Ever since, I first heard of Reserve Protocol on the Gitcoin discord about their upcoming hackathon. It has been circling around my head.
As I learned more about what they do here. I became excited about the possibilities. Of not just combining my passion for writing earning some crypto in the process, but also exploring a potential partnership with these guys.
How could LonesomeShark, a liquidation protection platform on Ethereum work with Reserve Protocol is for another time.
With my limited understanding, Reserve protocol solves the problem of inflation.
They believe access to stable money is a human right. Almost two billion people around the world don't have a safe place to store their money or are excluded from financial services such as payments and credit.
This is because some banks do not see the unemployed, women, or low income people as worthy customers. Apparently, lack of formal ID is one of the main reasons why women don’t have access to financial services. Source.
This is the reason why Muhammad Yunus started Grameen Bank. They pioneered the concepts of microcredit and microfinance. Loans are given to entrepreneurs too poor to qualify for traditional bank loans.
Struggles with inflationary currencies prevent families and communities from building basic economic security. To help solve this, Reserve Protocol offers financial services in high inflation economies. Their app (aka Rpay) users in Latin America can easily save and spend in US dollars, without worrying about their money devaluing overnight. They are not a bank. They are a new way to store and move money, creating new saving and spending experiences beyond borders. Source.
The Reserve protocol is a really interesting approach to enable the permissionless creation of stablecoins.
The success of the protocol and the first RTokens will depend on the participation of $RSR holders.
What are $RSV and $RSR tokens?
$RSV is the stablecoin pegged to the US Dollar that people use on Rpay.
$RSR on the other hand, is an ERC20 token common across all Reserve tokens (RTokens). RSR can be staked on a particular RToken, where it has two roles:
Staked RSR receives a portion of the RToken collateral’s revenue in exchange for being the first capital-at-risk in the case of collateral default. (This is how we can earn).
Staked RSR proposes and votes on changes to the RToken’s configuration.
For more info see this page.
Currently, Rpay is only available in Latin America (Spanish). However, the team plans on releasing an English version in the near future.
In summary, how reserve protocol fights inflation is that users can exchange their local currency pesos or boliviano (in the case of Latin America), with RSV coin, the Locals can then use the Reserve app to save, spend, and receive money without the need for a foreign bank account. You can use your local bank account and move money between them or use the app to make payment at online merchants that accept cryptocurrency.
Why am I excited about this? It is because this is another proven use case of a protocol finding product market fit.
Blockchain isn’t suitable in all use cases. However, in this case, it is. And that excites me.
From the beginning Andreas Antonopoulos, co-author of the book “Mastering Ethereum” was already talking about one of the benefits of DeFi - providing universal access to basic finance for the unbanked.
What Reserve Protocol is doing in high inflationary countries is a testament to that.
Kudos.