I like the vision of the Reserve team of bringing stability to countries with unstable currencies. However, I don’t fully agree on how they plan on executing such a vision especially in regards to the insurance of the RTokens.
When a user holds an RToken, let’s say pegged to a stablecoin like USDT, there is an implicite assumption that they really hold 1 USD. Users don’t need to know (and some of them won’t understand) how such a stablecoin is structured, if it is fully collateralized or who governs what they are holding.
In reality, the RToken could lose up to 100% of its value if :
- There is a bug in the smart contract or if it gets hacked
- The Rtoken Governors have the ability to withdraw the collateral backing the RToken
- There is a problem with the protocols where the collateral is deposited (this is Defi, everyday some protocol gets hacked even the big players are not that safe)
- In case the RToken (like RSV) is using a centralised stablecoin, the Reserve address could be blacklisted by the centralised issuer rendering any collateral in this stablecoin unusable.
The Reserve team are planning on including RSR staking on RTokens for those who wish to get an extra yield for providing insurance. I don’t think this is enough, because once the RSR used for insurance is depleted, the USERS of the RToken pay for the rest. So some farmer in Venezuela holding 1 RToken assuming they are holding (let’s say) 1 USD, the next day some protocol on the internet gets hacked, and his money is now worth 50% less or so … where is the stability in this ?
I know that the Reserve team are aware of such risks but they still plan on rolling the Reserve protocol anyway … As I said I like the vision and respect the work that has been done, but I think users
protection should be a PRIORITY.
Following the current model, the Reserve protocol will be creating a new form of instability while trying to solve one.
The issue could be solved if the RSR token is used as a last resort for the Rtokens that could be voted and backed by the governance.
RTokens would continue to function as intended by the Reserve team, but the RSR Governance could have the possibility of adding some of them under its umbrella and provide last resort insurance by minting and selling new RSRs.
For example there are RToken1, RToken2, RToken3 … the DAO Governance could vote on backing RToken1 and act as last resort in case the staked RSR is not enough. The other RTokens could continue to function as normal but outside of the DAO.
There are two scenarios:
- Either have RSR staking per RToken + A new staking module for all RTokens supported by Governance
- Or have only one staking module for all RTokens supported by Governance with a slashing % (like Aave) before new tokens are minted.
The RToken revenues will be allocated to the different players in the system.
Without a last resort in the design of the system, I don’t really see the stability that the team is aiming for. The risks are very high and users shouldn’t pay for them. Any revenues generated by the RTokens could go to the insurers as a payment for their service. The RSR DAO would have to manage the risks to the system (by using part of the revenues to buy insurance for example or put ceilings on how much RTokens could be issued as a function of the marketcap of RSR).