April 25, 2024: $rgUSD 💵💰
How Reserve Protocol's new "Revenue Generating USD" RToken could reshape DeFi
Congratulations to my fren Rex on the successful launch of $rgUSD — aka “Revenue Generating USD” — a new Reserve Protocol rToken that aims to become a public good DeFi primitive and has been successfully deployed in partnership with many of our favorite flywheel protocols.
$rgUSD
The new token $rgUSD has been launched successfully following a good discussion on the Reserve Governance forum. $rgUSD is as an over-collateralized stablecoin designed to act “as a collective point for DeFi users to negotiate with stablecoin yield providers for the best returns.”
Specifically….
Revenue Generating USD (rgUSD), is an overcollateralized stablecoin that deploys its capital into high yield, market neutral, low risk venues across DeFi. rgUSD directs the revenue generated from its collateral basket into supporting rgUSD growth, via incentivizing liquidity pools, lending markets and other safe, positive sum growth opportunities. These incentives are distributed proportionally based on TVL. As with all asset-backed currencies issued on the Reserve protocol, rgUSD aims to be overcollateralized with auditable proof of reserves available on-chain 24/7.
The issue being solved is sort of a variant on the old adage… “if you don’t know where the yield is coming from, you are the yield.” In this case, it’s a function of who gets the profits from operating a stablecoin. Stablecoins are a very profitable business, just look at the envy directed at Tether’s highly profitable business model. However, in order to run a profitable business, stablecoin operators need to keep some or all of these profits for themselves, which happens at the expense of the end user.
What if there’s a better way…?
$rgUSD intends to serve as a “public good” primitive that redirects this stablecoin yield back to bootstrapping liquidity, improving DeFi writ large in the process. As the proposal declares, “when rgUSD has permeated DeFi, DeFi is a better place!”
At launch, $rgUSD is backed completely by aDAI (Aave Dai) for the sake of simplicity and to keep mint costs lower during the launch phase. Over time, this is intended to transition to sDAI, and eventually towards a basket of assets to keep revenues up.
Its strategy is currently earning about 11% in collateral revenue, most of which gets directed back to liquidity incentives. We won’t draw a graph, given that pie charts are not a la mode, but fully 90% of the revenue is directed to bootstrapping liquidity.
In other words, Curve pools!
Several pools have already been established. Better yet, launch partners Inverse Finance, Alchemix, and f(x) Protocol are early to co-incentivize these pools, leading to heavy early rewards:
Several more are lurking….
The comments in the forum were mostly positive, with questions focused on mechanics of how the coin might move crosschain. Rex confirmed to us in DM that LTIPP incentives have been secured, so the coin is likely to be launched on Arbitrum.
One anon asked what the advantage would be here over just pairing with aDAI/sDAI?
The reply pointed out the advantages in pairing with a stablecoin that natively co-incentives rewards, as opposed to being purely extractive.
The intended audience for $rgUSD is therefore be protocols interested in issuing a stablecoin and looking for a token that helps in bootstrapping liquidity.
It’s a sharp idea, a much needed building block within DeFi, and the sort of primitive that could only be made possible through Reserve’s platform.
Reserve Protocol
As you’re probably aware, Reserve Protocol allows any user to spin up their own circular economy by launching rTokens, 1:1 asset-backed currencies.
Reserve provides a robust infrastructure to launch and govern their rTokens, including holding assets like veCRV and CVX to help users bootstrap liquidity pools.
It’s all in service of Reserve’s belief that stable currency and the ability to fight inflation should be a human right, a particularly acute need in countries with unstable currencies.
Reserve protocol has been going parabolic lately, one of the biggest successes of late. The RToken market cap is up to $71MM, with $1MM in income flowing back to $RSR stakers.
The initial four rTokens they operate have been “up only” in terms of market cap, showing off the hockey stick type growth that investors crave.
We may soon see $rgUSD join this basket, as it’s already passed the $1MM market cap.
A potential challenge facing $rgUSD is that operating as a public good, it will invariably lack anything like a “marketing budget” — but in DeFi good ideas (and high yields) are often better than any marketing budget.
So far, those who have learned about $rgUSD are quick to become advocates.
You can do your part to help by spreading word about $rgUSD. You should follow and promote the community run $rgUSD bull account that naturally popped up, as well as Reserve Protocol.
For more background, check out this podcast by Sovereign Stack, which covers $rgUSD and its full implications in good detail:
So too should you follow LogarithmicRex, who spearheaded the token launch, and subscribe to his Strange Waters podcast that provides a fantastic deep dive into Ethereum topics, with unmatched technical sophistication and rigor and frequently highlights the work done by core engineers.