The cryptocurrency market has been experiencing an influx of newer tokens in the ecosystem, greatly reducing their usefulness in a larger context. Any crypto token with a stable value can permit a wider range of usage when it comes to be a stable store of value, medium of exchange or any other standard of deferred payment.
Thus, even though the demand for cryptocurrencies remain high, implementing one is a different story altogether. Some clear flaws being demonstrated and exploited in some recent projects. The volatility prevents such cryptocurrencies to be used as a standard of deferred payment. This makes any user who negotiates rent, wages or loans using such tokens lack a stable value. In essence, they are acting as speculators on the token’s future purchasing power, which leads to an unnecessary level of risk.
A stable cryptocurrency is needed if a distributed app economy needs development. A cryptocurrency having all the qualities of Ether, along with a stable market value is thus needed to achieve more usage in the cryptocurrency trading sector. It will also increase usage of dApps for payments, as well as crowd funding and a treasury currency.
The Reserve Rights Token (RSR) has been released by the Reserve protocol team headed by CEO Nevin Freeman, with the goal of addressing the problem behind the lack of stable cryptocurrencies.
About Reserve Rights Token
The Reserve Rights Token (RSR) are one of the two tokens that interact with the Reserve Protocol., the other being the Reserve Token (RSV). The Reserve Protocol tokens, or RSV is a stable cryptocurrency, one that is independent of the dollar. It was designed with the aim of providing their users with a legally and economically robust asset. It is focused mainly on reducing the volatility of hyper inflated economies, with its latest project being the inflation ridden Venezuela. However, the RSR or Reserve Rights token is the native token on the reserve protocol. Its main aim is to maintain the stability of the RSV stable token, by fluctuating its price. It extends cryptographic rights to users for purchasing excess reserve tokens as the network expands. The token has been launched on May 22nd on Huobi Global, in the form of a direct premium offering rather than an initial exchange offering.
How Does It Work?
As mentioned before, the RSR token has multiple roles, one of them being the stabilization of the RSV Reserve token. The main aim of RSR is to stabilise RSV’s value when faced with some edgy predicaments. For instance, if there are 100 collateral tokens, each of them backing 1% of the value in RSV, the protocol mines and sells RSR tokens to make up any difference that may arise when a collateral defaults. In this case, RSR recapitalises the collateral pool, increasing it from 99% to 100%.
- Thus, in short, when the price of RSV increases above $1 on exchanges, newly minted RSV tokens sold by the protocol in exchange for tokenized assets or RSR tokens.
- In case the price of RSV falls below the $1 mark on exchanges, RSV tokens are purchased by the protocol only for tokenized assets, which in turn brings the price of RSV back up to $1.
- In case the vault accumulates excess RSV tokens, RSR token holders can purchase RSV tokens as part of stabilising the price of the token. This maintains the vault’s ratio of assets, reducing the supply of RSR
- The protocol then sells RSR tokens for tokenised assets, when the vaults ratio of tokenized assets drops below the target range.
The RSR token’s main purpose is to keep the value of RSV stable, at a target price of $1.00 to keep it equal with the dollar. The tokens are also used by holders to vote on governance proposals. This RSR would allow for profit making through arbitrage trading and is inherently volatile in nature.
One the main reasons why the RSR token is crucial to the Reverse protocol ecosystem its effect on the value of vault collaterals. It helps to recapitalise the network when the value of the vault collateral decreases. The circulating size of RSR tokens is expected to increase with the rise of RSV’s circulation and usage.
In some cases a collateralization ratio of more than 1:1 may be targeted by the reserve protocol, in which case scaling the supply of RSV requires additional capital. Thus, reserve protocol in this situation would resort to minting and selling RSR tokens to maintain the target ratio.
What Other Coins Is It Competing Against?
After assessing the benefits and the use cases of the RSR token, it is safe to say that the main competitors of Reverse Protocol’s entire ecosystem are other decentralised lending projects. One notable project which falls under this category is Maker.
There are various sectors of operation and functionality that Reserve protocol’s tokens have an advantage in. They are:
- Scaling: Maker currently does not have a proper operation to scale the supply of DAI, beyond any demand for decentralised crypto loans. This would render it almost useless in high inflation economies where Maker’s DAI token would face increasing volatility. And demands won’t be met. Reserve aims to counter this by providing hassle free scaling as soon as the demand increases.
- Multi-collateral DAI: Even though Maker can scale more with multi-collateral DAI tokens, the demand for CDPs may never be equal to demand for DAI. Thus, in case of excess demand in this case, DAI becomes more volatile. Maker has made several changes such as changing the stability fee structure to counter this problem.
The Reserve Protocol Ecosystem along with the RSR and RSV tokens are promising projects of their kind. With team members such as Matt Elder, Josh Furnas, Matt Gertler and CEO NEvin Freeman, the project has already been backed by industry heavyweights such as Coinbase, Peter Thiel Sam Altman. At the time of writing, RSR is valued at $0.002921 USD with a total marketcap of $11,527,928 USD. The token currently has 11 tradable markets across exchanges worldwide, such as Hotbit, Huobi Global, IDEX, Bilaxy and coin Exchange.
If you enjoyed reading this post consider following the blog for more updates on the market!