Reserve AMA with Wolf Crypto — Part Two
We held an AMA with Reserve Protocol in our public Telegram channel on November 7th.
The Reserve project aims to introduce a stable, decentralized currency that can’t be abused by a government because it is globally distributed outside of anyone’s control, and thus nearly impossible to shut down.
Reserve Protocol is a decentralized stablecoin system that scales supply with demand and is built to maintain 100% or more on-chain collateral backing.
The Reserve protocol defines three tokens:
- RSV is a stable cryptocurrency that can be held and spent the way we use US dollars and other stable fiat money. It is a decentralized, asset-backed stablecoin. Reserve believes it can beat fiat money in global stability. The protocol is designed to hold collateral tokens worth 100% of the value of all RSV tokens.
- RSD is backed by USD in a bank account, and will be one of the many collateral tokens.
- RSR is the protocol token and a transactional currency similar to MKR. When the RSV token is trading above $1.00, any excess RSV tokens in this pool can be purchased from the Reserve smart contract. Purchases are made with RSR, and only available to RSR token holders. Once the purchase is made, the RSR tokens are burned. Reserve estimates that about 2–5% of the USD value of the RSV in circulation will be burned in RSR per year. This comes from estimates about RSV velocity (for the transaction fees) and average collateral token appreciation rates (for thinks like tokenized treasury bills).
You can also visit the Reserve Telegram channel, Reserve Community Telegram channel or Reserve website for further details.
Here’s what Reserve’s CEO Nevin Freeman had to say in the AMA.*
*This AMA has been edited for clarity.
WC (Wolf Crypto Telegram Member)
Welcome to another edition of Wolf Crypto AMA, this time with Reserve Protocol!
We’re up to part two of our AMA series with Reserve now, you can check the previous AMA we did with the team here —
Joining us today is no other than the main man himself, Nevin Freeman!
This is the agenda for the AMA. I’m going to lead with questions but please feel free to chime in with related questions as we go through each section…
- Recent Updates
- The Reserve Application
- RSV & RSD
- The Reserve Mainnet
- The Future of Stable Coins & Money
- Reserve & FUD
- Reserve Partnerships
- The Reserve Community
Nevin, as always, it’s our absolute pleasure to have you here today. I’m going to skip the long winded personal and project intros as we coverd both in so much depth in our last AMA and I’m pretty sure we have a bunch of hardcore RSR fanatics here today who want to get deep and dirty into where the project is right now.
For those who may not know Nevin or Reserve Protocol, now is a great time to check out the link above of our previous AMA for everything you need to know.
With that out of the way, it’s been an age Nevin, we last spoke to you in May, which already seems like a year ago.
How about before we really get into this, you give us an update as to what’s been going on at Reserve since then?
NF
Hehe, hi everyone!
So in May, we had not launched our stablecoin RSV, only RSR.
One thing we have done since then is to launch RSV! Here is some info about that —
The other main thing we have publicly launched is a consumer Android all that allows people in Venezuela to buy and sell RSV (“digital dollars” we call them) with the local currency.
We’ve also done some exciting work behind the scenes we can’t talk about yet 😉
..and importantly, we have figured out a ton about what’s going on in Venezuela. I’ll try to give some examples of what I mean —
Something that many people don’t realize is that crypto is, in a sense, more legalized in Venezuela than maybe any other part of the world. There’s no distinction between security, commodity, currency, etc. — crypto is just one broad category and it all goes. The government has the explicit objective of being the most crypto-native country in the world, and welcomes BTC and other assets, not just it’s Petro. The reaction to USD stablecoins will be interesting to see.
Cash USD is becoming commonplace in Venezuela at this point. Similarly, many wealthier Venezuelans already use electronic USD transactions with Zelle and BofA, even to pay for things in stores. This is legal as well — the government seems to have given up its grip on the Bolivar and opened up to whatever works.
Businesses are starting to find themselves sitting on lots of cash USD. But some transactions need to be done electronically, and so there is a lot of switching back and forth to Bolivars, which can be sent electronically basically instantly and for free.
It’s impossible to convey the full picture in a few lines of text, so these are just examples of the things that we have become familiar with as we interact with our users and new team members in Venezuela. When you’re developing a new product, there are so many little details you have to understand about the situation to produce something that truly connects, and that’s a huge part of what we are focused on day to day.
WC
I saw a picture of Maduro on national TV holding a Trezor in his hand, like yesterday.
NF
Yeah, it’s nuts.
THE RESERVE APPLICATION
WC
How about you take us through how the app launch has gone, what the reception has been there for the app, who’s using it (both users and merchants) and what you’re learned from the launch so far?
(Of course, without revealing too many of your trade secrets! We know Peter Thiel would be upset with you if you did!)
NF
The initial app launch has been one of the most fun parts of this project so far. I’ll try to outline how we are going about it and what has happened so far.
For background in case some people don’t know, the app lets you buy digital dollars (RSV) by making a bank transfer in Bolivers (generally referred to as Bs), as well as selling RSV for Bs and receiving a bank transfer in the other direction. We also allow users to cash in and out via PayPal and Zelle. These transactions are not instant — far from it. They often take many minutes, and in some cases over an hour. Just sending RSV from one user to another in the app is instant.
We started by targeting individuals with the offer to save their money in digital dollars. The idea here is to see if people would like to use the app to escape inflation by saving in digital dollars, even if no friend or family had the app and no merchants were ready to accept payment with it. Why? Because if the service is valuable even before you have a large network, that makes it easier to bootstrap.
We’ve been pleased to see that a good number of early adopters are happy to use the app this way. We also stumbled upon a surprise use-case (as is common in startups) — people who have earned money working on the internet, and been paid in PayPal. They are shopping for the best way to convert their dollars in PayPal to something they can spend. We allow them to convert them into digital dollars in the app, and then when they are ready, to Bs. A good portion of our transactions every day are of this type, and this use-case is growing organically to the point where we are having trouble keeping up with the number of transactions users want to make.
That brings me to another point — the current version of the app isn’t yet built to scale. We took a bet that we could go faster by launching a product that isn’t meant to scale since it would teach us so much so fast by getting contact with users, and that’s paying off. But with everything we are learning, we will be building a second version of the app that’s more robust. Having too many users to keep up with is a good problem to have, and I was hoping we would find ourselves squeezed, so it’s a relief that it’s happening that way.
But this is oversimplifying things — just because we have some initial organic growth does not mean we have conquered the world; far from it. Our next target is understanding the usability for merchants (and again, we are interested in learning whether there is a use-case for them prior to having all of the consumers on board, for bootstrapping reasons).
Merchant needs are pretty complicated, and they vary. We’re in the customer development phase with several right now, where we are spending time on the phone with them to understand their situations and what they would need for this to solve their problems. We are investigating how we can help merchants with treasury management (like savings, but for a business) and paying suppliers — as money moves up through the supply chain, stability and electronic transferability become more important, since it sometimes sits for a while, and sometimes needs to be sent across borders. So we think cash USD and electronic Bs, which both are actually OK for making small purchases at the checkout, start to have more problems later in that cycle.
One thing that’s been striking is how much time people are willing to spend on the phone with us. In many cases, I think it’s not a selfish motive — people can see we are trying to improve the economy, and finding ways to do that is something that lots of the people we have been in touch with genuinely want.
WC
For those who might not know, what does Bs stand for?
You’re not bullshitting us are you Nevin?
NF
Haha, Bs means Bolivars, the local currency.
WC
Users holding RSV in the app as a way to get exposure to USD is interesting.
Can Venezuelan’s hold USD in a bank account? Or is that not allowed?
NF
Technically they can in some cases, but people tend not to trust that option. So nobody does as far as we are aware.
WC
What are the RSV transaction volumes on the app so far?
NF
We’re currently keeping this private, as a part of staying stealth. This is so that we can get a bit of a lead before inspiring competition.
But to comment on this generally: they grow a satisfying amount every week, but are still low in an absolute sense.
WC
The transaction volume is enough for you to start pulling data from and improving the app as you need to though right?
NF
Yep, we have a really detailed internal dashboard.
An one more thing to add on all this — just because we have some initial organic growth does not mean we have conquered the world; far from it. Our next target is understanding the usability for merchants (and again, we are interested in learning whether there is a use-case for them prior to having all of the consumers on board, for bootstrapping reasons).
WC
Is the RSV contract address public and if so, how are you able to keep the numbers private?
NF
Transactions are happening off chain right now. Kinda like if people were transacting with a Coinbase account (more on that in a sec).
WC
Can you elaborate on processing of PayPal transactions, and past PayPal, what other payment methods does the app support?
NF
Zelle, Bolivar bank transfers, and PagoMovil, which is like Zelle but for Venezuelan banks, to move money from one bank to another in a short period of time.
WC
Now the app is out there in the wild, can you give us a real world example of how it’s being used and what this user experience is like?
How does the transaction process work? How long do transactions take to process?
NF
Right now it’s mainly being used as a way to convert one currency into another — Bs to digital dollars for savings, or PayPal dollars into Bs for spending. On Thursdays a company called Humanatic, which employs people to listen to customer support calls and annotate notes, pays its employees with PayPal. In order to make use of this weekly paycheck, users convert their new wages into dollars in Reserve, and then into Bs to spend.
Sometimes they leave part of the money in Reserve until they need to spend it. Other users who get paid in Bs come to the app in order to achieve greater stability, buying digital dollars with any portion of their income they don’t intend to spend on payday, and converting back to Bs when it’s time to spend. Of course, as time goes by, users may keep more and more money within Reserve, and spend it directly there. But for now this hasn’t been the immediate goal.
WC
Are all of these transactions on chain? Can they be viewed on a block explorer or something?
Is the RSV token an ERC-20 token?
NF
No, the app uses cloud custody.
Yes, the token is ERC-20.
WC
Can you explain to us what “cloud custody” actually is?
NF
It means the user doesn’t hold the tokens directly — like a Coinbase account, for example. We totally want to promote self-custody in the long term, we just felt this was the best way to get the ball rolling.
WC
Hmm Coinbase and Reserve partnership? 😉
I hear they give you a free t shirt when you become partners!
WC
On the point of PayPal and the like, one of the challenges with projects such as yours is the ability to get money “in”…however on the flip side of that, keeping in mind your ecosystem is still limited at this point in time and in app money can only be used in so many places, getting money “out” also seems like it would be important to me.
How can a user pull money out of the Reserve application and exchange this for cold hard cash?
And on the same point, how about merchants? Taking a digital currency in is a great process until one of your suppliers wants to be paid in cash rather than in a digital currency…
NF
Indeed! This is why we designed the service that’s built into the app so that users can cash out into Bs or USD via PayPal or Zelle. (Zelle lets you transfer money to BofA and many other US banks.) You can do all of this in the app itself.
We don’t yet have a way for users to receive literal cold hard cash. That’s been a topic of conversation over meals in the office lately though.
WC
Ok so PayPal and the like is money in and money out right?
NF
Yep.
WC
To coin a widely used crypto phrase of “network effect”, I believe the application was going to give users the ability to refer on other users.
Is this live and if not when? And how will this happen in practice?
What incentivisation or reward do users get for referring on other users?
NF
We intend to offer a monetary incentive to refer new users when we are ready to scale. Right now, we are actually trying NOT to get too many users, as too many at once would disrupt our learning and product development. (Believe it or not, closed betas that startups run are not only there to generate FOMO, although they are also used as a tool for that these days.)
When exactly will it be time to scale? That’s hard to say. Part of the challenge of introducing something new like this is you don’t know all of the pieces you will have to handle in advance. Once we feel like the product is suited to serve mass audiences, we’ll start aiming for scale. If we never reach that conclusion, we could end up choosing to focus on some other go to market approach — but based on how it’s going so far I would be surprised by that outcome.
WC
How about ambassador programs and the like?
Does Reserve have something of that effect in place to help spread the message and gain usage of the app and network “around the world”?
NF
Yes, we call them Reserve Citizens. Right now, they are laying the groundwork — beginning to gather communities throughout Latin America, Eurasia, and Africa, and helping educate our core team about their regions. If you are interested in participating, you can talk to any CM in our Telegram channel for more info.
I wanna share with you all, one of our squads in Venezuela sent us a selfie yesterday and I just love how badass they are. They were out speaking to merchants when they took this —
WC
Correct me if I’m wrong, but it seems like once mainnet is running and RSV and RSD are issued and working, the only thing you need to do to expand to new regions is to actually allow access to the app in said regions.
If that is correct, and keeping in mind the last time we spoke was Venezuela first, Argentina second, when can we expect to see the app rolled out to other regions in the world?
NF
Yes and no — as we have been discussing, fiat liquidity is crucial for making RSV useful. So yes we can allow access to hold and spend RSV easily, but we don’t think that will necessarily lead it to catch on. Because of the importance of having a two-way market, the time it will take to roll out is harder to predict. But… we have been working on that ;)
WC
Reviews of the Reserve Application —
RSV & RSD
WC
So let’s talk about RSV for a bit.
How bout you give us a quick lowdown on what RSV is and how it fits into the overall Reserve ecosystem before we start talking about RSV v2 and the RSV beta?
NF
RSV is a stablecoin that is based on tokenized assets. It’s designed to be more like Bitcoin in terms of its censorship resistence once it’s at scale.
WC
1 RSV = 1 BTC then? 😉
NF
Haha, we wish. 1 RSV = 1 USD for the time being 🙂
WC
Good start at least, I remember when 1 BTC = 1 USD as well 😉
So you started off on RSV v1 and have now obviously moved to RSV v2.
How bout explaining the differences between the two and what this means for users of the network and the application itself?
NF
RSV v1 had us holding collateral tokens in a cold wallet. RSV v2 is more like the desired protocol, where they are held by the Vault smart contract on-chain. But it’s a simpler overall protocol than in the paper, as RSV is redeemable for a fraction of the basket of tokens in the Vault, rather than a USD value. Since the backing tokens are all stablecoins right now, it still has a tight $1.00 peg.
WC
The RSV v2 system has an Owner which can pause the system, this is mentioned as only being used in “emergency situations”.
Can you give some explanations of what emergencies these would or could be and who is the owner?
NF
Yes, and importantly this means that users today need to trust the core team. We don’t like this feature and don’t want to require anyone to trust us, so this is just a temporary bootstrapping measure.
As for which kinds of circumstances would consitute an emergency, that generally would be if there is abug discovered. Of course we have audited and carefully checked ourselves, but it’s hard to be 100% sure, and so one way of launching code like this is to keep some control for a while until it has been more battle tested.
WC
Ok so to be fair, does the fact this ability exists take away from the decentralised nature of it all?
Isn’t the ability to “pause the system” similar to a government or entity saying, “we’re not accepting X currency anymore” and totally devaluing it?
NF
Yes, this does run counter to the goal of not being in control. I’d argue it’s a little different than a government since we don’t have a political interest to steal the backing funds to spend on social programs.
But in any case, we do invite people to look at how it currently works and not hold it if they are uncomfortable with the level of trust needed right now.
WC
Just backtracking to RSV, you briefly mentioned it before, but what tokenised assets is RSV currently backed with?
And how about collateralised assets? (how do they get added chosen and added in).
NF
Tokenised assets are currently TUSD, USDC, and PAX.
For collateralised assets there’s a re-balancing procedure that’s pretty cool. Anyone can propose a swap with the Vault where they add tokens and receive some in exchange. The governance mechanism is used to approve or deny these swaps. Right now that’s also not yet decentralized, but we built the contracts so that control can be passed on to a DAO with a single transaction, and that’s our intention.
WC
Can you explain how issuance of RSV works on the network?
From my understanding it seems like anyone can issue RSV? (it certainly seems this way from these smart contracts I’ve looked at).
- For the USDC smart contract, which is at 0xa0b86991c6218b36c1d19d4a2e9eb0ce3606eb48, call approve(0x5BA9d812f5533F7Cf2854963f7A9d212f8f28673, USDC_AMOUNT), where USDC_AMOUNT takes into the account that USDC only has 6 decimals.
- For the TUSD smart contract, which is at 0x0000000000085d4780B73119b644AE5ecd22b376, call approve(0x5BA9d812f5533F7Cf2854963f7A9d212f8f28673, TUSD_AMOUNT), where TUSD_AMOUNT takes into the account that TUSD has 18 decimals.
- For the PAX smart contract, which is at 0x8e870d67f660d95d5be530380d0ec0bd388289e1, call approve(0x5BA9d812f5533F7Cf2854963f7A9d212f8f28673, PAX_AMOUNT), where PAX_AMOUNT takes into the account that PAX has 18 decimals.
- Finally, at the Manager’s address 0x5BA9d812f5533F7Cf2854963f7A9d212f8f28673, call issue(RSV_AMOUNT)
CerkiK audit of RSV v2 —
NF
Yes, anyone can issue or redeem without our involvement! You do this by interacting directly with the smart contracts Moar linked. It’s a little technical right now, and in the future there will be a GUI for doing it in a browser.
Essentially, you need a combo of the backing tokens (USDC, TUSD, PAX) to mint, and when you redeem, you get that same composition out. It’s 1/3, 1/3, 1/3 right now.
WC
So how much can be issued/minted at anyone time?
If I want to mint a million or two of RSV, can I do that or are there limits?
NF
It’s designed to be unlimited, though at this exact moment I think the development team set a limit to make sure nothing crazy happens.
I don’t know the exact amount.
WC
So we’ve spoken a bit about RSV. You also have RSD in your ecosystem.
Can you explain what this is, why it’s needed and why you’ve prioritised RSV over RSD?
NF
Sure. RSD is just another asset-backed token, a tokenized dollar. It can add a bit more diversity to the vault, especially if it can be done internationally. Also, we anticipate that the return on assets backing collateral tokens will be split between the tokenizer and the protocol over time, and so it’s a way for the project to receive a portion of the return in order to increase resources available for bootstrapping the RSV ecosystem.
If needed, the whole thing can run without RSD, and in the long term, it will be up to the community whether to include it or not, just like other backing tokens.
WC
Are the RSV and RSD tokens themselves going to be listed on any exchanges or will they forever remain internal to the Reserve ecosystem?
NF
Many exchanges seem to think this is a good idea. In some cases, exchanges that want to list RSV may be less interested in listing RSR out of legal conservatism.
WC
What are the legal difference between the two?
NF
Stablecoins are generally less contentious. Exchanges all have their own way of deciding what they are allowed to list, and tokens that may go up have a different kind of analysis.
THE RESERVE MAINNET
WC
So there’s quite a few things to go through on the Reserve mainnet front.
The first thing I want to bring up was that the mainnet has long been mooted for this year and there was recently some comments made that this “might not be in 2020”.
Does this mean the Reserve mainnet been delayed and either way, delay or not, when can we expect it?
NF
For those that don’t know, the Reserve “mainnet” marks the point where we launch the full Reserve protocol as described in our paper. Reserve can function with fewer features, but it’s not quite as good.
The time of mainnet launch is also when seed investor, advisor, and team tokens begin entering circulation.
We’re not behind on our technological progress, we’re actually right where we want to be. And if we choose to, I foresee no problem launching the Reserve mainnet in 2020.
That said, we may *choose* not to. Our choice will come down to what we believe is best for project success overall.
One factor in our choice is that protocol implementation trades off against consumer product implementation. I think we can all agree that mass-adoption of RSV is the main goal here, and in the short term, that may be helped much more by releasing technology that makes RSV easy to use than by making improvements to it under the hood. These improvements under the hood are very important to RSV’s censorship resistance and stability at massive scales, but won’t themselves yield adoption, which is our main priority right now. A beautiful, elegant cryptocurrency that nobody uses is still worthless.
Another factor in our choice is that unlocking further RSR tokens at the wrong time may be bad for the community. It will increase circulating RSR supply. If RSV is clearly on the path to significant adoption, there’s much more reason to hold. We want to do what’s best for all stakeholders in the Reserve universe, even if that means delaying the core team’s own ability to participate in markets for RSR.
These are some of the reasons we will take into account when solidifying the timeline for mainnet launch. We very well may choose to do it in 2020, and there is also a chance we will decide it makes sense to keep hammering on adoption angles for all of 2020, so we wanted to make this clear to the community.
WC
The big token unlock that comes with mainnet launch is something that has been talked about a lot…
What’s your plans to counter this big unlock and what do you expect these private sale token holders to do with their tokens?
NF
Of course I can’t make any guarantees about what investors will do with their tokens. We’ve seen some crazy times with unlocks recently. This is part of why we have thought recently about the strategy for when to release.
If the release happens in the right context of growth and adoption, we think it can come with a healthy amount of turnover rather than an unhealthy amount.
WC
Can you also give us a rundown on the overall token supply as of right here right now and how that changes as these additional tokens come into play?
NF
Right now there are only 6.x% circulating. Upon mainnet launch, significantly more will begin releasing.
You can read about these numbers in our Huobi announcement here —
WC
Speaking about the seed etc sale unlock and mainnet, you said you couldn’t control what participants in those rounds do with their tokens, but whats your expectation in regards to arbing?
Surely some of the big names that brought in didn’t do it to buy and flip a utility token, and it seems like the main utility case for the RSR token and why people are holding it is to take advantage or arbing once mainnet is live?
NF
Indeed, many of the seed investors have a clear long-term view and enough capital that it would make more sense for them to hold, including our man Peter.
If you hold your RSR and participate in RSR-realted RSV arbitrage pro-rata, you can maintain the same % ownership of RSR while receiving an income stream in RSV. We expect sophisticated holders to follow this strategy in many cases. It’s what the project itself it likely to do for a long while.
WC
So Peter Thiel holds RSR for that RSV arb? That’s awesome.
What does he bring to the table in terms of using his wide range of large contacts, connections and developments of the product?
NF
As you can imagine, Peter has lots of useful connections. As I’ve mentioned before (we get this question a lot), we think those connections are the most relevant once we have proven our point and are working on scaling up. The way Peter puts it, you want to dominate some small market and then expand outward in concentric circles.
That process of scaling out is something that is more assisted with others being cooperative than the initial push, since the initial push is about understanding the users and making a great product. He was the one who introduced us to Sam Altman, so that was nice of him 🙂
WC
So if RSD and RSV aren’t listed on crypto exchanges, how can RSR token holders actually go about arbing between those pairs?
NF
Two things here.
(1) RSV and RSD are intended to be listed. So that makes it easy.
(2) Also many liquid markets exist outside of normal crypto exchanges.
Some arbing may happen from traders going out and buying in more informal markets like we see in Venezuela in order to redeem!
WC
Speaking of listings, what’s your take on Huiobi US ban?
NF
We’re not supposed to comment on exchanges on the RSR side of things 😕
WC
If RSR token holders can participate in arbing, and the project itself holds RSR, does that mean Reserve itself will be taking advantage of these arbs opportunities themselves?
NF
I think it’s fair to say we will understand the tech the most at the start. But it’s not that complicated, so this asymmetry shouldn’t last that long.
As for information about price fluctuations, arbitraging in this context means buying and selling at the same time, so all information about price that exposes an arb is going to be public. E.g. we buy for $0.99 and redeem for $1.00.
I can imagine cases where we have opportunities to buy in private markets. Others will have opportunities like that which we aren’t aware of as well. Probably big trading desks will know of more than we do.
WC
How about the fact that arbs in the crypto market on “traditional” pairs are pretty much within the realm of bots these days?
How can normal users participate in arbs on Reserve if it ends up being a bot farm process?
And do you think here will be a way to arbitrage RSV automatically via official or community run pools?
NF
Yes, this is part of the plan. Specifically, there is a natural evolution for RSR holders, which is to designate your RSR in a contract so that in any RSR transactions with the protocol, your supply participates pro-rata. We may deploy a contract that does this ourselves, but if not, we expect others in the community to do so.
WC
So this contract would be something an “arbing as a service provider” could deploy?
Users could add coins to it, it would arb on their behalf and they’d get paid for the results of it?
NF
Roughly. I don’t want to misinform about how this will work, and there is a question we are pondering about how it should be set up that comes down to smart contract composability, so I don’t want to overstate the details right now.
WC
Could you clearly confirm then that this process will be a “no bots” arb process on Reserve then?
NF
So you should absolutely expect bots to participate in arbitraging RSV. But since redemptions happen on-chain, they are limited by block speed. So if there is a contract designed to allow you to participate pro-rata in the protocol’s purchasing and burning of RSR, and you deposit your tokens into that contract, you’d be able to participate along with the bots.
The contract would basically be your bot!
WC
So on that, if you’re ETH based, could you expect something like the ICO days where it ends up being a gas war to get transactions in/front run other transactions to get the arb?
NF
I don’t think so. The transaction in question is an auction, and I believe the design is such that you will be able to place bids and then the bids will be cleared, so I don’t believe there will be a race in time in this sense.
WC
4chan knows…
THE FUTURE OF STABLE MONEY AND STABLE COINS
WC
Of course, some of the big news in the crypto space of late has been around China and their change of direction on blockchain and plans to issue a digital Yuan.
When we last spoke to you, this stable coin conversation was pretty much entirely contextualised around Libra and their plans to issue their own currency supported by a basket of various physical assets.
What are you thoughts on China’s move into this space and has this changed anything at Reserve’s end in regards to your strategy moving forward?
Has it provided validation for what you’re trying to do and do you see this as a competing force or something that adds value to the overall crypto ecosystem in general?
NF
We are not surprised. It’s a logical step. It doesn’t really change our plans. I think it’s pretty clear to the world what state controlled cryptocurrencies will be like, and we’re clearly building something different from that.
WC
On a similar note, as much as China has steamrolled forward with their digital currency plans, Facebook and Libra seem to have hit a quagmire with their plans to do the same.
With Zuck fronting Congress recently and a host of traditional payment providers and services dropping out of the Libra project after threats were made by certain Congressman threatening their current business models, how do you see this affecting both Reserve’s plans and the future of digital dollars in the USA?
NF
Well, Libra allowed the space to see the future a little more clearly I think, since it made politicians come out and state a bunch of their views of crypto actually being used as money.
We wrote a post with some thoughts on this —
I think that this accelerates the process of pushback on stablecoins in the US for sure. So it has led us to prioritize accordingly.
WC
In our last AMA we spoke on the difference between Reserve and other stable coins, and MakerDAO and DAI was a big part of that conversation, so much so, you wrote an entire article about it —
Since that’s all transpired, MakerDAO have announced their MCD, a multi-collateral DAI that is backed by a basket of traditional assets (and not just ETH like the current DAI token).
What’s your opinion on supporting DAI and MCD and why you’ve chosen not to support it in RSV2?
NF
The reason is that DAI is not directly redeemable for 1 USD or 1 USD worth of ETH. This makes it much harder for infrastructure providers like market makers and OTC deasks to deal with. So while we like DAI’s decentralization, we felt it would actually degrade the real utility of RSV in the short term.
That said, in a world where US-based stablecoins were getting tons of pushback, the community could rebalace and hold lots of DAI to back RSV relatively quickly!
WC (Gustav from MakerDAO)
Why do DAI work with almost all the top OTC’s and market makers in the world then?
NF
Any crypto project will aim to do that. But if you ask any of those groups about their experience handling DAI, I think you’ll get the same answer we did when we asked.
WC (Gustav from MakerDAO)
I doubt it haha as we actually work with them (Gustav from MakerDAO).
NF
If someone comes to an OTC asking for 1 million DAI, that’s hard to price. It’s unclear how much it will cost to gather that much DAI on the market. With e.g. USDC, it’s a single SEN transaction with 1:1 parity.
But I’m all ears and totally open to learning more!
WC (Gustav from MakerDAO)
We have our own OTC and it’s by no means difficult to price.
I’m not against anything. We actually had Nevin attend our Maker celebration at DevCon. However I just want to make sure that the the things being said are truthful
NF
Okay, on MCD: I see it as a useful step in that each new collateral asset available creates more demand for CDPs, and thus more DAI. If enough DAI can be generated, then it can be a very useful asset to the ecosystem as it grows. Our main critique of DAI was the concern that it couldn’t scale well, since demand for DAI and supply for DAI are not tightly linked.
In the limit, including things like tokenized treasuries in MCD seems to me like it can generate seemingly infinite demand to lock up collateral and thus issue DAI. So I think that is a promising route forward.
The concern then becomes stability. Those on the Maker team may disagree with me, but I think that the lack of immediate redeemability and the need to maintain stability with a changing cost of locking up collateral in CDPs is a blunt instrument, and that the swings we have seen the team having to deal with will potentially get much worse as it scales.
WC (Gustav from MakerDAO)
So the DAI savings rate will be lever to increase the demand by default…
NF
Agreed — though my concern isn’t just about increasing demand (I think that will happen by means of making crypto accessible in the parts of the world that need it even without interest rates), it’s about fine-tuning demand and supply to maintain stability.
WC
So do we see a world in which DAI and Reserve can work together?
Or at the least, exist together?
NF
I think it’s clear that both projects will be in this for a long time and will coexist! Like I mentioned, in a world where USD stablecoins are getting shut down and not many other internationally backed tokens are live yet, DAI would be a great choice for holding in the Vault.
RESERVE & FUD
WC
This is one of these things we all hate to have to deal with in crypto, but recently there has been a wave of “FUD attacks” against Reserve on various forms of social media.
Most of this centers around the validity of some of the people and funds that have invested in Reserve.
From your end, can you confirm that Fenbushi Capital and others are indeed investors in Reserve?
NF
Yep, everyone listed on our site did in fact invest.
Including Fenbushi.
WC
So Peter Thiel is still in too?
NF
Sure is 🙂
WC
What’s you general opinion on what seems to be obvious FUD campaigns that are launched against projects such as yours and how do you feel it’s best for the project itself and individuals who support the project to respond?
NF
We are mainly just puzzled about it. Some people think these folks are trying to depress the price to buy lower. So maybe that’s what’s going on? I half wonder if it’s just fun for them.
I think projects should do whatever it takes to succeed. If FUD ends up really mattering, then they will need to address it. If not, it’s important not to get distracted.
I think the FUD attacks are most hurtful to the active community. They have to deal with people who are uninformed losing faith, and maybe they question if it’s real themselves from time to time. It makes the ride bumpier, which I think is unfortunate.
WC
Does all this FUD change your method of communication to the community moving forward?
Especially considering some of your own words have been used against you?
NF
I have learned that many people don’t read into the details and learn about our project from the small clips that get forwarded around.
This means it’s important to sometimes give short, simplified statements. Even if they lack detail, you can convey more that way sometimes. I’m still practicing 😳
WC
Does that mean you’re going to start meming? 😉
NF
Haha that’s a good idea, maybe I will!
WC
Did you ever address the situation where the whitepaper stated a $10 RSR price?
NF
Yes. Lemme try to do the “short answer” thing here.
An old whitepaper said $10 was the lowest price the protocol would sell newly minted RSR for. We updated the paper but forgot one place that said $10, hence the meme. It’s a funny meme, but clearly the protocol should be willing to sell RSR for less than $10, so you can tell it’s just a joke.
Here’s a longer answer from a previous AMA —
There’s another thing I want to follow up on that was asked this morning in our WeChat AMA and also during the Chainlink office hours. People asked why the minimum price for selling new RSR was $10 in the paper.
This was included in error. In an update a long time ago, we removed reference to any specific number in the sections that talk about this, but our verson control approach was imperfect and one instance was left saying $10.
I occasionally saw people reference this, but thought it must have been from an old version of the paper. We just checked only to find out it had been there all along. So we’re updating it right now to not state a specific value. The value will be set at mainnet launch.
This variable is just what stops the protocol from needlessly diluting RSR holders if there is ever a moment in time when there is no demand for RSR and the procol is selling RSR — you woldn’t want the protocol to e.g. double the RSR quantity because the market had gone down for a few mins, etc.
I can see why there would be confusion over the $10 number. That would be a $1 trillion market cap at 100 billion RSR (!) We are ambitious, but getting that far would take quite some time if it happens, and the protocol certainly needs to be able to mint RSR on occasion before that happens.
RESERVE PARTNERSHIPS
WC
We’ve noticed since we last spoke to you that Reserve has entered into quite a few partnerships in the crypto space, most notably, Chainlink
(I believe somewhere in your feature list was the ability to add in “price feed oracles”, I assume this is related to Chainlink)
Can you give us a rundown on this partnership, the others ones you’ve formed and what these actually mean for Reserve and your ecosystem?
NF
This may be a boring answer: Resreve intends to use Chainlink. Heh.
A little more info can be found in this article here —
We have been building relationships with many in the crypto world behind the scenes. So we expect that in the future we will have more exciting partnerships than we do now.
(Not to say we are not fans of Chainlink, we are!)
Turns our Sergey is a really interesting thinker. We talked about human psychology for a while at the Maker party!
WC
How about real world partnerships? Anything of note there?
NF
Again nothing to say yet, but lots of conversations in the works.
THE RESERVE COMMUNITY
WC
Seems like a good time to segue into this question…
What do you think of the fact that some people are calling Reserve Protocol the new Chainlink and that you have been embraced as the new Sergey on 4chan?
NF
The 4chan attention was a surprise to us, as I think it was to Chainlink as well!
I think it’s been healthy for the community, and while some of the chan culture is pretty out there, I like the camaraderie that I sense in the folks that have come from there and hang out talking about RSR.
WC
One of the things I’ve personally found most impressive about the Reserve project is the strength of your community in the crypto space. In a market in which most crypto traders flip from project to project with mercenary like ethics, you seem to have built up a strong community of believers and holders in the project.
What do you attribute to this to and how do you feel this places you against other projects in the space?
NF
Well, I think Reserve as a project has a spectrum of features that make it appealing to many audiences. We have Peter who the 4chan audience likes to meme, we have a real mission that the ideologues in crypto understand, we have smart tech people that the Ethereum community can appreciate, we have a startup ethos that fits in here in Silicon Valley, and we spend time understanding the markets we are going into and now can relate to the struggles and forces at play there.
So the Reserve community has become interestingly diverse already and it’s still relatively unknown all things considered. As I told our group recently I’m thinking about holding an event for the community sometime; it’s funny to imagine all those groups in one place 😄
WC
I don’t think most of them leave the house, but hey, you can try! 😉
A final note on your community…Is Moar actually a bot? And is Thomas actually a dunce?
NF
Moar has been confirmed to be a bot, and we have programmed him to assess Thomas’s dunce status and there must be a glitch because we have not gotten the answer yet…
CLOSING QUESTIONS
WC
Will Reserve be venturing into lending/borrowing in the developing world?
NF
Cautiously. We think the risk of many DeFi lending platforms is higher than most people think right now.
But we are interested in offering our users yield where we can do that safely and legally.
WC
Will Reserve be expanding out to any African countries any time soon?
NF
WC
Your current roadmap seems to end about now, when is this going to be updated the reflect the next steps for Reserve?
NF
I hope to update the community roadmap-wise before long. But I will note that the ICO era tricked people into thinking that you could say what your startup is going to do years in advance, which is completely unrealistic. So we will be sticking to making honest statements about our intentions and uncertainty in hopes of looping the community in while not setting expectations overly specifically.
As for 2021, the general goal of course is to be in a period of exponential growth in RSV usage in parts of the world that truly need and value stable cryptocurrency, like Venezuela, Argentina, Angola, and so on!
CLOSING THOUGHTS
WC
Well we’re well over three hours for this AMA now, so Nevin, we’d better let you go and get back to building.
It’s been our distinct pleasure to have you and some of your community here today!
NF
I agree, very thorough, thanks for having me again. I’ve not been doing many interviews recently but I remembered how useful the last AMA was for explaining what was going on to interested people, so I couldn’t say no.
See y’all next time!
Reserve Resources
Website: https://reserve.org
Telegram: https://t.me/reservecurrency
Community Telegram: https://t.me/reservelodge
Medium: https://medium.com/reserve-currency
Github: https://github.com/reserve-protocol
Whitepaper: https://reserve.org/whitepaper.pdf
Wolf Crypto Resources
Public Group: https://t.me/WolfCryptoPub
News Channel: https://t.me/WolfCryptoAnnounce
Twitter: https://twitter.com/WolfCryptoGroup
