[Serenity Premium] Reserve Protocol and eUSD [Initial Review Nov 2023]

Reserve Protocol is the issuer of eUSD, a yield bearing stablecoin on Ethereum. Reserve Protocol is also a permissionless platform that allows anyone to issue their own stablecoins.

Reserve Protocol will address two imminent issues in the crypto space. First, real world assets, once tokenised, need to be composable into other forms of derivatives. Second, on-chain fund management will be in high-demand, as more yield-bearing assets are introduced into crypto space.

Introduction

Reserve Protocol is an permissionless stablecoin issuer platform. Anyone can make his own stablecoins. These stable coins typically yield bearing and the platform is designed for yield distribution purposes.

Based on the chart below, the flow of Reserver Protocol for making a yield bearing stablecoin can be divided into the following steps:

• Reserve Protocol develops plugins for large DeFi protocols, such as Aave, Compound, Convex, or Lido (for ETH), so that the LP tokens of these protocols can be composable in Reserver Protocol.

• Anyone wishing to issue a stablecoin can pick a combination of the supported underlying assets, e.g. aUSDC from Aave or cUSDT from Compound, to form a portfolio. The stablecoins issued against this portfolio will be the yield-bearing stablecoins, such as the native eUSD.

• The issuer decides on the allocation of the yields generated by the underlying assets, amongst LPs, the RSR stakers, and the GP (the issuer or any external party). RSR is the platform token of Reserve Protocol, which is used as insurance. RSR tokens deposited into each stablecoin vault issued under Reserve Protocol will share the vault's yield, but can be seized by the protocol in the event of a collateral token default, in order to cover losses for LPs.

• Different stablecoins can be issued this way. Further, they can be combined or pooled in other protocols to create more complex financial instruments for investors.

eUSD by Reserve Protocol

To demonstrate the use of its protocol, Reserve Protocol issued created its indigenous product Electronic USD, eUSD (different from several other eUSD stablecoins, e.g. Lybra eUSD).

eUSD by Reserve Protocol runs on Ethereum and has a market cap of $17.5m,eUSD vault has about $9m worth of RSR token as insurance, providing an insurance buffer of 54%.