What is Reserve? DeFi Protocol Guide

The Reserve Protocol permits the permissionless issuance of asset-backed currencies. Its primary goal is to stop hyperinflation through a decentralized, scalable approach that uses cryptocurrencies like Bitcoin and Ether together with yield-bearing collateral. Any party can deploy a Reserve stablecoin (RToken) and choose its collateral basket, governance scheme, and revenue distribution method.

Overview

Reserve supports the creation and governance of on-chain asset indexes called Decentralized Token Folios (DTFs). Each folio is backed one-to-one by a basket of digital assets and can be minted or redeemed at any time via on-chain governance mechanisms. DTFs are permissionless and configurable, enabling applications from stable-value currencies to diversified investment products. The protocol offers two primary forms: Yield DTFs, which capture yield from collateral and may include overcollateralization via staked Reserve Rights tokens, and Index DTFs, which simplify management of diversified token baskets without complex collateral modules. Reserve aims to enable asset-backed currencies that follow the combined value of varied global assets rather than a single national currency, seeking long-term stability through transparent, decentralized portfolio construction and governance.

Features

Yield DTFs are on-chain asset baskets made up of yield-bearing ERC-20 tokens and deployed through the Reserve protocol on networks such as Ethereum, Base, and Arbitrum. These DTFs can be created permissionlessly, issued and redeemed at net asset value, and are governed fully on-chain. Collateral produces yield via staking, lending, or similar mechanisms; that yield is harvested automatically and allocated according to rules set by governance. Overcollateralization can be provided by staked Reserve Rights tokens, which act as a first-loss buffer if collateral defaults, with losses handled by predefined rule-based processes. Periodic revenue from the basket is collected and distributed among DTF holders, RSR stakers, or other designated recipients, and is reinvested through automated on-chain auctions that raise the redeemable value of the DTF or the stake that secures it. Each Yield DTF functions under its own governance framework defining collateral composition, risk limits, revenue splits, and procedures for rebalancing or replacing assets in response to market shifts or defaults.

Index DTFs are on-chain indexes that combine multiple ERC-20 tokens into a single fungible asset using a lighter-weight framework within the Reserve protocol. They permit permissionless minting and redemption at net asset value and operate without price oracles or specialized collateral modules, accommodating a broad array of token types. Rebalancing to target weights is performed periodically via autonomous on-chain Dutch auctions that source liquidity from decentralized exchanges and solver networks, with governance determining parameters like timing and duration. Instead of relying on collateral yield, Index DTFs generate revenue from management and minting fees that accumulate as newly issued DTF shares and are distributed according to governance rules, including protocol-level allocations. Every Index DTF has its own customizable on-chain governance that sets asset composition, rebalancing mechanics, fee structures, and revenue routing, with all proposals, votes, and executions recorded on-chain.

Reserve Rights (RSR)

Reserve Rights (RSR) is an ERC-20 token used inside the Reserve ecosystem for risk management, governance, and protocol-level value flows. Its total supply is 100B tokens. Within Yield DTFs, RSR may be staked to provide overcollateralization, serving as first-loss capital if collateral fails; stakers earn a portion of DTF revenue based on governance allocations and their share of total staked RSR. Staked RSR can be slashed when losses occur, unstakes are subject to a governance-set delay, and stakers gain rewards as the staked-to-unstaked exchange rate rises while revenue is converted into RSR. For Index DTFs, RSR functions as the default vote-locking token, granting governance control over basket makeup, fees, and rebalancing parameters, with optional participation in fee income. A share of Index DTF platform fees is used at the protocol level to market buy-and-burn RSR, lowering its circulating supply. Governance for both Yield and Index DTFs is performed on-chain through proposal, voting, and timelock execution processes, and Yield DTFs commonly use a standardized governor contract that supports delegated voting and parameter updates.

Tokenomics: Reserve Rights (RSR) has a fixed total supply of 100 billion tokens, of which 50.6 billion were in circulation at launch. The remaining 49.4 billion tokens are held in the Slow and Slower Wallets. The Slow Wallet, controlled by ABC Labs, supports RToken adoption efforts and enforces a hard-coded 4-week delay on withdrawal transactions. An organizational restructuring in January 2024 created Confusion Capital, which oversees funding for the Reserve Ecosystem, including Best Friend Finance and ABC Labs. Confusion Capital manages the Slower Wallet and applies stricter withdrawal constraints, retaining the 4-week delay and limiting withdrawals to no more than 1% of the total RSR supply every four weeks. This change is intended to reduce dependence on Confusion Capital's trustworthiness.

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