Introducing Rosen Reserve Protocol
It’s ok to put your eggs in one basket, just make sure it’s the right basket.
Introducing Rosen Reserve Protocol, a new seigniorage project aiming to create the algorithmic reserve asset for DeFi. Building on the likes of ESD, Our seigniorage token is pegged to a basket of global currencies aiming to mitigate the risks associated with a USD denominated system.
Why a basket of currencies instead of USD?
Cryptocurrency is a borderless paradigm, stable coins should represent this. Non USD currencies are heavily under represented in the cryptocurrency space. The majority of popular stable coins are USD denominated. We’ve seen increased volatility in the USD in 2020 causing concern for its use as a reserve asset in the global market.
Fig1: COVID FX: Exchange rate dynamics around 25th February 2020 US yield curve inversion (USDEM7 is a PPP-weighted average of 7 EM currencies: Brazil, India, Indonesia, Mexico, Russia, South Africa, Turkey). Black line is USD yield curve inversion, a classic signal of a looming recession.
Source: https://voxeu.org/article/covid-19-crisis-dollar-and-capital-flows
As you can see there was a large increase in FX volatility during this period. Combined with the fact that 23.6% of all US Dollars were created in 2020 alone, we feel this emphasises the need to diversify away from single currency stable coins and offer an alternative ‘safe haven’ in the cryptocurrency space. A basket of assets mitigates these FX fluctuations by giving exposure to multiple currencies more widely representative of the global economy.
Creating the infrastructure for a single algorithmic token pegged to a basket of currencies makes more sense than a different system for each individual currency. Creating an algorithmic reserve asset that can be used as collateral results in any tokens issued on top of it also being inherently algorithmic.
RMR/RSN
The Rosen Reserve protocol consists of 2 main components:
- Rosen Model Reserve (RMR) — Token representing a share of a pool containing a basket of currencies.
- Rosen (RSN) — Our algorithmic seigniorage token, target peg of 1RSN:1RMR (this is the incentivised Uniswap LP pair used in our seigniorage system)
We’ll be announcing the details and inner workings of these systems along with some unique stabilisation mechanisms closer to launch.
Capital efficiency for Synthetix:
Initially the basket of currencies in the RMR pool will be Synthetix: sUSD, sJPY, sGBP, sEUR. Synthetix require a large collateralisation ratio (500%+). This ensures that the stable assets are backed by collateral but results in poor capital efficiency. By using Synthetix for the underlying assets in the seigniorage system we can open up that capital for use in our system with the RSN token. The underlying pool is also publicly tradeable, which with deep liquidity will allow for easy FX trading between Synthetix currencies (more to come on this).
We are also exploring the option of adding a more widely available stablecoin to the pool, such as USDC, allowing for easy, gas efficient, onboarding from USDC into any of the Synthetix currencies (or pool liquidity, and as a result, RSN).
That’s all for now, we’ll be sharing more details the closer we get to launch.
Make sure to follow our channels for further announcements in the coming weeks:
Telegram: http://t.me/RosenReserve
Twitter: https://twitter.com/RosenReserve
Medium: http://medium.com/@rosenreserve
Discord: http://discord.gg/RwQ5dhAQ4a
