One cryptocurrency-powered under-the-radar payment app that’s gaining traction in Latin America is Reserve. The platform acts as a convenient way for people to convert their local currencies, which can experience high inflation levels, into US dollars through the Reserve stablecoin (RSV). The network also has the reserve rights token (RSR), which is used for the governance of the protocol.
Since its launch in March 2021, the platform claims to have registered 367,000 registrations in total. Meanwhile, the number of weekly active users has surpassed 100,000, with most located in Argentina, Venezuela and Colombia. In the past 30 days, the app has processed approximately 547,000 transactions. In addition, more than 8,000 companies, mostly based in Venezuela, now accept the reserve as a method of payment for goods and services.
2/11 Let’s start by looking at customer growth.
Our customer base has often grown faster than our systems at the time could handle, forcing us to implement the invite-only system.
Despite this, we are proud of the number of adoptions we have achieved so far ⬇️ pic.twitter.com/E5wsxjNSdD
– Reserve (@reserveprotocol) 25 October 2021
During a live demonstration of the Reserve app at Cointelegraph, Reserve CEO Nevin Freeman withdrew dollars from a USD bank account to a Venezuelan Bolivar bank account with RSV acting as an intermediary. The transaction was almost instantaneous and the application does not charge any fees. Freeman claimed that users can immediately spend bolivares, like when doing online transactions, or swipe their debit / credit cards to use the money. However, the liquidity providers, which are controlled by the Reserve, charge a spread on the initial foreign exchange transaction. Below is the full interview between Cointelegraph, Freeman and Reserve Community Manager Yens Michiels.
Co-telegraph: With the rise of the blockchain industry, there are many crypto-to-crypto and crypto-to-fiat payment solutions. What do you think makes the Reserve protocol unique?
Nevin Freeman: The Reserve app is a cloud-based stablecoin wallet. We hold the crypto in the background and users transact on our database. We will switch to on-chain users in the future, but due to [high] Ethereum gas charges, that way the only way we could deliver this use case in countries like Venezuela. In answer to your question on what makes it different is the ability to deposit and withdraw with all of these different currencies. These first five [options in the app] are different Venezuelan banking methods to deposit or withdraw; Argentine Pesos, Panama Dollars, PayPal, Zelle, Uphold, Colombian Pesos, our token [RSV] on-chain, and a bunch of other crypto options that people use. We also recently added Axie Infinity Tokens as there are a lot of people in Venezuela playing Axie Infinity. So it’s an easy way to convert that money into dollars.
CT: How does the Reserve app help clients protect themselves against inflation in the aforementioned countries?
NF: It is a very common practice for Reserve app users to get paid and convert their money to a stable dollar so that they don’t have to worry about their money devaluing. And then, throughout the week or month, they will periodically make small transactions in the local currency to make transactions with the local economy. And then, more and more, due to the growing number of traders, we are seeing more and more transactions where people don’t have to retrain; they can simply pay directly in US dollar stable dollars.
So it’s not really rocket science. The concept is very basic. It’s just, like, save dollars and live your life in dollars, which a lot of people want to do, but the change here is that [task] much easier to do and more accessible.
Let me add another interesting point here: in Venezuela, for example, a lot of transactions are done through Zelle, which is like the American banking way of sending money quickly between American bank accounts. The 1% in Venezuela all have US bank accounts, and they all have a large chunk of their money in their US bank accounts. So there are a lot of transactions going on with Zelle. So everyone in Venezuela would love to have a Zelle account. The point is, you can’t get a Zelle account unless you go to the United States and physically create an account in the United States. And many Venezuelans do not have the opportunity to do so. So the way a lot of our users perceive the service is like, oh, it’s like a Zelle account, but anyone can open one, so that’s part of the appeal.
CT: So far we have mainly discussed RSV and fiat currency. But what about the RSR token? What are your development plans on this?
NF: The primary role of the reserve rights token is governance. The basket that supports any R-token, which is our name for Reserve stablecoins, will need to evolve over time. And you need a very secure and robust method to manage this development in a decentralized way over the long term. RSR therefore has a key role to play in governance. The other main role of RSR is to provide insurance. to certain reserve stablecoins. The fundamental mechanism, economy, and purpose of how it all works has remained the same, but the exact mechanism by which RSR provides that assurance has evolved a bit in the version of the protocol we’re about to launch.
The way it all works is, as an RSR holder, you can choose any stable reserve, or a combination of them, on which to stake your RSR tokens. And when I say stake, I really mean stake; you actually put them on the line. Because what you do is say, okay, I’m ready to provide my capital as a safety net in case a collateral asset that supports this stable reserve is lacking and loses value. And in exchange for putting my capital in place and risking it, I will get a portion of the income or return generated by the stablecoin.
It is truly a decentralized insurance method, where many blockchain protocols require token holders to vote and decide how they want to pay; that’s not how it works in this case. There are in fact chain mechanisms, where in the event of depreciation and replacement of tokens by other tokens, the reserve rights tokens that have been staked are automatically seized and exchanged to compensate for that value. So it really is a more decentralized version of blockchain insurance.
CT: Would you like to include a vision or mission statement on the future of Reserve Protocol?
Michiel Yen: What we are doing now is providing a solution to hyperinflation via a stable US dollar coin. However, in the long run, we believe the US dollar may lose some of its value as well. Because when you look at the history of currencies, every time a great empire issues a currency and loses power, or gives that power to the next empire, that currency loses a lot of its value. So right now, I think we have the solution for these countries, like Venezuela and Argentina, because we have this strong US dollar to allow them to escape hyperinflation. But then you can also think about the future, what will happen if the currency we rely on, the US dollar, loses value. And then, no one has an escape route to turn to.
This is based on price increases of 0.9% in October officially measured by the United States Bureau of Labor Statistics https://t.co/ngFereAPvw
I sure don’t want to use fear to promote @reserveprotocol, but it’s at the point where I think about it for * my own bank account * https://t.co/ugmQRSsdl2
– Nevin Feeman (@nnevvinn) November 10, 2021
The long-term vision is therefore to create a currency that is stronger than any fiat currency that currently exists. In our view, this currency is obviously a cryptocurrency, which will be backed by more than 50 chain assets, ranging from digital currencies, maybe even fiat currencies at the start, and commodities such as gold, can – even being actions. So it will be a super big basket. Finally, the idea is that the value of this basket would follow the global GDP [Gross Domestic Product]. If you look at the global GDP, you will find that it is very stable; even during the financial crisis of 2008, it fell by only 2%. If you can create a currency that is as stable as the world’s GDP, it would be superior to any fiat currencies that exist today. We’re starting to focus on this now in small steps, but it’s obviously going to take a few years. [to accomplish].