[RFC] eUSD Collateral Basket Change Proposal 5

[Sawyer]

Summary

This proposal replaces low yielding collateral assets with higher yielding collateral assets that maintain a similar risk profile and reduces eUSD’s exposure to lending markets by 50%.

Current Basket:
33% Comp V3 USDC: 3.2% APY
33% Aave V3 USDC: 4% APY
33% Comp V3 USDT: 3.6% APY
Blended Yield: 3.6% APY
Lending Market Exposure: 100%

Proposed Basket:
50% Aave V3 RLUSD: 7.1% APY
50% Curve RLUSD/USDC: 8.1% APY
Blended Yield: 7.6% APY
Lending Market Exposure: 50%

New Asset Addition:
Ripple USD
Ticker: RLUSD
Contract Address: 0x8292Bb45bf1Ee4d140127049757C2E0fF06317eD
Current Circulating Supply: $1,156,463,817

New Protocol Addition:
Curve: a non-custodial decentralized exchange.
TVL: $2,117,172,455

*APY and TVL Snapshot was taken on 11/23/25

Abstract

The Proposal if enacted would remove Compound exposure from the collateral basket entirely and adjust eUSD’s underlying protocol weight to 50% Aave and 50% Curve. Assuming the Curve pool stays balanced, the underlying asset composition of eUSD would be approximately 75% RLUSD and 25% USDC.

Problem Statement

On November 4th 2025, Gauntlet proposed pausing Compound’s Ethereum USDC, USDS, and USDT Comets due to the concerns around Elixir’s assets being used as collateral: sdeUSD and deUSD. The proposal passed and shortly after the pause was enacted, deUSD and sdeUSD lost peg and created a total of $7m of bad debt across the affected Comets. Compound used its Reserve’s to pay off the bad debt to ensure no supplier was negatively impacted. eUSD is a supplier in both the USDT and USDC comet, and during the pause, eUSD redeems were not operational as withdrawing existing liquidity in these comets were paused. (Aave was not impacted by Elixir.)

eUSD has a layer of overcollateralization from RSR stakers that will protect eUSD in the event that any debt socialization is large enough to negatively impact eUSD’s supply position in a lending market.

eUSD’s exposure to lending markets is at 100%. Due to the flexibility and composability of the Reserve Yield Protocol, eUSD can seek other collateral backing options outside of lending markets that remain aligned with the mandate and provide yield to RSR stakers.

Rationale

eUSD Mandate:
“1. Maintain a $1 USD peg and be fully collateralized. 2. Generate yield to eUSDRSR stakers who provide overcollateralization.”

Ripple USD:
Ripple USD (RLUSD) is Ripple’s U.S. dollar–backed stablecoin. Each RLUSD token is supported one-to-one by cash deposits, U.S. Treasuries, and cash equivalents. Ripple USD (RLUSD) is designed to maintain a constant value of one US dollar and is redeemable 1:1 for US dollars. RLUSD is issued under regulatory oversight, and it has approval from the New York Department of Financial Services (NYDFS) and the Dubai Financial Services Authority (DFSA). Additionally, according to bluechip.org RLUSD has an “A” rating, making it one of the most trusted stablecoins in crypto.

Aave RLUSD:
Aave is a decentralized liquidity protocol that is built on a supply-and-borrow model, it enables users to supply liquidity and, in return, allows other participants to borrow against supplied collateral. The RLUSD supply side on Aave is earning about 7% APY through added Merkl incentives. The Supply cap is set at 600m with 599m supplied and the Borrow Cap is set at 240m with 120m borrowed. RLUSD cannot be used as collateral.

The Aave USDC supply is currently in the eUSD collateral basket at 33%, however the APY of this market is not offering a competitive yield which is the main driver of this proposal.

Curve RLUSD/USDC:
Curve is a decentralized exchange (DEX) and automated market maker (AMM). RLUSD/USDC is a Stableswap-NG pool. The Stableswap pool is for assets expected to hold a price peg very close to each other, like a pair of stablecoins i.e. RLUSD and USDC. Stableswap-NG is an improved version of the first Stableswap implementation. It is gas optimized and also includes dynamic fees which increase as liquidity utilization increases. The pool is being incentivized and is earning 8% APY in RLUSD and a daily Base vAPY of 1.7%. The total pool TVL is $66m broken down to $49m USDC and $17m RLUSD.

Why Curve and not Convex Finance?

Convex Finance is a yield optimizer for the Curve Ecosystem, however the yield being generated from this pool comes in the form of RLUSD incentives and trading fees(vAPY), the yield offered on Convex will be the same on Curve. The incentives for this pool are not coming from CRV emissions and therefore Convex will not offer a higher APY. Without a higher APY, the additional smart contract risk and complexity of Convex is not worth considering.

Risks

Liquidity Risk: When/how users can deposit/withdraw funds.
Aave RLUSD:

• The borrow cap is 40% of the supply cap. With these guardrails in place for this market, it is unlikely that the lenders will run into a scenario where they will be unable to withdraw their funds due to the funds being borrowed(i.e. high utilization for an extended period of time).

• eUSD is unable to supply into this market as the supply caps have been reached. Once supply caps have been raised then eUSD will be able to deposit ~10m into this market.

• Continuous monitoring of the supply cap is necessary. Once eUSD has a position in this market, if supply caps are reached, then new mints will fail.

Curve RLUSD/USDC:

• Potential loss in slippage from trading in/out of RLUSD.

• RLUSD/USDC Pools on both Uniswap and Curve are out of balance.

• Given the current onchain liquidity, about $14m in size can be swapped with less than 0.5% of slippage.

Liquidity Risk Solution: A possible interim step can be considered until the supply caps are raised on the Aave RLUSD market.

Interim Step 1 Basket:

100% Curve RLUSD/USDC: 8.1% APY

ABC Labs to simulate the collateral basket change and confirm liquidity conditions work before proceeding.

Once supply caps are raised governors can proceed with the final composition proposed in this proposal.

Proposed Basket:
50% Aave V3 RLUSD: 7.1% APY
50% Curve RLUSD/USDC: 8.1% APY

Yield Volatility Risk: Yield returns over time.

Aave RLUSD:

• The yield comes from a program initiated by the Aave DAO and implemented by Merkl. Aave Labs does not guarantee the program and accepts no liability.

• The yield needs to be continuously monitored, if the program ends, governors should act to remove this collateral asset from the eUSD basket.

Curve RLUSD/USDC:

• The yield comes from Ripple incentivizing the pool with RLUSD rewards.

• The yield needs to be continuously monitored, if the program ends, governors should act to remove this collateral asset from the eUSD basket.

Standard Reserve Protocol Risk:
eUSD governors should be aware that RSR seizure can occur during normal rebalancing. The backing buffer is set at the recommended value(0.15) to mitigate this risk. Additionally RLUSD has deep onchain liquidity and is unlikely to see trade slippage(ABC Labs to confirm) that would result in RSR seizure.

Additional Considerations:
eUSD is currently being used in an “earn program” with Sentz and UglyCash. Governors should understand if this new asset backing allows both Sentz and UglyCash to continue using eUSD in their respective earn programs.

• Yes, I am for this proposal
• No, I am against this proposal

[Braden]

Great proposal. At this point, eUSD seriously needs any advantage it can get.

It seems like eUSD is an incredibly unattractive stablecoin, even if we give underlying collateral yield to fintechs as an example for other fintechs to join in. I’ve been scratching my head for a long time trying to figure out why it’s so unattractive. Perhaps we are still operating in stealth mode.

Perhaps this extra yield will make a difference, but I’m not convinced it will. Even if the Ripple collateral is more risky, it’s worth a shot. After all, stakers will foot the bill if collateral defaults, so the fintechs using eUSD have nothing to lose and everything to gain. If we don’t please the fintechs, eUSD TVL will go even lower and they’ll just use something like USDC instead.

Let’s just try it.

[Fernando]

I like the idea and I am in favour of this proposal.

Finally I feel RSR stakers will be happy earning a higher APY and more people will join it.

My only suggestion would be to find a third basket with similar APY to dilute the risk of a default. Being exposed to only 2 baskets seems more risky. I would not know which asset to suggest but I am sure your DEFI heads would know.

Let’s make RSR GREAT!

Sincerely, Fernando

[josh]

@Braden it’s a good question. @Sawyer has there been a share on the Fintech’s talked to & underlying why’s? Not sure if this is more the ABC vs. eUSD level, but if eUSD was looking to have more fintech’s in the program I’d be interested in the outreach scope & learnings.

@Braden on reasons why…I can share from our experience some of the knocks against it.

• Not Genius Compliant - making it difficult for both access to some geos & getting centralized banking/payments partners comfortable.

• Expensive Settlement - Needing to settle with banks, card networks etc when needing to mint/redeem to a currency they take

• Early for CEO Stamp - Very easy for a CEO to say YES to a regulated Stablecoin-as-a-Service provider (like Paxos/Stripe) or even a wrapper of Genius Compliant versions (like M0)

• Risk Control - Fintechs will have very different understandings of DeFi and risk level tolerance…the more that may bundle in with other Fintechs with different models, that can get complex for them (vs. M0 where there’s a single Genius compliant thing that it is, that fintechs buy into. No future variability)

  ie: lost

[josh]

An aside thought, with how much cash Ripple is throwing at this….There may be a strong opportunity for eUSD if Reserve explores a shared RLUSD ↔ eUSD Curve pool.

Why this matters:

• RLUSD already has a deep, heavily-incentivized Curve pool (~$60M+).

• eUSD pools are still small, limiting routing and exit liquidity.

• Combining Reserve’s Curve/CVX power + Ripple’s Merkl incentives could create a far more efficient liquidity plane than eUSD/USDC alone.

Key “if → then” questions:

• If Reserve can deploy meaningful Curve gauge weight, then how much TVL/APY lift could a shared pool achieve?

• If Ripple continues RLUSD Merkl incentives, then does stacking them with Reserve’s votes create better emissions efficiency for both sides?

• If a shared pool could realistically reach $20–40M TVL, then it is a meaningful liquidity upgrade for eUSD vs. the current.

• If eUSD gains deeper routing and visibility next to RLUSD, then does this strengthen the eUSD opportunity & broader RToken ecosystem?

  • it would solve a few of my points above for “other fintechs” and us as well.

Potential upside (if numbers line up):

• 5–10× deeper liquidity for eUSD

• Better emissions efficiency (your votes + their incentives)

• A credible liquidity plane bridging decentralized and regulated USD assets

[0xJMG]

@Sawyer great proposal for yield boost + reduce lending market exposure.

@josh incredibly valuable ‘insights from the street” you’ve shared, this brings everyone along on the journey to co-own the outcomes. Thank you for helping the community out of guessing-purgatory. Also terrific call to action on what sensitivities others Fintechs are feedbacking - hope you @Sawyer can collate this with ABC and share for public discourse. Imperfect sobering transparency can lead us to healthier discourse, enrolling more co owners and amplifiers.

EUSD is at an important juncture whether to have its eggs all in one basket Ugly Cash or to become core infra for an array of fintechs that would benefit from (1) avoiding costly stablecoin startup/management/compliance expenses, (2) plus proven yield sharing (3) while adding the already black swan tested resilience of RSR-powered onchain operations and overcollateralization.

[Sawyer]

@josh

@Braden it’s a good question. @Sawyer has there been a share on the Fintech’s talked to & underlying why’s? Not sure if this is more the ABC vs. eUSD level, but if eUSD was looking to have more fintech’s in the program I’d be interested in the outreach scope & learnings.

@Braden AFAIK, one of the reasons that ABC Labs didn’t work to expand the FinTech RevShare program to multiple FinTechs was due to regulatory uncertainty. One of the FinTechs I wanted to include was Holyheld, at one point they had already integrated with multiple yield DTF’s on their own and so it seemed like a natural fit, this obviously hasn’t moved forward. I’ll leave it up to ABC Labs to correct me or share more info from their point of view.

That being said, I’m getting ready to announce a new partnership for eUSD, this was coordinated without ABC Labs, so it’ll be interesting to see if they are in support or not when it hits the forums for gov approval. When? Soon.

[Sawyer]

I don’t actually think a RLUSD/EUSD pool makes sense.

The incentives attract mercenary capital, if a flywheel hasn’t been established that can sustain itself, the capital will leave as soon as the incentives stop.

I don’t actually believe that eUSD will benefit from any onchain liquidity at this juncture. Currently eUSD’s only distribution is through the FinTechs. Onchain liquidity has only made it easier for UglyCash to swap for eUSD as opposed to mint then bridge.

Unlike other stablecoins where there is a central issuer, with eUSD, the Reserve Protocol is the sole issuer of new units.

I would like to see ALL onchain liquidity removed for eUSD AND I want to see everyone who uses eUSD interacting with the Protocol as opposed to swapping for it. I think Protocol TVL is more important than onchain liquidity.

Additionally, I would like to see infra developed for FinTech’s so that they can integrate their customers directly into the Reserve Protocol. When 1 USD comes into their app and is deposited in the UI for eUSD, there is an immediate interaction with the protocol i.e. automation as opposed to manually swapping. UglyCash leverages Base, so I’m unsure what sort of eng lift is needed to implement this or if it’s even possible. Might need a buffer of some sort to enable this automation.

Lets get spicy and add a mint fee and redemption fee(>mint fee) into the yield protocol inorder to generate more revenue(burn or pass down to stakers).

@0xJMG Any thoughts on this?

[0xJMG]

Bear (and bull) with me. Some thoughts…

The last 18 months was indeed a big bang increase in stablecoins and stablecoin issuance platforms across both GENIUS aligned and permissionless models. Interesting seeing SKY and FRAX pivot toward GENIUS adjacent.

Stablecoin issuance itself is becoming commoditized. Value differentiation is built-in-distribution (e.g. Stripe, Klarna, MetaMask), hyper-efficient liquidity including bridges into TradFi, and bundled neobank-like services such as debit cards, savings, yield, lending, insurance or other killer apps. Watch DeFi experiments from fxUSD/fxSAVE, crvUSD and alUSD v3 for the new killer app stuff.

Many teams pursuing GENIUS alignment are building neobanks around their stablecoin and in some cases buying legacy businesses to give its purpose in life. e.g. Ripple’s purchases of Hidden Road and GTreasury.

Defipunk aligned teams are pursuing a similar neobank but with (1) permissionless access, (2) onchain transparency, (3) NATIVE YIELD, (4) no middlemen and (5) programmatic safety-nets. Etherfi and Aave will lead with +100s of contenders following. Some mixing regulatory alignment with Defipunk, see Coinbase / Morpho’s mullet.

Josh’s RLUSD-eUSD pool idea mentioned above is an interesting but assumes eUSD’s strategy is settled. Is it?

eUSD has effectively become an onchain RSV for Ugly Cash. It has not added fintech partners, its brand has not expanded, and TVL has stalled. No hate. Its hard out there but these issues are drawing legitimate concern.

Across the community I see bursts of interest in wanting to pursue more fintech integrations, but not necessarily a complete strategy, defined ownership and a funding plan to execute. This cannot be done properly with one person at 10% of their time.

Josh dropped some gold in this thread and we should treat it as SIGNAL. eUSD is not ideal today for partners that want GENIUS alignment, low-cost TradFi settlement, quick & easy executive decisions, or traditional risk frameworks.

But which prospects are early enough, small enough still where eUSD can do the hard work for them? And they get all the benefits mentioned in my 1,2,3,4,5 above while accessing the infamous 1970s Visa co-op benefits that kicked off eUSD’s fintech strategy in Summer 2024.

There might be 20 to 40 smaller teams still searching for PMF that might benefit from eUSD, but finding them will take work. Nook and Tuyo are examples maybe worth targeting.

ABC Labs already explored this fintech space for eUSD in Q3 2024, so repeating that effort without sharing their findings would be wasteful. Those findings + Josh input = a pattern, we can build on.

On fintech value adds, we should also map what else could be bundled from the Reserve ecosystem. One option is a co-op package built around eUSD plus assets like ETH+, CMC20 and a tokenized gold DTF that spreads counterparty risk and offers censorship resistance with yield via aTokens, Uni LP positions and similar. Get some gold-inspo here: https://x.com/0xJMG/status/1978927204672376964

It would be helpful for other RSR community members to weigh in where they have strong views. There is mixed sentiment around eUSD, and this is a good moment to surface it directly.

eUSD brand omnipresence is sorely needed. Whatever strategy and differentiation pursued for eUSD, it will need consistent marketing and daily education in the places prospective users spend time. Could include X, Reddit, YouTube, TradFi banking pub audiences looking to modernize or an AI search strategy that could convert at 10–40% vs 1–2% from SEO: https://x.com/gregisenberg/status/1966611467714916629?s=61&t=DurRFeTMENiqwE87909Hww.

Sorry for the long post. TLDR:

• Clarify eUSD’s strengths and weaknesses in the current market.
• Identify which Reserve assets could add meaningful, differentiated value to a bundle.
• Gather detailed feedback from past fintech conversations to understand what resonated and what did not.
• Build an updated strategy with clear milestones and success metrics.
• Secure funding and the right talent to execute with professional standards.
• Push hard once the plan is locked.

For context, I wrote this based on market observations. I do not hold eUSD, though I borrow it against my ETH+ position on Morpho. This is not a full strategy review since I am not directly involved in eUSD work. That said, I am willing to contribute a few hours each month on a volunteer basis. Use me wherever it helps.

p.s. recognize my post was mostly a long winded answer to @Sawyer question while being a bit out of scope from the original post here. Happy to move it to a new post should someone kick it off. In the meantime lets crack some eggs and make an omelette.

.

[0xJMG]

p.s.s excited about your upcoming announcement Sawyer

[ham]

Wow, very impressed with the discussion here. Don’t think it would be difficult to tease out some high priority action items to set the foundation for a stronger eUSD offering in 2026.

Firstly, however, i’d like to focus on the proposed basket.

1. Heavy RLUSD exposure

Despite it not being explicitly stated in the mandate i’m uneasy with the proposed basket being ~75% concentrated in RLUSD. Firstly, this weight would leave us with a diversification ratio of 0.375 which feels low when there are so many stablecoin yield offerings out there. Also, this level of concentration is well above the level of overcollateralization that eUSD enjoys, it the event of a significant depeg where RLUSD is written off at or close to zero, however unlikely, RSR stakers will be completely wiped out and eUSD holders will be left with a sizeable haircut.

The concentration in RLUSD is even more concerning when you take into account the falling level of overcollateralization which now sits at 44%. While the recent sudden drop can be attributed to the short term negative price action of RSR I expect RSR to continue trending down as revenue share is transferred from stakers to UC. For reference the latest proposal plans to reduce revenue shared with stakers by a further 2.9%.

However, I will concede i’m less worried about the concentration given the strong bluechip rating and protocol mechanics which means a depeg is unlikely and if it were to happen the protocol would likely flee for it’s emergency collateral well before a scenario which would see the RLUSD allocation being written to zero and eUSD holders take a haircut. Although this is DeFi and strange things can happen e.g PAXOS accidentally minting $300T PYUSD which also enjoys a A- rating on Bluechip. It’s also worth noting the current imbalance in the RLUSD/USDC Curve LP so total actual exposure to RLUSD sits slightly lower at 63% based on Sawyer’s numbers.

2. Supply Caps

Before we proceed to onchain voting i’d like so more information on the Aave supply cap. Currently RLUSD supply is sitting at it’s $600M supply cap demonstrating huge demand for the yield opportunity. However, in my mind given the way eUSD operates we can’t operate in an environment where the markets supply cap is close to or has been reached seen as though mints will fail. In this situation it’s also unlikely we can just reduce our exposure to the market seen as though other market participants will enter and fill the gap leaving us no option but to completely exit the position. With this in mind it leads me to think that this market is better off left alone until it has found equilibrium between supply and demand, unfortunately though this means likely the last ones to the table in terms of yield.

3. Duration of incentives

As per the Merkle campaign the incentives for the Aave RLUSD market as due to expire in 5 days. While i’m sure these are planned to continue it’s probably worth trying to find out the planned level of incentivization and their duration before going ahead with the rebalance. I’d hate to rebalance into the proposed basket just to rebalance out a month or so later if / when these incentives dry up.

I acknowledge this will be hard to get from Ripple directly but maybe they have published in on socials or in their blog?

4. Interim Basket

Lastly, I understand your desire to improve the yield profile of the basket as soon as possible Sawyer but before pushing ahead with this interim basket I’d like some clarity on duration and an exit plan in place in case we’re not able to achieve the desired final basket given it’s concentration in a single position and of course ABC labs confirmation that the interim basket can be entered smoothly especially since we’ve seen slashing occur in the past with LP positions.

I think the clarifications around the interim basket can be as simple as when you expect we’ll swap into the final basket, a deadline upon which we’ll diversify the basket if we haven’t been able to allocate to the Aave RLUSD market and what this alternative basket looks like.

Summary

While i’m in favour of the direction this proposal takes, providing higher yield for eUSD holders, stakers and reducing the collateral baskets dependence on lending markets there are a few considerations that need addressing before i’d be happy to vote this proposal through.

• Consideration to reduce the concentration in RLUSD.
  – Adding another asset at a 25-40% weight would reassure me that the level of overcollateralization now and in the future would be able to cover any depeg scenario.
  – @josh What is yours and UC take on this?
• A defined strategy as to eUSDs actions if the supply caps on Aave’s RLUSD market are hit as to minimise the duration where mints fail.
• A basic evaluation of RLUSD incentive programmes.
• A clear plan around the duration of the interim basket and ABC labs confirmation that this basket can be entered smoothly with minimal slashing risk.

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eUSD onchain liquidity

I think you raise some good points regarding onchain liquidity Sawyer and I generally agree. We’ve already seen this play out with our current LPs which are now imbalanced against eUSD as fintechs, quite rightly, aquire eUSD through the most efficient routes. However, @josh I think it would be good to model your costs of swapping in or out of eUSD vs your costs of minting and redeeming eUSD through the protocol. If you can’t share them publicly i’d definitely encourage you to to share them with ABC labs, if you haven’t already, to see if they can mitigate some of these issues for you.

Completely removing the DEX liquidity for eUSD is interesting and would certainly remove the operational oversight and incentive drain on ABC Labs I’d be concerned about the reduction in venues where eUSD can be supplied ultimately cause capital to exit eUSD as these incentives to dry up, reducing the level of collateralization even further. I’d also be concerned about how critical the LPs are for money markets but definitely worth exploring further.