RFC - Introducing RSD

Introducing RSR Dollar - $RSD
A stablecoin that directly supports the Reserve Protocol by creating deflationary pressure to $RSR via token burns and aims to become the deepest source of liquidity against $RSR and the go to pool for Defi users.

Finance the future of stable money and the battle against
hyper-inflation supporting the Reserve ecosystem.

Introduction

RSR Dollar ($RSD) is a stablecoin that directly supports the Reserve Protocol by creating deflationary pressure to $RSR via token burns and aims to become the deepest source of liquidity against $RSR and the go to pool for Defi users.
Other than burning $RSR, one of the main goals of $RSD is to demonstrate that a successful burning mechanism can be implemented in RTokens and it’s already built into the protocol for future uses.
Part of the yield generated by the stablecoin that is assigned to be burned will be automatically sent to a burn address by the protocol in the form of $RSR and no human interaction is required to do so.
RSR Dollar is a community project and each decision is taken as a collective. If you want to take part in the evolution of the RToken and its growth you can reach out to us on Twitter: @RSRDollar or directly join the Discord Server and Telegram Channel.

Mandate

What is the mandate?
A USD stable coin which directly supports the Reserve Protocol by creating deflationary pressure to $RSR via token burns and aims to become the stable coin of choice to pair with $RSR on decentralized exchange liquidity pools.

Why is that the mandate?
The focus of the RToken is on supporting the Reserve Ecosystem, each subdivision of the yield generated by the underlying assets has its utility in doing so. Whether it is the $RSR burned to create deflationary pressure, the RSR directed to stakers to insure $RSD and the percentage directed to the treasury which is all devolved in favour of creating a optimal enviroment around $RSD and $RSR, thus increasing their usage and market cap. $RSD becoming the main stablecoin paired with $RSR would substantially increase the tokens burned.

Deployers

Who are the deployers?
Even though it’s a collective effort and each decision is taken within the community, we are three individuals who take care of the project and watch over the treasury with a Multisig Safe Address.

Ottokili had the original idea of a $RSR Burning RToken, mainly takes care of the initiatives around the RToken social media side, graphic design and RToken architecture.

JackOfSwords joined in the effort of deploying $RSD and mainly takes care of the initiatives around the usage and growth of the treasury and RToken architecture.

SMallinson as OG active community member in the Reserve Community joined in the effort of developing the RToken idea, taking part in its deployment process and making the treasury management safely possible with a multisig wallet between the three of us, mainly takes care of illustrating the aspects around the RToken.

As a community project, RSR Dollar $RSD was also deployed with the contribution of zduck and four other anonymous contributors.

Why did we decide to deploy the RToken?
As passionate individuals in the Reserve community we are always looking for ways to enhance the Reserve ecosystem. We thought that a burning mechanism for $RSR that creates deflationary pressure was a great way to achieve that. $RSD sets an example for future RToken deployers that they could integrate burning in their RToken architecture or simply integrate a small percentage of $RSD itself in the backing assets to actively burn RSR and aid RSR Dollar in achieving the goal of creating deep sources of liquidity in Defi for the Reserve ecosystem.

What’s in it for us?
We are happy to create a mechanism that will have an impact on Reserve’s mission of creating stable currencies and fight hyperinflation, we believe that depending on $RSD’s adoption, we can create a scenario that really favours the Reserve Ecosystem.
Anyone invested in Reserve would benefit by $RSD effects, both for the objective of burning $RSR and creating liquid pools on decentralized finance.
We are enthusiastic to deploy a “tool” that could give anyone the possibility to additionally support the Reserve Ecosystem, even if they have no knowledge of liquidity pools and decentralized finance.

Collateral Asset Backing

What does the initial collateral backing for this RToken look like?
60% Convex/Curve eUSD+FRAXBP pool.
20% fUSDC - Flux USDC.
20% fDAI - Flux DAI.

Why was this collateral backing chosen?
We chose enough assets to diversify the collateral basket without heavily impacting the cost of minting $RSD. In the future a more diversified basket could be picked preferring assets that directly influence the Reserve ecosystem (e.g. RTokens related backing assets only) while keeping the yield high enough to successfully fulfil the mandate of $RSD.

Should governance keep the collateral backing as it is or update it whenever it can?
Governance should aim to keep a diversified enough basket that provides a high yield and is the most influenced by the Reserve Ecosystem.

What is the estimated APY with the initial collateral backing?
Around 12% - 6% towards burning $RSR.

Revenue Distribution

What will the initial revenue distribution look like?
50% RSR Burn
30% Treasury
20% RSR Stakers

Why was this particular distribution chosen?
This distribution was chosen to maintain the focus on the main goal of $RSD, which is to burn $RSR, while having the necessary protection from $RSR over-collateralization and a meaningful percentage to the treasury to over time make an impact on the secondary goals of the RToken (Which affects $RSR Burning).

We made the decision to deploy the token with a high percentage directed to the treasury to efficiently kickstart the strategies around it. The goal of the first period after deploying $RSD is to grow marketcap an keep compounding the treasury, once that’s developed enough, we can put it to use to further support $RSD and $RSR burning.

In the future, once that’s achieved, governance can look into lowering the percentage directed to the treasury and increasing the one of burned $RSR, but at the moment we believe that creating a strong enviroment around $RSD is much more important than the initial burned $RSR, insuring the success of RSR Dollar will accomplish a much higher percentage of burned $RSR on the long run.

A deeper look into the treasury:
Treasury address: 0x1D77e95a5feC42e47aBFfbd4218B6f17112E4330
We decided that the goal of becoming the stable coin of choice to pair with $RSR on decentralized exchange liquidity pools would give an incredibly more important usecase for the RToken and increase its chances of success in its mission, Eventually a DAO can be formed to manage these funds optimally. We individuated different initial strategies we could take with the treasury, that could change over time with the community decisions.

Curve Finance - The treasury can buy $CRV directly to stake on Curve.fi and accumulate $veCRV.
The $veCRV provides voting rights for which curve pools are incentivised with additional $CRV emissions.
The treasury could then direct this to vote for our desired pool - eg. RSD/RSR/USDC
It will however take time to accumulate enough $veCRV to make an impact.

Convex Finance - Instead the treasury could purchase $CVX. Convex Finance is a building-block on top of Curve and the protocol already owns significant amounts of $CRV. Here the treasury would stake and lock $CVX to influence where Convex directs its $veCRV votes.
Here we could once again direct them to a created pool eg. RSD/RSR/USDC

Frax Finance - Another additional option is to purchase Frax share ($FXS). Staking and locking $FXS for $veFXS can once again be used to vote and further incentivize a created curve pool. The pool would need to incorporate $FRAX to gain the maximum benefit eg. RSD/RSR/FRAX pool.

Sushiswap LP - We could also directly use the treasury to build Liquidity in a sushi swap LP pool. As the treasury builds up its $RSD reserves it could buy $RSR and pair it directly on sushi swap slowly increasing it over time proportionate to the growth of $RSD.
A problem with this option is there won’t be any additional yield incentives besides trading fees.
However the treasury could apply to join Sushi’s Onsen program and partner with sushiswap to provide additional incentives to the pool.

Dao Airdrop - Whichever route the treasury decides it could also look at the possibility of launching its own DAO governance token for the treasury itself. ($RSR stakers would still have governance over $RSD) - This could be used to incentivize whichever LP pool has been created with additional yield and perhaps reward early minters of $RSD and early LP providers.

Whichever path is taken the number one priority is to build the treasury (by having as much $RSD minted as possible) to a point in which it can be effective in its secondary mandate. To make $RSD the deepest source of liquidity against $RSR and become the go to pool for Defi users. The deeper the pools the larger the burn.

Product Differentiation

How does this RToken differ from competitors?
Introduces a $RSR burning mechanism for RTokens.
A collateral basket that leans towards “supporting” the Reserve Ecosystem.
Supports Reserve in the battle against hyper-inflation.
Ultimately generates value to $RSR holders.
$RSR over-collateralization for insurance.
A built in governance method to manage the backing assets of the stablecoin.

Why will people use this RToken?
Safety: $RSD is a stablecoin pegged to the USD, always redeemable for its underlying assets, over-collateralized by $RSR and secured by the Reserve Protocol.
Philantropy: By holding $RSD you burn $RSR which on the long term will increase the value of Reserve’s slow wallet thus indirectly making an impact on their mission of creating stable currencies as a human right.
Value: Burning also increases the monetary value of everyone that invested in $RSR.
Community: $RSD aims to create a stablecoin that will support the Reserve Ecosystem in every aspect; burning $RSR, using backing assets related to the protocol and creating the deepest source of liquidity against $RSR.

Go To Market

Who do you see as the early adopters and advocates of this RToken?
Anyone that wants to have an additional way of supporting Reserve and its ecosystem.
Dedicated community members (Potential integration in other community projects).
Anyone that has interest in increasing the value of $RSR.
Future RToken deployers that want to dedicate a percentage of their RToken’s yield to burning can include $RSD in their backing assets.

What does success look like for this RToken?
A stablecoin that burns a significant amount of $RSR, is backed by assets related to the Reserve Protocol and has a strong impact in the creation of liquidity pools against $RSR.
Ultimate success would be actively impacting Reserve’s mission providing value to its ecosystem.

Branding

Why was this RToken name chosen?
“RSR Dollar” provides a direct connection to $RSR and the fact that $RSD aims to become the stablecoin of choice around it.
RSR - The burning mechanism is related to $RSR, the token tied to the Reserve Protocol.
Dollar - Pegged to USD
“RSR Dollar” is short and easy to remember and gives an immediate connection to $RSR and its community.

What does the logo look like?

rsd_logo

Why was this logo chosen?
The logo is inspired by the RSR “#” look, morphed into a Dollar “$” symbol with red (burn-fire) brand colors.

What does the brand represent?
A way the community can support the Reserve Ecosystem and the mission behind Reserve while having $RSR burning as main practical focus.

Call to action

What is expected from the RToken’s governors?
To maintain $RSD diversified and align with the idea of keeping the collateral basket the most “Reserve related” possible keeping into account a good source of yield to fulfil the RToken mandate.

What can the community do to make this RToken a success?
The community should be the pulsing heart of this project. Bring ideas, participate in its evolution, discuss how the treasury can be used and how to most affect the Reserve Ecosystem.
Ultimately, if you believe in Reserve and if you believe in what RSR Dollar tries to achieve for it, you could potentially mint and hold some of your capital into it, integrate it in community projects and show enthusiasm in how the RToken future could be shaped.

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I still want to think more about the economics and incentives before commenting…but in the meantime I noticed a technical thing I wanted to share:

  • RSR does not have a burn() function, and since it inherits from OpenZeppelin ERC20, transfers to the zero address have been disabled. See
    $0.002 | Reserve Rights (RSR) Token Tracker | Etherscan
    This means that the “burnt” RSR would have to be held at an unowned address, and this unfortunately means it would appear as part of the totalSupply on etherscan. You could work with them (maybe) to change this, but by default that’s how their system would display it.
  • RSR also cannot be sent directly to the RSR contract, which is the other obvious schelling point for a burn address.

edit: Apparently address(dead) is recognized by Etherscan :laughing:

2 Likes

I love to see this kind of experimentation with RTokens, it’s exactly what the platform was made for. Big up to @ottokili, @Jackofswords, @Mallo and all other contributors to RSD!

After sitting down to think through this RFC in some more detail, I’ve found there to be a gap in my understanding of RSD that’s holding me back from saying: “Ah, yes, this thing has a ton of potential!”. I’d love for you guys to help me clarify the doubt below.

What doesn’t click for me yet is what RSD’s unique utility is for the broad crypto space (i.e. a unique use case that naturally makes anyone use RSD). The unique selling point of RSD is clearly the burning mechanism, but I see that as too narrow of a USP. After all, the only people/entities that this USP applies to are those that are already holding RSR, which is a tiny part of the crypto space. So why would Alice and Bob hold RSD if they’re not holding RSR?

To give you a sense of what I mean by unique utility, here’s what I consider them to be for other existing RTokens (excl. decentralization, on-chain reserves, and overcollateralization):

  • eUSD: the only stablecoin that can be transacted privately and cheaply using the MobileCoin chain. There’s a good case to be made that people/entities that see value in private transactions will use eUSD (there’s no other option anyway).

  • ETH+: when ETH+ evolves to its intended state, it could very well become the most diversified ETH staking derivative out there. Ethereum users that care about decentralization might decide to hold this particular basket of LST to make sure Ethereum staking stays as decentralized as possible.

  • hyUSD: an easy way to be exposed to a diversified basket of high DeFi yielding tokens while being protected against smart contract hacks/bugs of the underlying protocols via overcollateralization. It makes sense to me that DAOs will want to allocate part of their treasury into hyUSD because of this unique utility.

Noteworthy is my understanding of FRAX, which I didn’t consider to have a unique utility initially as well. It worked for them, though, as they had a huge budget of CVX to direct CRV emissions. The resulting high APY Curve pools were a utility of itself, and got them many DeFi integrations. But still, at a certain point FRAX was used for nothing else than LPing. Since then they’ve added unique utility with products like Fraxlend.

Wondering how you guys think about this - thanks in advance!

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I think your framing is well done @Sinatra .

To expand on this, it’s a good idea to contemplate scoping out the market opportunity. This also happens to be an essential question in business plans for recruiting, fundraising or partnerships. Team members, investors and partners want to see what is possible!

The total available market (TAM) is the total market demand for an offering, usually calculated in units or revenue if 100% of the available market is achieved. The segmented available market (SAM) is the portion of TAM that is reachable and can potentially be targeted by a company or project’s offering.

In other words, TAM is the theoretical maximum size of the market, while SAM is the realistic size of the market that a company or project can target.

  • In SaaS, Salesforce.com is the #1 player (revenue) with 19% of the TAM revenue.

  • In social media, Meta/Facebook is the #1 player (revenue) with 29% of the TAM revenue.

  • In crypto, Ethereum is the #1 player (active developers) with about 25% of the current TAM for crypto devs (however this is a very nascent market and should change dramatically in next few years)

Looking at the TAM of a few RTokens…

  • eUSD deployed for use in the MOBY app is for the (World Bank estimated) 280 million person remittance market where it can cost people $8 to $34 to send $200 cross border. eUSD is intended to reduce that pain to under a penny (however fiat off ramp charges may apply). And RPay has also adopted eUSD.

  • I believe there are 120 million ETH current supply (https://ultrasound.money/). That’s the current TAM for ETH+.

  • hyUSD with up to 8% apy on-chain might be interesting to some subset of the (Crypto dot com’s estimated) 425 million crypto wallets in existence. Since many crypto holders have several wallets, I’d estimate this TAM closer 150 million, which is not too far from the total # of unduplicated Coinbase and Binance accounts. Of that TAM I am not sure how many would find hyUSD interesting, maybe 1%?

Looking at RSD we know with an intention to burn RSR, it will probably matter mostly to RSR folks. Its difficult to know how many there are as I have seen on chain wallet estimates of 15k to 50k. So that’s the TAM of RSD currently.

As implied above in the Salesforce/Meta/Ethereum examples, #1 players getting 30% share of the TAM is significant (and uncommon). Applying this to the 15k to 50k RSR wallet range suggest a SAM of 4.5k to 15k wallets – which is very small. Then the really hard part, is attracting them through go to market planning and execution.

As RToken deployers consider how to come to market I would suggest identifying TAMs that have the potential for 100 million+ users. Hopefully we see RToken deployers get 10% or even just 1% of that TAM!

There are lots of exceptions to what I mention above, for example a hedge fund might launch an RToken for only 500 users but those users could collectively represent 100s of millions of dollars in assets given their portfolios.

There are many business books, essays and free college courses accessible via a few google searches that go much deeper than I have here. There is even a new acronym “SOM” that I haven’t mentioned.

Hope this helps think through RSD finding a 100 million user TAM to solve a problem for.

3 Likes

Hello! Thanks for the interesting response and helping to ignite a conversation around $RSD.

The suggestion here seems to be unless you think you can appeal to 100m users, it’s not worth it, I could not disagree more!

Yes, the market appeal to hold & use RSD is aimed at RSR holders and the growing Reserve ecosystem participants as a whole. Its utility IS to burn RSR and contribute to the Defi flywheel by applying deflation to RSR.
All rTokens including RSD are ‘protected’ by over collateralization in the form of RSR.
RSR is not backed by anything and is only worth what the market says its worth. So the over collateralization is shaky at best.

RSD proposes to do two things which directly benefit & strengthen RSR.

  1. It burns RSR, reducing supply through deflation and theoretically - with time - assists in price growth.
  2. Increases Liquidity for RSR. To be a truly effective source of collateral insurance for rTokens, RSR should have deep permanent liquidity. Via the treasury mechanism currently implemented we hope to accomplish this by directly compounding RSR/RSD LP throughout RSDs lifetime.

Another critique seems to be of the flow of funds to the Treasury. RSD is ofcourse governed by RSR stakers so flow of funds can be voted on and changed at any time. We have had discussions on directing a percentage to RSD holders. It is something which will likely be implemented in order to position RSD 'in-between’ eUSD & hyUSD. This will likely come at the expense of the treasury, but should the entire treasury be scrapped and directed to rToken holders? Invalidating the desired goal of compounding long term liquidity? Should it be a minor reduction? Balance is key of course and we should have further public discussion around it, so any suggestions are welcome.

There has also been discussion of the treasury being managed in the future by its own DAO. Where early minters or LP providers could be airdropped DAO tokens to reward early participation.

I propose RSD needs two areas of support in order to drive its success.

  1. Creation & incentivisation of a tri-rToken curve pool RSD/hyUSD/eUSD or RSD/eUSD.
  2. Creation & incentivisation of a RSR/RSD pool.

This way RSD can be easily traded from any major stable coins, eg. USDc routed via eUSD/FRAX/USDc via tri-rtoken into RSD. And RSR will be connected via the additional routing of the RSR/RSD pool and vice versa.

The biggest beneficiary of the growth of RSD is Reserve themselves as the largest holder of RSR via the slow wallet.

It has been suggested that Hedge funds or Daos may want to hold their treasuries in rTokens - yes sure, I would take it one step further - if RSRs liquidity strengthens and simultaneously the token becomes increasingly scarce via deflation, an argument could be made these same hedge funds & Daos may want to hold RSR on their books as well as rTokens. This is the ultimate addition to the flywheel. The more RSD minted and used the more RSR is burnt, the more RSRs liquidity grows. As new holders of RSR - individuals and organizations alike - hold RSR the more they will be inclined to hold value in RSD.

This is a call to action-:

By deploying RSD we have created a spark. A spark which if the community and Curve/Convex voters help ignite, has the potential to become an inferno. An inferno which will provide the greatest utility to the entire Reserve Protocol ecosystem.

Hi there,

Good to see long form replies and sensible opinions on RSD and it’s use-case. As RTokens are in their infancy it’s interesting to see how the mere discussion of an RToken forms into certain positions. That of business legitimacy, technical possibility and the softer features of analysis and Reserve assistance.

I think I have 3 main points - firstly around the token itself and secondly around process (I’m a process guy). Lastly - time - the unknown.

First up RSD - I believe RTokens should not be designated good or bad based on whether they will have a large market cap. If they address a need in a group of people suitably then that is good enough for me. I think their relative safety and the intention is more important - people who create RTokens through a bona fide belief in addressing some form of need - ‘altruistic’ - you could say is a perfectly good, indeed important factor here.

I see the future of RTokens being very much the same model as youtube, where niche is the absolute reason why the long tail is required and should be encouraged. From this long tail comes the ability to adapt to society’s needs and the changing landscape of innovation around money.

So, what is the appeal of RSD? Burning - a fairly simple approach, given, but let’s frame this a different way - is the perception of the protocol increased by the very people who obviously value the project enough to pay money to own it’s token? I’d say yes - in a small way, yes, but nevertheless it’s generally seen as positive. The financial reality is something else completely - but by simply creating this RToken, you get free karma. This is niche, admittedly, but I think emphasises the point that you don’t need an army of adopters to fulfil a need.

Secondly - process. I think this is incredibly important - to be seen to be able to do this from a standing start and literally from 3 guys on the internet thinking about doing something. To be seen to go through the process and experience it so that others can see what the process is and how things can be enacted is very important for the protocol. Documents and discussions are nice, but there’s nothing can cement someones idea than see someone else act it out.

‘We can do that - just look at RSD - 3 guys with an idea - let’s get our xyz idea off the ground’ should be a narrative that creates the long tail. Will they all be great? No - but I bet one oddball idea turns out to get 100M TVL. Which one will it be? We don’t know!

In much the same way as venture capitalists look at seed rounds - I don’t know which idea will make a billion dollars, but I want to own the one that does.

Another side of process is Reserves response to new RTokens - again, it’s early days and things can change but the structure of this is interesting - somewhat formal and ideas based - which is great for ‘serious’ RTokens - but it’s a wide stage. Maybe there should be different approaches based on the target audience - big RToken eUSD for Signal - lot’s of due process and scrutiny - small RToken for internet game with 1000 users - maybe a different approach. Certain features should never be compromised - safety for example, but maybe the dial can change on other factors.

Lastly - time. We just don’t know what the passage of time will do. Something that seems silly might become big and something big might dwindle and disappear. But that’s the point - more actors allow this to happen and the whole protocol can become a vessel for society to try out composable money. Low entry cost and ideas should see ‘creators’ take leaps and try things out - again youtube is a great example - started with a video at the zoo - was that the best thought out thing for the first upload? No - absolutely not. However the network effects of youtube are undeniable - and for Reserve to prosper I believe network effects are required - and that means getting lots of people talking to their friends about it and it being the ‘central business district’ (apologies 80s human geography coming in there) of stablecoin manufacturers. Basically the first place you go to either re-use a stable or create your own.

More RTokens means more people spreading the message into communities that have never heard of Reserve - I think that helps a lot in awareness. Imagine this - a chain of old people’s homes decide to create an RToken so they can pay their Bingo rewards in it and earn interest at the same time and residents get to use that for offers on coach tours - stupid example but that’s the point. Granny gets a trip to Brighton because of an RToken.

I’m just waffling now so I’ll shut up, but I think the process and cultivation of creativity are important factors.

I’ve previously stated my points on discord but a brief summary is that I am in agreement with Sinatra here, I’m not sure if it’s attractive to people who don’t hold RSR. Degens looking for yield may simply defer to hyUSD. I generally lean towards dividends over buybacks in terms of effectiveness and I haven’t seen a strong example of a buyback and burn providing much value.

Nevertheless, Mattias has pointed out that this RToken could be used as a building block for more RToken uses. I see the value in that!

more actors allow this to happen and the whole protocol can become a vessel for society to try out composable money.

I think this is my take on it as well. I think one of the best things about this setup is the focus on engagement. If you gatekeep too hard it could stifle that. I understand that some ideas might seem weird or maybe they don’t make much practical sense but in a weird way I think that is really the beauty of this whole thing. It’s totally wide open to anybody and everybody.

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