RFC - Introducing hyUSD

Introduction

Introducing hyUSD, a yield-bearing RToken aimed to create a fair financial system for all.

Hodl Stable money and earn passive income, powered by DeFi

High yield USD (hyUSD), is a decentralized flatcoin initially pegged to $1 USD that provides convenient access to DeFi yields, enabling holders to grow and preserve their wealth. hyUSD is 1:1 asset backed by a basket of other yield bearing tokens including eUSD as well as tokenized lending with exposure to US Treasuries. Given the unique design and current market conditions it is estimated to yield 8% or better to anyone holding hyUSD in any wallet, outpacing the rate of inflation in over 100 countries around the world and providing safe refuge for purchasing power everywhere. As with all asset-backed currencies issued on the Reserve protocol, hyUSD aims to be overcollateralized with auditable proof of reserves available on-chain 24/7.

In this RFC I will give you an overview of hyUSD. I highly encourage the community to ask questions and share their suggestions. I’d also appreciate any help I can get in growing the RToken - if you want to help bring this product to success, please do reach out to me on twitter: @Tom_hyUSD or email at Tom@high-yield.io

Mandate

What is the mandate?

  • A decentralized flatcoin that provides convenient access to DeFi yields, enabling holders to earn passive income on their capital. Governance should aim to take low to moderate risk to return high DeFi yields in order to mitigate against inflation.

Why is that the mandate?

I wanted the mandate broad enough to capture the right risk to reward ratio, but also narrow enough to focus on a specific market.

Deployer

Who is the deployer?

My name is Tom. I am launching pseudonymous for now as I think that would be best in the early stages of deployment. I plan on opening up more at a later date. I discovered Reserve shortly after the IEO on Huobi back in 2019.

Why did I decide to deploy the RToken?

I thought it would be a unique opportunity to be a part of what could potentially be an upgrade to the current financial system. I’m also kind of a defi geek at heart.

What’s in it for me?

The most interesting thing in my mind when I think of potential success is I hope to eventually be able to ask myself something along the lines of …”did I just deploy a fair financial system for all?” I still haven’t been able to wrap my head around what that means and what it looks like. But being able to ask that sort of question is what I would take the most pride in and what I would consider what’s in it for me.

Collateral Asset Backing

What does the initial collateral backing for this RToken look like?

  • 13.5% fUSDC - Flux USDC.
  • 13.5% fDAI - Flux DAI.
  • 36.5% Convex/Curve MIM+3CRV pool.
  • 36.5% Convex/Curve eUSD+FRAXBP pool.

Why was this collateral backing chosen?

All of the assets I believe have the following traits. 1) they are sufficiently decentralized. 2) they strike the right balance between risk and reward.

Should governance keep the collateral backing as it is or update it whenever it can?

This will be an ongoing process to keep the basket up to date. For example, if hyUSD continues to grow in market cap, the yield will eventually drop slightly, and to counter that, governance should be open to adding in more assets that fall under the traits above. As well as make sure that hyUSD risk tolerance stays low to moderate.

What is the estimated APY with the initial collateral backing?

Around 8% to hyUSD holders.

Revenue Distribution

What will the initial revenue distribution look like?

  • 81% to Rtoken holders.
  • 16% to RSR Stakers.
  • 3% to hyUSD Treasury: The Treasury will likely be used for potential expenses such as Exchange listings, Strategic Partnerships, and providing liquidity to trading pairs for hyUSD on dex’s which will allow the hyUSD ecosystem to continue to grow. There is a possibility that these funds could be governed by a DAO in the future.

Why was this particular distribution chosen?

The distribution was chosen to be competitive in a growing yield-bearing market. If the rewards for holding hyUSD were significantly lower than the underlying assets then it would not be attractive for users to hold the RToken over those assets directly.

The reward distribution for RSR stakers must also be attractive so that they have the incentive to stake and risk their tokens, while also providing governance.

The revenue going to the treasury will be directed towards the continued success and growth of hyUSD.

Product Differentiation

How does this RToken differ from competitors?

  • Dynamic basket management by RSR stakers, who are incentivized to manage it properly.
  • RSR default protection up to a certain amount.
  • Competitive yield vs other yield savings products.
  • Prioritizes the use of decentralized stablecoins in the collateral basket.

Why will people use this RToken?

  • Stability: hyUSD will be initially pegged to 1$ USD providing stability to holders.
  • Passive Yield Exposure: Users can earn passive income on their capital by simply holding hyUSD in their wallet.
  • RSR Staking Protection: RSR tokens that have been staked on hyUSD, will be sold off in the event of a de-peg by any of the underlying assets in the basket.
  • Simplified Defi Exposure: Holders gain exposure to Defi through the underlying basket of assets.

Go To Market

Who do you see as the early adopters and advocates of this RToken?

  • People who are trying to escape inflation.
  • People looking for a wealth building strategy.
  • DeFi enthusiasts exploring ways to earn passive income.
  • DeFi yield farmers, especially on Curve.
  • DAOs, Hedge Funds, and Market Neutral Yield Funds who want to diversify their treasuries.
  • RSR stakers who believe in the project.

Community members are invited to create novel strategies and tactics to raise awareness for hyUSD and improve its positive impact on the wider crypto community. If you have go-to-market ideas and would like to contribute please leave comments and suggestions.

What does success look like for this RToken?

A highly liquid flatcoin that can be easily minted, traded, and used in DeFi protocols.

Branding

Why was this RToken name chosen?

High-Yield USD does a good job of describing what the product is and what holders can expect when holding hyUSD.

What does the logo look like?

Why was this logo chosen?

A simple logo that is very unique and demonstrates a hand waving “hi”.

What does the brand represent?

The brand is the embodiment of the RToken mandate and represents the future of money and a fair financial system for all.

Call To Action

What is expected from the RToken’s governors?

  • I expect Rtoken governors to see the vision of hyUSD and align themselves with the continued success of hyUSD.

What can the community do to make this RToken a success?

  • Get involved! If you ever wanted to be “early” to a project, now’s the time :slightly_smiling_face:.
  • Please share any thoughts you have about this RToken in the comments below.
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Hi Tom

Congratulations on getting hyUSD off the ground - great to see a new RToken coming from the community.

A couple of questions from me…

Is there a timeline for getting Zaps introduced for hyUSD? Given the nature of the collateral being relatively exotic, I think without Zaps there will likely be a big barrier to minting hyUSD, which will hinder liquidity growth.

My main feedback is that the 3% to the Eth address isn’t particularly transparent, and it’s rather wooly around how this will be spent. I’d really like to see this treasury being community-governed, or a plan for making this happen beyond “there being a possibility in the future”.

If I were being cynical, it might look like a way to make a quick buck. I’m sure it’s not - in which case, why not make this community-run, and tap into the community hive mind? Grants could be awarded to proposals for ecosystem growth etc.

Given that this RToken is going to need decent support from the existing Reserve community to find traction during its early days, I think this would also engender a sense of ownership amongst stakers and make them more aligned with the success of the RToken.

It would also be a great showcase for other potential deployers, such as DAOs, showing how yielded income can be governed in a democratic fashion.

Wishing you all the best with the launch.

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Hey Tom

I know you’re currently thinking about a response to my point, but I did just want to drop a clarification in here as well.

My comment about the 3% going to the Eth address was not meant to be a dig to you personally, and apologies if it came over that way. I’m really excited by the overall approach you’ve taken to hyUSD, and think it’s a great addition to the RToken offering.

I also have no problem with the principal of deployers diverting yield to themselves as a way of making money, if that’s their actual intention.

I just feel that whatever the plans for the yield are, you need to be really clear about it, in order to set expectations properly.

If it’s for marketing and/or eventually moving to a DAO, I think more details around this would be really helpful. Without this, I’m preempting you will be receiving “wen marketing?” queries on a regular basis, and it will potentially become a bone of contention within the community.

That’s why I suggested, if this is intended for marketing, why not make a firm commitment to having this treasury as being community governed. We could then potentially work through this with you, as a community, to find the best approach to make it happen.

Anyway, just wanted to add those extra thoughts in. And again, best of luck with the impending launch!

Cheers

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Congratulations on deploying hyUSD, @Tom_hyUSD, and thank you for this RFC! :clap: Excited to see where hyUSD is heading.

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Hey @teasea thanks for the comments.

teasea:

Is there a timeline for getting Zaps introduced for hyUSD? Given the nature of the collateral being relatively exotic, I think without Zaps there will likely be a big barrier to minting hyUSD, which will hinder liquidity growth.

Zaps will be implemented for hyUSD shortly after they come online for eUSD.

teasea:

My main feedback is that the 3% to the Eth address isn’t particularly transparent, and it’s rather wooly around how this will be spent. I’d really like to see this treasury being community-governed, or a plan for making this happen beyond “there being a possibility in the future”.

In the long term 3% will not always go to the treasury. One plan that’s been talked about is through governance to give some of the revenue share to a wallet(think metamask, coinbase wallet, or uniswap wallet etc). The revenue would be shared to hyUSD holders in that specific wallet. So holders of hyUSD in that wallet would earn the 8% apy plus a share of the additional revenue directed toward them from that wallet. The idea behind this would grow the hyUSD ecosystem into the broader crypto community. There are other options as well, maybe an individual can help with mass adoption of hyUSD. If this individual can have a greater impact than me, Reserve, or the community at large, I think it would be in everyone’s best interest through governance to award this individual some of the revenue share. The possibilities are endless, and the truth is I don’t actually have a set plan with what I will do with the revenue share or with the treasury at this instance in time.

There will be expenses along the way that I will have to use the Treasury for. One expense that I hope to have in the near future is an exchange listing expense. The process is more complicated than just simply paying a fee to the exchange. In the near term, my goal with any funds that accrue will be used to continue the adoption of hyUSD.

As far as setting up a DAO to govern the Treasury, I really like this idea but it complicates things. In order for a DAO to function properly it needs a governance token. As of right now my focus is on the hyUSD token. The governance token for hyUSD is RSR. I think in the short term adding in a 3rd token might hinder the progress of hyUSD. Setting up a DAO would be a really good way to govern the Treasury, I just don’t think it’s practical at this time.

teasea:

If I were being cynical, it might look like a way to make a quick buck. I’m sure it’s not - in which case, why not make this community-run, and tap into the community hive mind? Grants could be awarded to proposals for ecosystem growth etc.

Given that this RToken is going to need decent support from the existing Reserve community to find traction during its early days, I think this would also engender a sense of ownership amongst stakers and make them more aligned with the success of the RToken.

I think the way I can have the community on my side is through communication and building relationships with community members. This overtime will develop the trust I need from the community to make hyUSD a success. I have my dm’s open 24/7 and will be as active as I can in the discord. As far as rewarding the community, I agree as they are going to be the early adopters for hyUSD. I am not sure what the best way to reward the community would be. I like the idea of grants but there are no funds in the Treasury at this current time. Other ideas being talked about to reward the community have been airdrops in the form of an NFT or a POAP. I think if there are a select few from the community that continue to provide value repeatedly the reward for them should be greater. I just don’t know what that looks like yet.

teasea:

My comment about the 3% going to the Eth address was not meant to be a dig to you personally, and apologies if it came over that way. I’m really excited by the overall approach you’ve taken to hyUSD, and think it’s a great addition to the RToken offering.

I appreciate the comment regarding the 3%. Thank you for the support.

teasea:

I just feel that whatever the plans for the yield are, you need to be really clear about it, in order to set expectations properly.

I agree, this will be a continuous effort on my part to communicate what the plans are for the treasury. There are currently no specific plans at this time. Ideas are always welcome.

Hi Tom

Thanks for the info, much appreciated. Great news about Zaps, I think this will greatly improve the user experience and adoption across RTokens.

I appreciate there’s lots of thinking to do and there are many options on the table. And to be honest, until there’s a pretty significant TVL the amount of yield trickling through to the Eth address will be pretty insignificant - so there’s time to work things through and find the best solution.

I like the idea about the wallet boost, a really nice way to incentive wider uptake.

And I can see how awarding a key influencer with a kickback would be smart too.

Whatever is decided upon, my main point was that I felt the community should probably have an input in deciding how the 3% wallet funds were spent.

Perhaps I’m oversimplifying things, but it feels like the elements for a proto-DAO are in place already. Tokens are only really needed for a DAO to enable governance/ voting and to raise funds. With hyUSD - as you say - staked RSR acts as the governance token, and funds are raised via the Eth wallet.

A third token a full DAO legal status is certainly overkill for now. If TVL does take off, hopefully the treasury would grow into a decent size, without the need for anything beyond what’s in place right now.

With the above in mind, I’m still a bit fuzzy around how you’re seeing the 3% wallet work though. Is the intention to enable proposals on how funds are spent and open them up to stakers via governance?

I agree that good communication will be key to success, so great to see you in Discord, and looking forward to continuing the conversations.

Cheers

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Thank you for the RFC and for willing hyUSD to this point @Tom_hyUSD :raised_hands:

I agree with @teasea on the need for clarity on the obligations/mandate of the hyUSD Treasury. But I also believe that Tom (and any RToken deployer for that matter) should be fairly compensated for the work that goes into launching an RToken, whether that comes in the form of revenue sharing or a one-time grant. An example distribution could be 1.5% to a multi-sig for actual operating expenses such as exchange listings and other payments. The other 1.5% could be directed to Tom’s EOA wallet as compensation for his continued community building and marketing efforts. RSR stakers have the final call on whether enough value is delivered to justify this, and so incentives to advance hyUSD are aligned. On $10M TVL earning 8% APR, a 1.5% fee share amounts to $12k, which I think is modest compensation for what will amount to a part-time job with a lot of potential upside. These numbers are merely examples and happy to hear others’ thoughts.

I am confused about the following however:

I’m not actually sure what the implementation of this looks like. Is this an external staking contract where hyUSD stakers share in this excess yield? I personally don’t think such marginal benefits help delineate “true” hyUSD community members from those of mercenary farmers (not to mention the added friction of understanding this mechanic). In my opinion, this yield would be better spent on things that actively stimulate growth of the hyUSD ecosystem as a whole (e.g. points discussed above).

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teasea:

With the above in mind, I’m still a bit fuzzy around how you’re seeing the 3% wallet work though. Is the intention to enable proposals on how funds are spent and open them up to stakers via governance?

I would need an official team member to confirm, but I don’t think RSR stakers on hyUSD have the ability to govern anything outside of hyUSD on the register app. Maybe @Larry can confirm.

I think @Larry replied with a good potential example of how the 3% could end up working. I just don’t have a set plan as of now.

Hi Larry, thanks for the kind words and the response.

Larry:

I agree with @teasea on the need for clarity on the obligations/mandate of the hyUSD Treasury. But I also believe that Tom (and any RToken deployer for that matter) should be fairly compensated for the work that goes into launching an RToken, whether that comes in the form of revenue sharing or a one-time grant. An example distribution could be 1.5% to a multi-sig for actual operating expenses such as exchange listings and other payments. The other 1.5% could be directed to Tom’s EOA wallet as compensation for his continued community building and marketing efforts. RSR stakers have the final call on whether enough value is delivered to justify this, and so incentives to advance hyUSD are aligned. On $10M TVL earning 8% APR, a 1.5% fee share amounts to $12k, which I think is modest compensation for what will amount to a part-time job with a lot of potential upside. These numbers are merely examples and happy to hear others’ thoughts.

Initially I had it set up that 1.5% was going to a “marketing/partnerships” multisig. And then the other 1.5% was going to the hyUSD Treasury multisig. But it was decided last minute that it would just be best to direct all 3% to the Treasury(for now). This was because there was no plan set up for the marketing wallet.

As far as operating expenses are concerned, I am self funding everything right now. My current operating expenses are as follows:

Twitter Blue x 2: 16$/month
Google workspace emails x 2: 24$/month
Google domain x 1: 5$/month
Linktree x 1: 9$/month
Travel: TBD (consensus this week, and other future conferences)

I don’t think it’s worth allocating any revenue from the multisig to cover these expenses. Two main reasons 1) Potential tax implications, I do not have a cpa or legal counsel advising me. 2) I would like to build trust within the community, and have more discussions on what the best course of action is with the Treasury.

Larry:

I’m not actually sure what the implementation of this looks like. Is this an external staking contract where hyUSD stakers share in this excess yield? I personally don’t think such marginal benefits help delineate “true” hyUSD community members from those of mercenary farmers (not to mention the added friction of understanding this mechanic). In my opinion, this yield would be better spent on things that actively stimulate growth of the hyUSD ecosystem as a whole (e.g. points discussed above).

I don’t know what the actual implementation of this would look like either. This was just a potential marketing idea that was discussed with the goal of growing the hyUSD ecosystem. I appreciate the feedback on this idea as well as the points above.

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Tom great work launching hyUSD.
I’ll be a staker, minter and be seeking LP yield myself.

Regarding DAO mentions above, RSR governance “IS” the DAO!

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Thanks so much for all the support, I’m glad to hear that.

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Thanks for all the additional info Tom.

I was wondering if there was a way to piggyback off of the current governance flow, as per below.

Maybe it could just be a simplified version that stops after the online poll, although this doesn’t include on-chain voting.

Having the IP voting included would enable a more robust governance approach, but might be overkill/ too slow for more reactionary marketing decisions/ timescales.

And maybe there would need to be some integration with a multi-sig wallet to release funds.

Probably something @Larry would need to feed into, as you say.

I’m interested in how an element of governance can be incorporated into decisions around how funds directed to an Eth address could be approached, as I’m currently thinking about how charity focused RTokens might work, with the stakers making decisions around grants/ funds being awarded to specific causes. Ideally without having to set up a separate DAO with another governance mechanism.

Cheers

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I agree it’s only fair that a deployer would have expenses covered and as compensation, and as recognition of their hard work - the last thing I’d want to see is anyone out of pocket.

I’m interested to understand how a multisig could work for releasing funds for actual expenses, as well as stakers having a call on whether remuneration to a deployers’ EOA wallet is fair. Understanding the governance gates these sorts of things might go through would be really useful.

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teasea:

Maybe it could just be a simplified version that stops after the online poll, although this doesn’t include on-chain voting.

Having the IP voting included would enable a more robust governance approach, but might be overkill/ too slow for more reactionary marketing decisions/ timescales.

And maybe there would need to be some integration with a multi-sig wallet to release funds.

Probably something @Larry would need to feed into, as you say.

I don’t have a set plan with the Treasury at this time. I like the idea, as this could potentially be utilized later on down the road. However, I don’t know what that implementation would look like. I think all discussions regarding the treasury will be good to start in this forum. Currently the Treasury has 0$ in it and we are at a 10k market cap. Do you have any ideas on the best way to spur growth of hyUSD into the broader crypto community?

teasea:

I’m interested in how an element of governance can be incorporated into decisions around how funds directed to an Eth address could be approached, as I’m currently thinking about how charity focused RTokens might work, with the stakers making decisions around grants/ funds being awarded to specific causes. Ideally without having to set up a separate DAO with another governance mechanism.

I think this question would best be directed under the governance-discussions in the discord. I am not qualified to make a judgement on why or how the governance model was determined. I do know a tremendous amount of time, thought, and research went into the governance model.

The Glo Dollar also called the antipoverty dollar is a stablecoin for charity. I am sure they could leverage the Reserve Protocol in some way. Here is their twitter: https://twitter.com/glodollar

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teasea:

I agree it’s only fair that a deployer would have expenses covered and as compensation, and as recognition of their hard work - the last thing I’d want to see is anyone out of pocket.

I disagree, I think its best that any deployer cover any expenses on their own(at least in the early stages). If I were to pay myself right away, this would set a precedent that everyone who contributed to hyUSD would also expect to get paid. By me not paying myself, I open the door to find people who really believe in hyUSD’s mission about creating a fair financial system for all. This would set the expectation that whoever contributed would also not be getting paid. Potentially later on down the road, maybe the treasury is there to reward those early people that really helped spur growth in the hyUSD ecosystem.

teasea:

I’m interested to understand how a multisig could work for releasing funds for actual expenses, as well as stakers having a call on whether remuneration to a deployers’ EOA wallet is fair. Understanding the governance gates these sorts of things might go through would be really useful.

I don’t know what the implementation would look like for an application like this. I think governance questions on what power the governors have is probably best asked in the discord under governance-discussions. I am not qualified to speak to that.

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@teasea a solution to directing funds on chain to different beneficiaries whether it be charity, dao, employees, contractors, etc, is a governance proposal. You don’t have to build a new governance system, it’s just a RFC, then a vote.

For example, tomorrow someone could decide wouldn’t it be a good idea for hyUSD to donate 10% of its overall revenue to GiveDirectly to combat poverty. high yield USD becomes high yield for people in need as well as hyUSD holders.

Anyone thats an RSR Staker could make this proposal right now and if they could rally community support they could change the revenue share of hyUSD. I am not saying they should or should not, but rather trying to illustrate what governance can do right now.

It’s important to draw a distinction between how governance works out-of-the-box vs rallying community support to vote one way or the other. RTokens are really flexible!

@Sinatra please do correct me if I got any part of governance wrong in this post.

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Of course its important to point out that the above example may not align with the mandate for hyUSD and most likely the supporters of hyUSD will want to stick with changes that align with the mandate. At any rate, this is the power of RSR stakers to decide.

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Thanks @0xJMG . What you’ve described is how I originally had seen things working. I was getting a bit confused by @Tom_hyUSD’s suggestion that in order for governance to work there would likely be a need for a DAO and potentially a third token.

As Tom says, all of this is a bit hypothetical at the moment when there’s $0 in the treasury, and the focus should be on growing TVL. I just thought it useful to have some of these chats up front to try and get a bit of clarity around how things would be governed further down the line.

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Now Zaps are live the barriers to entry are so much lower, which is great.

I would start with some outreach to smaller DAOs, maybe with <$100,000 in their treasury, using DeepDAO or DefiLlama’s treasury filter, and getting into their governance forums. Quite a few seem to be having discussions around rebalancing treasuries away from centralised stablecoins at the moment. One thing I thought might be useful would be to try and connect directly with some of the most active propers via Mail3 or DeBank Hi, which lets you send an onchain message directly to a wallet (like a cold email).

Having success with a few small DAOs should hopefully open the doors to some larger ones, such as Olympus, who I know are actively proposing around how to rebalance their treasury currently.

One thing I’ve been wondering about is whether/ how a referral programme could work. Flux Finance’s looks interesting - referrers receive a share of yield from their referees for 30 days. Lybra, who launched their stablecoin the other day, also have one in place.

Maybe that’s something we could think about across all RTokens. What would that look like for Reserve? Potentially someone could set up a referral link, and if that was then used to mint an RToken, they’d be eligible for a share of the yield?

Maybe in the early days the ‘treasury’ wallet address is reserved for rewards for those minting over $X, with boosted rewards streamed to them over the first 3 months? Bounties for mints could be good too.

Doing some outreach to potential ambassadors as well, thinking about what a potential kickback to them might look like. I imagine an agreement around giving them a % share of yield might go down really well. See if that’s viable and maybe that could be proposed through governance.

Outreach to reputable CeDeFi platforms with yield products like Nebeus to see if you can get yourself onto their platform.

I think generally building up a bit of a campaign for hyUSD - high yielding, diversified, back-stop protected - and looking for PR opportunities where you can position hyUSD as an upgrade to current options… have your USPs all lined up and make it easy for defi journalists looking for some commentary/ opinion. Get yourself into the forums and become the mouthpiece for hyUSD. Get the cashtag working for you on the socials.

I know there are limitations around what you can advertise when it comes to financial products, but you could think about investigating paid spend experiments on a few channels. (Although that would obviously need a bit of budget, so maybe that’s further down the line once the treasury has grown a little.)

Maybe we could crowdsource opportunities for exposure into the hyUSD channel in Discord.

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