a stable currency (RSV), is held and consumed in a similar way to legal currencies such as the US dollar.

2. Reserve Network Token (RSR), RSR stands for Reserve Equity Token, which is a simple ERC20 token. RSR is mainly used to promote and guarantee the stability of stablecoins. RSR is the second of two tokens implemented by the Reserve protocol. RSR is not a stablecoin, it is somewhat similar to MKR, HT and BNB - users can use these tokens in transactions.

The supply of these tokens will tend to decrease if they are heavily used in the corresponding service.

The economics of RSR are somewhat similar to MKR tokens. The broad market power of the Reserve network can affect its value, so there is an investment incentive to hold RSR. Community members can decide whether to hold or consume their RSR. The Reserve team does not guarantee the future price of RSR.

3. Collateral Tokens, Mortgage Pass (RSD), which is the anchor asset used to guarantee the value of the stable currency in the smart contract (100% mortgage rate, mortgage assets include tokenized commodities, currency securities or mainstream digital assets, etc.). The mortgage assets held by the Reserve protocol are the collateral assets of the stable currency RSV in the smart contract. Assets used by market participants to purchase RSV are placed into these smart contracts and held as collateral when new RSV is sold on the market. This maintains a 1:1 ratio of Reserve issuance to collateral even as supply increases.

How to stabilize the Reserve Token (RSV)?

When demand rises, the same mechanism works in reverse. If the price of Reserve Token (RSV) on the open market is $1.02, speculators will happily buy newly minted RSV with $1 worth of assets or RSR and immediately sell them on the open market until it is unprofitable, and That is when the market price equals the purchase price of $1.

The following is the community Q&A session

At this point, the mortgage asset value is lower than the RSV market price. In this case, in order to maintain the target collateralization ratio, additional funds need to be added to expand the supply of RSV to reduce the market price of RSV. To this end the Reserve Protocol will mint and sell RSR in exchange for additional RSV. These additional assets will not go to waste - when the target collateralization ratio is back to 1:1, the additional collateral will be returned to holders of the Reserve Stake Token (RSR).

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The following is the community Q&A session

Q1: Can you briefly introduce Reserve and your team? And why are you doing this project? What is the significance of doing this project?

Nevin Freeman: The Reserve Protocol defines two types of tokens: Reserve Token (RSV) - a stablecoin, Reserve Stake Token (RSR) - a utility token with multiple functions in the network. The Reserve project was started by a group of people who believed that a cryptocurrency would outperform fiat currencies. However, there is no guarantee that any existing solution will be universal, maintain stable purchasing power, and will not be shut down.

Our goal is particularly simple: to create a currency that is the most accessible, economical, and attack-resistant. In time, we can convince a large portion of the world to use this currency instead of other currencies.

We want to solve the core problem of existing fiat currency systems, many existing fiat currency systems work so well that residents of most developed countries need hardly worry about inflation or deflation.

However, there are still 16 countries in the world with annual inflation rates above 20%, but the situation in Venezuela is particularly serious. The Venezuelan currency depreciated by nearly 10% almost every day, and the entire country fell into the disaster of poverty and famine. In 2017, Venezuelans lost an average of 24 pounds per person. The presence of Reserve in Venezuela will help people protect their money from depreciation while buying the food and groceries they need.

In developed countries, where money and payment systems are well established, the process of switching to cryptocurrencies in these countries is obviously not easy. But in regions where the economy has effectively collapsed, the need for an alternative currency is real.

Q2: Looking through your white paper, we don't quite understand one thing. As a stable currency, why should it be depegged from the US dollar in the end? And why issue a centralized stable currency in the first place?

Nevin Freeman: The initial version of the Reserve protocol will contain a relatively centralized phase. Over time, each protocol component will gradually transfer to the chain and gradually leave the control of the founding team, and eventually become completely decentralized. centralized.

The reason why we want to depeg from the U.S. dollar in the future and anchor a basket of countries’ legal currencies or assets in the future is mainly for the following two reasons: First, we don’t want to maintain the stability of the currency by anchoring the U.S. dollar. What if the system collapses one day in the future? Secondly, we believe that the act of anchoring any country's legal currency is centralized, which is contrary to the decentralized nature of the blockchain.

Q3: How is RSV different from other stablecoins?

Nevin Freeman: We believe that any stablecoin must have 3 properties in order to be successful in the long term: it must be stable, scalable and decentralized. The reasons it has to be stable are obvious; scalable to meet the requirements of a stablecoin; and it has to be decentralized because if it is large enough, governments cannot shut it down in the future.

We believe that other stablecoins are either designed to be scalable or decentralized, but not both. We think we have found a way to design stablecoins that are stable, scalable, and decentralized at the same time. You can learn more about us here.

Q4: Can you introduce the RSR token? What is its relationship to RSV? How do the two work together?

Nevin Freeman: In the Reserve protocol design, RSV is a stable cryptocurrency that can be held and spent like we use the US dollar and other stable fiat currencies. It is a decentralized, asset-backed stablecoin. It is backed by a package of what we call “collateralized tokens” — individual asset-backed currencies, like tokenized currencies, tokenized government bonds, and tokenized commodities.

RSV transactions are subject to a 0.1% transaction fee, which is adjusted over time.

If RSV demand falls, expect prices in the secondary market to fall. What happens next?

Assuming that the redemption price of the Reserve token is $1, if the price of the Reserve token on the open market is $0.98, arbitrageurs will be motivated to buy and redeem it with the Reserve smart contract in exchange for a mortgage token worth $1. They will keep buying Reserve tokens on the open market until they are no longer profitable, which is when the market price equals the $1 redemption price.

When demand rises, the same mechanism works in reverse. If Reserve tokens are priced at $1.02 on the open market, speculators will be happy to buy newly minted Reserve tokens with $1.00 worth of collateralized tokens or Reserve equity tokens (RSR, only possible if there is an excess mining pool) Tokens are issued and immediately sold on the open market until unprofitable, that is, when the market price equals the purchase price of $1.

Other assets held in smart contracts to back the value of the Reserve token are similar to how the U.S. government backed the U.S. dollar with gold in the past. The protocol is designed to hold collateral tokens worth at least 100% Reserve tokens. Many collateralized tokens will be tokenized physical assets, such as tokenized commodities, currencies, and securities. As more and more asset classes are tokenized, portfolios will gradually diversify from simple to diversified over time.

The Reserve team has partnered with a Nevada trust company to tokenize U.S. dollars, similar to other U.S. dollar-backed currencies in circulation today.

These tokenized mortgage assets will be registered in many different countries. If any tokenized asset is facing regulatory pressure, the Reserve smart contract will be able to trade these tokens for other collateral tokens, thereby reducing its dependence on the country where the tokenized asset belongs to. This is somewhat similar to EOS - there are points of centralization, but they can be easily overruled at any time.

If the staked tokens are completely defaulted for some reason, the lost value can be recovered by minting and selling other RSR tokens.

• RSR is the second token in the Reserve network and is a standard and unstable encrypted asset. If RSV tokens increase in circulation and use, the supply of RSR tokens will decrease, as RSR will be used for some transactions in the protocol and burned.

• RSV transaction fees are paid in RSV tokens. As collateral assets increase in value, we mint additional RSV tokens to back up the increased collateral value.

When RSV tokens are trading above $1.00, then any excess RSV tokens in the pool can be purchased from the Reserve smart contract. Only RSR token holders can purchase. RSR tokens are destroyed once the purchase is complete. Buyers are generally arbitrageurs, and their model is as follows:

Buy $1.00 worth of RSR on an exchange;

Use the Reserve smart contract to trade $1.00 worth of RSR for one RSV;

In this way, the supply of RSR tokens can be reduced.

Assume that $1 million in RSV tokens has accumulated in the pool. This will result in the burning of approximately $1 million in RSR tokens.

In this way, the larger the RSV spread, the greater the reduction in the supply of RSR.

Q5: What is a mortgage token? How to ensure that RSV is backed by corresponding legal currency assets?

Nevin Freeman: Our mortgage certificate is a tokenized US dollar, similar to USDT or TUSD. We have completed the audit work, and we still have US dollar-backed assets. In the next step, we will also issue assets similar to U.S. treasury bonds. This form, because its advantage is that there will be certain benefits, which is also beneficial to the entire system. In the future, we will also tokenize foreign currencies or foreign government bonds, or tokenized commodities or equity.

In the short term, it is guaranteed by the US dollar. In the long run, we want to realize its global stable value, so we will realize a diversified form of token value on a global scale, because we ultimately want this token to be able to become an indicator of changes in the global economy.

Q6: Are the application scenarios of decentralized stablecoins and centralized stablecoins consistent? If inconsistent, what are the application scenarios?

Nevin Freeman: Our decentralized stablecoins are similar to centralized ones in some respects. We are not only targeting digital currency traders, but we also want this currency to enter circulation and apply it to legal tender issues for comparison Consumer apps issued in many countries, such as Venezuela, circulate as a local digital currency.

Q7: What platform is Reserve currently released on?

Nevin Freeman: Initially it was issued on Ethereum, and we will also publish it on other platforms in the future. For example, we will also negotiate with Neo, hoping to issue it on it. We will issue it on the United States or other platforms. Future plans It is to be able to issue and use our stable currency on multiple platforms.

Q8: How does Reserve manage?

Nevin Freeman: Governance is never easy. Our best way to do it right is based on a reputation system rather than an ownership system. Because a system based on ownership has the disadvantage that anyone with money can manage to control the outcome.

At the same time, decentralized governance still seems to have a long way to go, and we are skeptical of the methods currently being tried.

We try to cautiously advance decentralization over time, and only make big strides when we are confident that the approach we're taking is working. We believe that this is as difficult as drafting a constitution for a new country - a task not to be taken lightly.

Q9: It is mentioned in the white paper that Reserve’s token transfer fee is initially 0, but it is variable. In the early stage, the transfer fee was determined by the team. I would like to ask whether the transfer fee is a profit point for the team itself, or is there a Other ways to make money?

Nevin Freeman: There are two main income methods. This income is for the entire network rather than the company. One is the transfer fee, which is about 0.1% for each transaction. Another benefit is that the assets we hold have appreciated in relation to the way we pay. For example, we hold treasury bonds, but we pay in US dollars. The appreciation of treasury bonds will bring us additional benefits.

Q10: How to convince Peter Thiel to invest in Reserve?

Nevin Freeman: Peter funded one of my previous companies, so I had an early connection with him. But we didn't really know each other because it was the partner of my previous company who was communicating with him.

When we decided to launch Reserve, we realized it was a lot like what PayPal was trying to do in the first place. So I asked my former partner to introduce us. To my surprise, he agreed to meet and have dinner with me.