[RFC] RSR Health: Request For Comments

[0xJMG]

1. Summary

• Problem: RSR’s structure distorts key metrics and concentrates control. The idle supply inflates valuation optics. Offchain governance dulls engagement and trust, deterring external talent and concentrating value capture responsibility within the central team.

• Solution: Introduce and budget a veRSR-governed tail-emission model and transparent treasury accounting to decentralize control, align incentives, and make value capture verifiable and distributed. Empower the community to operate as productive capital.

• Outcome: Burn unused supply (estimated ~30 billion RSR), re-engage external capital and builders, and transform RSR’s monetary framework into a transparent, community-owned engine for durable growth.

Fear, uncertainty and doubt grows in the void left by implementation gaps and the erosion of shared ownership. This proposal aims to offer solutions to fill that void.

2. Introduction - Why Now?

I’ve been part of the Reserve ecosystem for seven years. First as a seed investor, then Head of Ecosystem Growth, and now as an independent community contributor to the OPEN Stablecoin Index DTF.

The Reserve Rights (RSR) token governs the Reserve ecosystem. When vote-locked or staked, RSR grants Decentralized Token Folio (DTF) governance rights and a share of DTF fees. For Stablecoin and Yield DTFs, RSR also provides first loss capital. RSR does not yet govern its own treasury, with (at least) ~41% of supply held in company wallets here, here, and here.

Roughly 4.4 billion RSR are staked across DTFs from ~300 wallets, with governance participation often below five voters per proposal for the largest DTFs. A concerning share of staking and voting activity originates from company-linked wallets, as explained in Problem, section 3.2 below. The cited figures can be independently verified via the governance tab for each DTF on app.reserve.org.

In putting together this proposal, the OPEN Stablecoin Index provides a helpful analytical lens for evaluating RSR vs its peers on a relative basis. This is similar to how the market (capital, talent, partners) assess where to spend their limited time and money!

Here in Table 1, you’ll get a glimpse into how 13 comparable ecosystems differ from RSR in ways that might help contextualize this proposal.

Table 1:

You can view the more detailed dashboard here.

Before continuing, it’s important to acknowledge every current and past Reserve contributor, investor, and community member. The project’s longevity exists because of your conviction, and a belief in the potential of “Reserve Rights.”

Also recognizing the livelihoods intertwined with RSR’s future, from contributors to the global underbanked it aims to serve. This proposal is written in that shared conviction to safeguard RSR’s long-term health.

This proposal is meant as a conversation starter. It does not pretend to be precise, final and scientific. Ask questions, flag risks, and build on what’s useful. With luck, a thoughtful and open community dialogue will emerge.

3. Two Core Problems

RSR’s health today centers on two structural issues that shape how it’s perceived and governed.

3.1. Excess Authorized Supply (Metric Distortion)

A large portion of RSR remains authorized but unused, inflating the fully diluted valuation (FDV) without contributing to productive activity.

• This weakens RSR’s TVL-to-FDV and several other efficiency ratios compared to peers.

• The distortion is optical, not fundamental, yet capital allocators often filter opportunities on headline FDV alone.

• As investor Jon Charbonneau observed: “Many funds simply use the headline FDV. We know it’s misleading, but that’s the reality.”

As a result, RSR appears overvalued and underperforming (see Table 1 above). If you’re talent or capital, how do you weigh the opportunity cost of joining and staying in the lowest TVL-to-FDV ecosystem versus the median or top-tier performers?

3.2. Ownership Alignment in Emissions Governance

Company wallets control at least 41% of RSR supply. Treasury allocation decisions remain offchain and opaque, including investment into other portfolio companies that do not accrue value to RSR.

RSR’s manually managed emission curve mirrors Bitcoin’s predictability in form but misses its onchain transparency, adaptability, and proof-of-work distribution in substance. This is foundationally problematic.

RSR currently captures little verifiable value from its treasury, emissions, or investments due to this structure which also introduces three systemic concerns:

1. Dump risk from a single dominant holder.

2. Company-linked wallets outvote independents (example, illustrated), causing governance disillusionment (example)

3. Builders hesitate to build atop RSR when value leaks elsewhere.

As a serious builder or integrator, how do you justify building vital infrastructure atop RSR’s opaque operations and neutered ownership? Deployers could launch a DTF with their own governance token, but why not make RSR itself the most compelling foundation?

4. RSR in the Indexing Landscape

RSR is optional as a governance token on DTFs although fees from all DTFs buy and burn RSR.

Major fintechs, CEXs, and ETF issuers are accelerating into crypto indexing. Crypto.com Baskets, BlackRock iShares ETHA, and Bitwise Indexes are part of the wave. Many will remain centrally managed, reflecting Web2 design and legal structures.

Kraken stands out for hedging both worlds, running centralized Kraken Bundles while supporting the onchain CF Large Cap Index DTF utilizing CF Benchmarks data, its own subsidiary.

The following section highlights criteria and tradeoffs for onchain DTF builders designing governance and value flows. It offers context for potential RSR integration rather than a prescriptive checklist.

Reserve’s edge likely lies in serving DTF deployers who need resilience & neutrality, permissionless composability, plausible deniability, rapid market entry, or some degree of decentralized governance and marketing.

RSR health likely plays a pivotal role in realizing this edge.

5. Peer Context

Across crypto, top ecosystems are rethinking their token models to balance flexibility, transparency, and community alignment.

• HYPE ($36B FDV) is wrestling its own similar metric distortion and considering a token burn and either removing the max supply cap to allow ongoing emissions, or maintaining the cap and addressing potential ecosystem growth fund shortages later when market sentiment changes.

• FRAX ($134M FDV) is replacing its capped model with a tail-emission schedule governed by veFRAX holders. This ensured predictable long-term incentives while allowing veFRAX holders to govern how emissions are allocated. It effectively gave Frax a flexible, decentralized monetary policy that adapts with market conditions.

• ETH ($470B FDV) transitioned to a proof-of-stake, adaptive emissions framework in 2022 that adjusts validator rewards to network conditions while burning a portion of transaction fees. Its net issuance rate currently tracks below Bitcoin’s. The Ethereum Foundation’s treasury is centrally managed but holds less than 1% of total ETH supply.

By comparison, RSR ($601M FDV) follows a Bitcoin inspired structure, but without the open and verifiable onchain features that made Bitcoin’s model credible.

6. Proposal: Modernizing RSR’s Monetary Logic

Objective: Reduce inflated FDV, improve economics legibility, and integrate community ownership with emissions governance.

Proposed Steps:

1. Publish treasury data: Confusion Capital and ABC Labs to disclose historical allocations and forward forecasts to guide emissions planning for a veRSR system. Learn more about veTokenomic systems here.

2. Model veRSR capital needs: Confusion Capital and ABC Labs forecast bull and bear scenarios to determine N-month prefunding for veRSR. Publish with a request for community comments.

3. Create an independent discretionary fund: Establish a fund to support near-term RSR ecosystem priorities in research, regulatory policy, and crisis response, replacing the Slow and Slower Wallets. Portfolio company investments that do not accrue value to RSR should seek external funding sources.

4. Introduce tail emissions via veRSR: Replace the fixed supply cap with a flexible schedule governed by veRSR holders.

5. Burn excess RSR (estimated ~30B): Remove unused supply to improve RSR health ratios and signal credible scarcity.

6. Mandate governance justification: All new resource allocation proposals must include justification, projections, and receipts. veRSR would serve as the main funding engine for Reserve ecosystem initiatives driving TradFi, DeFi, and Retail adoption.

7. Expected Benefits

Market Credibility:

• Lower FDV and transparent accounting improve core valuation ratios.

• Clarity attracts credible analysts, capital, and builders.

Shared Governance & Ownership:

• Integrates treasury and emissions with the community turning collective participation into productive capital.

• Restores ownership legitimacy and empowers contributors to compound their impact.

Ecosystem Expansion:

• Predictable monetary policy provides a way to onboard new ideas, expertise and capital.

• Encourages new DTF deployers to adopt RSR as default governance infrastructure.

8. Success Metrics After 12 Months:

• Market health: Improve RSR’s TVL-to-FDV ratio by at least 30% from today’s level.

• Community alignment: 35% of circulating RSR vote-locked in veRSR, showing active, long-term commitment. (current comps: veCRV 40%, veFXN 67%)

• Decentralized governance: Each major DTF (>$20M TVL) has 7 or more independent voters consistently. Voters may be delegated from the company’s RSR supply but must be community-elected and re-approved every six months through open renewal votes.

• Community initiative: Excluding DTF basket changes, at least 10 community-led growth proposals inspired/submitted annually, with 2 or more adopted, backed with Reserve administrative & awareness support.

• Transparency: 70%+ of funded proposals publish clear receipts and impact reports on how RSR capital was used.

• Ownership distribution: Company wallets hold no more than 10% of total RSR supply.

Some may want on metrics like TVL or RSR token price, but forecasting them is futile in an emerging market under the weight of technical, operational, and regulatory risks. What we can shape are the inputs: our incentives, transparency, and participation. The outcomes ahead will reflect the integrity of what we build today.

9. Closing

The Reserve Protocol is now more efficient, composable, and secure than ever. But RSR’s health has stalled, and while an upcoming market upswing could mask the cracks, a future cooldown is likely to expose and magnify them.

First-impression metrics obscure the RSR ecosystem’s strength. External capital, builders, and integrators are under-engaged in the RSR flywheel.

Engaged capital creates outsized impact. They stake, govern, integrate, recruit talent, and shape outcomes through their networks. They identify risks early and lend credibility that attracts others. They function as an extended BD team and serve as one of the clearest signals of product-market fit and compounding momentum.

A refreshed governance model could calibrate emissions in real time, more reliably align dilution with growth, and restore confidence in RSR’s monetary framework. Onchain alignment between mission and operations secures this framework.

By reducing unused supply and improving transparency and governance, Reserve can fortify its credibility and deepen its community strength in tandem.

Founders often fear that sharing control with tokenholders slows execution and blocks shipping. The best founders should be trusted to move fast, but governance isn’t binary. There’s an efficient frontier where minimal rights and protections can meaningfully boost asset value and investor confidence without hampering agility.

A few high-leverage, low-cost governance trade-offs can unlock outsized upside. Traditional finance has long understood this equilibrium.

Accessible transparency compounds like interest. Shared ownership multiplies strengths. Together, they create durable value that keeps RSR healthy in every season.

We’ve outlined key problems and a potential path forward, open to refinement. What resonates or feels missing? Please add.

[Teeb]

This proposal is well articulated and clearly outlines the elephant in the room with respect to the Reserve Project, the 40B locked supply and “RSR treasury of 20B tokens” valued at $140m USD. The projects original inception was to fight inflation and introduce a deflationary monetary system, yet the tokenomics of the project clearly contradict the whole ethos of the ecosystem.

I’m 100% supportive of this, I would even argue that the “RSR treasury” that has 20B tokens aside from the “teams allocation” of another 20B need to be revisited. Meaning, the Reserve Treasury should disclose their historic run rate and future run rate of that 20B tokens, as part of this proposals point 1.

Overall, the community led Treasury is great, however, id like to ensure this doesn’t slow down the project decision making that currently ABC leads. If this is taking 10B from the 40B odd then keen to review this, as this would mean the current 20B RSR treasury under ABC labs control would remain?

I would argue, post review of ABC publishing The treasury data, the goal should be to burn the entirety of the locked supply of 40B tokens. The ecosystem needs to know that the Reserve Treasury already has 20B tokens under management, that’s currently $140m USD at roughly today’s price. Again the goal of this project is to crate value across several realms, one being the projects value denominated in RSR, therefore the $$ value per token is important and I would argue if the project actually focussed on this, everything else would be “healthy”. Take Bitcoin for example, one token is worth over $100k, I’m not suggesting RSR will ever reach that, however, why not if we’re really trying to “index the world”. Therefore having 100B tokens with any project is completely ludicrous, again, yes the price of the token is less than a cent, however, that is unfortunately the teams fault in having a inflationary tokenomics construct from day 1.

Whatever happens to crypto, one thing that will never change in the next 10 years is the price of each crypto project tokens being denominated in USD or any fiat currency for that matter, so therefore, build a tokenomics that favors this and an ecosystem that directs value into the RSR token. This was a big miss from the project once they transitioned from the RSV dilemma in LATAM to UglyCash. Great progress is being made, however, this is being completed diminished by the lack of leadership in building up the “Share price” of Reserve I.e RSR token.

As a community member since 2021. Nevin & Reserve, please fix this immediately, be more transparent, the last forums decision making on RSR locked supply was far from transparent and lacked visibility into ABC labs treasury requirement and usage.

We are at a critical stage with DTFs, Stablecoins, and its clear Reserve is missing the ball with respect to institutional adoption amongst other players, to retain and attract the right investors and partners, the strategy surrounding RSR token needs to evolve.

[glock]

TLDR for anyone who is interested.

RSR’s got two big problems:
• Too many unused tokens making it look overpriced.
• The company still controls most of the supply and decisions.

The fix this guy suggests:
• Burn 30B RSR (delete useless tokens).
• Create veRSR, where people lock RSR to get voting power + rewards (real community control).
• Make all treasury activity public and transparent.
• Replace company control with community-run funds.

Goal = more trust, real decentralization, and stronger RSR value.
———-

My response as a community member:

Burning 30B tokens is a smart move. It kills the inflated FDV issue and makes RSR look healthier to new investors. As for veRSR, I’m really interested — giving the community the option to lock for weeks, months, or even years (earning more rewards and voting power the longer you lock) would be huge. It’s not just healthy for the system, it could drive RSR’s value up like crazy.

[Ranger]

I support this. If the project is going to succeed, then 10b tokens is much more than enough for whatever function. And also if it’s true what Teeb is saying about the treasury containing the 20b tokens there’s no reason to keep these 30b tokens around. For what? They can’t even be sold without tanking the price and destroying the project completely. I really don’t see how it would be beneficial to keep it around. Just the treasury and the 10b is hundreds and hundreds of millions of dollars.

[MarkDoc77]

I agree with much of what’s written here — it’s well-structured and long overdue. My biggest concern is that the current RSR inflation and emission model feels outdated and misaligned with today’s market realities.

Comparing it to BTC’s halving schedule doesn’t hold up when you factor in RSR’s far larger supply, weaker adoption, and minimal marketing momentum. After nearly seven years of DCAing I’m only barely in profit — not because the thesis failed, but because the execution hasn’t evolved. It still seems like Reserve (or Confusion Capital) is relying on our bags to fund ecosystem growth — a 2017-era model that doesn’t inspire long-term confidence. I’m fine with supporting development if it actually bears fruit, but we need clarity on how this token becomes scarce, useful, and valuable to holders. Otherwise, continued dilution and vague promises will keep pushing real supporters further out on the risk curve.

Do we have some big adoption pending we’re just being kept in the dark about?

It seems irresponsible to be funding adoption with dedicated bag holders funds ten years on. If that is only option can we call failure yet? You know what would drive adoption? Burning the remaining RSR, creating a massive bull run into RSR and thus the ecosystem. Could you imagine even getting half the current with RSR valued at $0.10?

[RyanTreeFiddy]

Yes. I’ve been in support of this for years. Burn it. That’s the one criticism I don’t have a good response for.

[Teeb]

[Husky777]

I like the burn idea! Let’s see noticeable value growth in the RSR coin!

[Mikail]

Lets burn!!!

The émission right now is way to agressive

[Niti1250]

If its good for RSR token, lets burn it!

If we do it now or wait 5 years they all gonna burn so lets do it now! And go for price action! After that we will get exposure for DTFS and index the world.

[jamba68]

Hi folks, I’ve been supporting this project for 2 years. He is right with this proposal. I remember the vote from December 24 about token distribution. We don’t need an excessive token supply at the moment. Is this a top 10 market cap project? No! That proposal only created FUD about high inflation — which nobody wants. The project needs to focus on positive promotion of the Reserve Protocol in this highly competitive market.

Isn’t the mission of Reserve to remain a stable (non-inflationary) currency? Remember XRP? Years of token distribution turned it into something like a stablecoin. Many people ended up disliking that coin.

[rspa_StableLab]

Hi James! Great proposal and lots of food for thought.

I personally love ve/gauges. They’re one of the best ways for simple token holders to express their preferences in a meaningful way. I have written about that at length on X. Most notably here:

The issue is to design a gauge and emission system in a way that it also funds cost centers.

Gauges were invented by Curve. There gauges governed where the CRV bazooka would amplify LP yield. Super clever system, and it gave rise to a cambrian explosion of innovation. Most notably Convex, Redacted Cartel and other bribe markets.

RSR needs to incentivize staking so that DTFs can be overcollateralized, but it should also fund development, marketing and the fantastic legal work that is happening.

If yield should come from protocol profits, or DTF profits, then these would go unfunded, as no one would stake there.

The devil is very much in the details. Where do emissions come from? Protocol profit only? Or from the treasury? If so, what’s the emission rate?

How are cost centers taken care of? How are the gauges designed and implemented?

There’s a great chance to design something really amazing here. I’m certainly happy to help.

What I can only advocate against is rushing to any conclusions here.

Centralization in governance is almost native to DAOs, simply because they are plutocratic systems and distributions of real and social capital follow power laws. At the same time Strnad pointed out that more participation isn’t necessarily a plus. https://arxiv.org/pdf/2505.04136

Each DTF DAO can decide to engage more governoors if they see fit, and want to incentivize them in one way or the other. I really don’t think there’s a “right” way to do it.

What I would love to see is a cross-DTF DAO that can fund marketing and community building activities. We have discussed this here in the forum, and I hope someone runs with this proposal.

Thank you again for the passionate and very well articulated post. Happy to help develop it further.

[SharingisCaring]

Hi. Thanks for having this discussion.

I agree with the proposal. Always want see best governance that protects and safeguards the future of RSR. Trust and Transparency are fundamental to the success and longevity of any company.

[Originalrsr]

Yes, a burn is necessary. Over supply is a problem. It creates uncertainty in the market for buyers and holders.

[Smeddy]

I’ll say this delicately because I’m a big-time supporter of the Reserve, and don’t want to be misconstrued as anything but.

I had no problem with the road to 60BN unlocks, but assuming there’s a healthy treasury, it begins to feel like the team is breaking its ecosystem for the sake of a hoarding mentality.

It may well be that community, narrative, and perception are basically unimportant from a team perspective, and all that matters are growing DTFs.

But it’s impossible nowadays to take anyone on the Reserve journey when the supply has the energy of the kind of projects you are warned to cross the street away from. It’s hard to suggest people take part without adding asterisks and caveats.

I know the team want to avoid unhelpful volatility (e.g., the 11c price point just set up unrealistic expectations and an unhelpful reality), but it does seem like the scars of the last market and last regulatory regime have swung the pendulum too far the other way.

I have a lot of trust in you, but confidence doesn’t come from silent comms and (actual or perceived) misaligned incentives. And right now, there’s no competing story against the weekly unlocks.

I remain convinced Reserve is one of the most important projects in any financial sphere right now. But everyone’s distracted from explaining and shouting that message.

[Ranger198P]

I support this fully and I think it’s a bit overdue.

[Anonandgone]

Problem #1: straight burn (remove supply) or veRSR (emissions with purpose) seem like good options. I haven’t thought through the outcomes for each one well enough to recommend one over the other, but either are probably better than just keeping the supply sitting there.
Problem #2: Partially solved in my answer below:

The RSR project is ambitious and working on many things in a constantly shifting crypto landscape. By itself, this is not only not a bad thing, but potentially a very good thing. However, it is critical to have those ambitions a) documented and accounted for and b) followed up on and course corrected based on the new reality.

Since token price and community frustration point to a) and b) not being done properly, i recommend the following:
~5-7 OG RSR hodlers should be appointed as “team communicators”. These communicators will be the link between user input/concerns and team development and outreach. They’ll have access to relevant information and to the team’s schedule. Team members *must* make it a priority to meet with these team communicators and have every question answered. Even if that answer is ambiguous, it should be communicated clearly. The point is not to have the “right” answer, but an “official” answer. And if the question keeps coming up and the answer doesn’t change, the communicators can red flag it and tell the team what should be moved up the stack in their priorities.

As a start, the team should get on a call with these communicators and discuss topics for clarity:

• supply and emissions
• RSR allocation and decentralization of governance
• stablecoin vs DTF focus and market fit
• team employees, workload, salary, etc
• future roadmap and “hype vs results”

The initial roadmap is:

1. Let the devs dev.
2. Install key people to hold devs accountable (preferably with economic incentives).
3. Change the reserve supply to make the project more attractive
4. Iron out a focus roadmap (less about deadlines, more about what is important and why)
5. Implement, evaluate, repeat.

I don’t mind if my suggestion is overruled by something better, but there should be a clear plan of action moving forward. Pointing at the problem is simple enough. Pointing at the problem and then saying “if X, then let’s do Y” is where the magic happens.

[flameingoindigo]

Brilliant breakdown, James. Thank you for that.

I believe that what you suggest can immensely help the project. Everybody knows what the top 10 market cap coins are, and RSR has to have a chance to grow into one of the top 10 most valuable crypto projects.

Growing the RSR value is the best way to gain attention and adoption while indexing the world. Reserve Rights is not the only one trying to do that, and even though we believe it will do it best, the growing value of the native coin—supported by what you suggest—will be the best marketing.

I write this as someone who held 5% of the circulating supply in 2019. I saw firsthand the desperation of people in Venezuela losing their life savings within weeks due to hyperinflation, and I loved the idea behind the project. That is why I invested quite a lot without hesitation.

I’m still here, and I still believe that a backed stablecoin is a game-changer for a fairer world. I want that world for my children and grandchildren.

[Zibble]

No more words needed, burn it!

[Charlie]

I am for the burn also. There is far to many RSR than there need to be. Burn the 30/50B as suggested. This can only bring good things! It will bring eyes to reserve and new capital flow. It will bring eyes to DTF’S, it will solve the “FUD” Nevin has been addressing. It will bring RSR to a more respectible price point. And it will shut all thoses trolls up! I really dont get why not if your for reserve and your investors.

I agree with the posters suggestions and i think not doing so, not stepping up and making these changes will impact reserve and slow progress to the ecosystem.