[RFC] - Introducing rgUSD

Introduction

Introducing rgUSD, an overcollateralized stablecoin launched on Reserve Protocol that acts as a collective point for DeFi users to negotiate with stablecoin yield providers for the best returns.

Revenue Generating USD (rgUSD), is an overcollateralized stablecoin that deploys its capital into high yield, market neutral, low risk venues across DeFi. rgUSD directs the revenue generated from its collateral basket into supporting rgUSD growth, via incentivizing liquidity pools, lending markets and other safe, positive sum growth opportunities. These incentives are distributed proportionally based on TVL. As with all asset-backed currencies issued on the Reserve protocol, rgUSD aims to be overcollateralized with auditable proof of reserves available on-chain 24/7.

In this RFC I will give you an overview of rgUSD. 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: @LogarithmicRex or email at rgusd@rexkirshner.com

Mandate

What is the mandate?

Hold $1 USD peg, and deploy collateral to generate safe, on-chain yield to incentivize liquidity for itself and partners

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 Rex - you can find me at LogarithmicRex on all social platforms. I am an Ethereum researcher, content creator and investor/participant in De-Fi. I discovered Reserve in 2021.

Why did I decide to deploy the RToken?

While we have seen a lot of innovation in stablecoin design, we generally see models that concentrate the profits generated from the underlying collateral into protocol/company profits. While these models have generated incredible profits, the centralization/capture of value is counter to many of the principles that make De-Fi and blockchain so special.

rgUSD is a different kind of stablecoin, one that is designed to grow through by deploying the profits generated by its collateral into the De-Fi venues where rgUSD is being used as incentives. This stablecoin will decentralize its profits and organically (and non-dilutively) grow the supply rgUSD over the long term.

What’s in it for me?

rgUSD is a public good that makes De-Fi better. By using rgUSD, users (myself included) gain all the benefits of participating in De-Fi plus an extrinsic revenue stream that is completely independent of how it is being used. This will make participating in De-Fi more attractive and will help DAOs, protocols and other people who pair with rgUSD to build deeper liquidity on-chain.

When rgUSD has permeated De-Fi, De-Fi is a better place!

Collateral Asset Backing

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

100% aDAI (likely switching to sDAI)

Why was this collateral backing chosen?

The single collateral asset was chosen due to its high yield and to reduce friction of minting (lower gas costs) during initial RToken launch.

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. As the rgUSD grows, we expect to open the collateral basket to other assets for diversification and to maintain high revenue to power liquidity incentives

What is the estimated APY with the initial collateral backing?

Around 11% earned in collateral revenue.

Revenue Distribution

What will the initial revenue distribution look like?

  • 90% - Liquidity Incentives
  • 5% - DAO Liquidity
  • 5% - RSR Stakers (governance and overcollateralization)

Why was this particular distribution chosen?

The distribution was chosen to maximize distribution of yield towards liquidity incentives.

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 DAO liquidity will be directed towards the continued success and growth of rgUSD liquidity.

Product Differentiation

How does this RToken differ from competitors?

  • There is no comparable product that provides liquidity incentives to itself that can scale making it the ideal co-incentive partner for other stablecoins
  • Its permissionless mint and redeem ensures a permissionless entry and exit that won’t leave LP’s stranded
    • I.e. no waiting for borrowers to want to repay their loans
  • Dynamic basket management by RSR stakers, who are incentivized to manage it properly.
  • RSR default protection up to a certain amount.

Why will people use this RToken?

  • Protocols trying to grow liquidity of their tokens are incentivized to pair with rgUSD as an efficient way to grow liquidity from its scalable liquidity incentives
  • Stability: rgUSD will be initially pegged to 1$ USD providing stability to holders.
  • Earns competitive market rates under the hood and pays its share in co-incentives
  • Flexible: incentives can be directed at a variety of end destinations including lending market pools

Go To Market

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

  • Protocols trying to grow liquidity of their stablecoins
  • DeFi yield farmers, especially on Curve due to high yields of rgUSD pools
  • RSR stakers who believe in the project

Community members are invited to create novel strategies and tactics to raise awareness for rgUSD 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 stablecoin that can be easily minted, traded, and can grow liquidity of other assets it is paired with.

Branding

Why was this RToken name chosen?

Revenue Generating USD does a good job of describing what the product is and what partners can expect when pairing with rgUSD.

What does the logo look like?

Why was this logo chosen?

A simple logo that is very unique and demonstrates the distribution of revenue and incentives through its arrows

What does the brand represent?

The brand is the embodiment of the sustainable liquidity incentives and a reliable co-incentive partner that will always deliver its fair share of revenue.

Call To Action

What is expected from the RToken’s governors?

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

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!
  • Please share any thoughts you have about this RToken in the comments below.
12 Likes

Amazing intro to both yourself and rgUSD, Rex.

I like how the logo involves the arrows while minimally compromising the shape of the S. It’s good.

rgUSD exists on mainnet Ethereum. Would your team be interested in deploying rgUSD on Base for example? Of course, the collateral will likely be different. How does your team envision including Base action/liquidity in rgUSD?

4 Likes

Welcome Rex,

Thanks for a really compelling use of the Protocol - I love this idea. I think it takes out a layer of smart contract risk and accessibility at the moment for LP. I think to explain the advantages a real-world example should be shown vs another pairing and LP rewards, addressing the points of directing the yield and the liquidity advantage. Maybe just an infographic or a how-to.

Also keen to see this on Base in some form or another.

4 Likes

What an intro post! Very excited to see rgUSD play out and grow in defi.

3 Likes

Yes! We are very much interested/looking into deploying on other chains. We are exploring a few options including:

  • Keeping all rgUSD collateral on mainnet generating yield, bridge yield to whichever chain rgUSD is and then distribute there
  • Move an amount of collateral proportional to the TVL on each chain to that chain, and generate yield based on the best yield opportunity for that specific chain
  • A hybrid approach
  • A new approach

Everything is currently on the table as we walk through technical and strategic planning!

5 Likes

Totally agree that there is a lot of opportunity/value in improving communications! We will continue to work on that!

3 Likes

So it will be an aDAI/sDAI wrapper in the beginning, as good as aDAI/sDAI itself but without profits for the holders?

Don’t understand why anyone would hold rgUSD instead of (1) holding battle-tested aDAI/sDAI/etc or (2) putting their stables into Yearn’s or any other vault. You basically want people to transfer yields from their stables to somewhere (RSR-protocol and liq.incentives).

Why will protocols trying to grow liquidity of their stablecoins be interested in rgUSD - can you unfold this take? Why do you think there will be “high yields of rgUSD pools on Curve” - any math behind this logic?

1 Like

Our ideal user is a protocol with a stablecoin (or volatile asset) that needs to pair with a stablecoin. Today, while they have many stablecoin options, very few of them will support the growth of that liquidity pair. For example, let’s say we create anonUSD and want to create deep liquidity, and our initial pool is going to be 50% anonUSD and 50% other stable. Let’s also say we have a budget of $100 for incentives.

We could pair anonUSD with USDC, USDT or any other stable; let’s pick USDC. So now we have a pool that’s 50% anonUSD and 50% USDC. When we deploy our $100 of incentives, we are not only paying to grow anonUSD, we are also paying to grow USDC.

rgUSD is different because, by default, it comes with native liquidity incentives (generated by aDAI/sDAI/etc). sDAI is currently yielding 13%, which will be paid to support liquidity pools that pair with rgUSD. For the sake of simplicity, let’s assume all rgUSD is deployed into liquidity pools.

By pairing with rgUSD, the anonUSD-rgUSD automatically comes with 6.5% yield, paid in stablecoins (not shitcoins, not high emissions governance tokens). And this is on top of our $100 incentive bonus. rgUSD is effectively the same as pairing your coin with sDAI (or whatever the collateral backing of rgUSD is at the time)… which is not possible to do directly.

So, in summary, if you pair with a normal stablecoin, you need to pay an equal amount to grow the coin you care about and the stablecoin you are providing liquidity with. With rgUSD the dynamic is flipped: rgUSD is paying to grow your token.

(I may have double posted – apologies still getting used to the Reserve governance forum)

4 Likes

Great idea! I have a question:

  • When you explain the distribution of revenue, you mention a 90% allocation to LP incentives, I guess this means all rgUSD-anyToken pairs. What does DAO liquidity mean, then?

DAO liquidity is supposed to represent funds used for incentives on an rgUSD exit liquidity pool (rgUSD/eUSD/USDC). It is important for rgUSD to have deep liquidity against USDC to enable ease of use and trading in DeFi as well as open the door for future integrations like lending markets.

Think of DAO liquidity like “rgUSD-owned liquidity.”

1 Like