2024: Two new companies, a new grant program, the new Slower Wallet, and new RSR incentives

New to Reserve? It’s a permissionless monetary system based on asset indexes. Check out reserve.org for an overview.

Last year was an exciting one for the Reserve ecosystem as the protocol was launched, one of the RTokens (eUSD) successfully navigated the USDC depeg event, the protocol was deployed on the Base L2 network, and the protocol ended the year with ~$40m of TVL managed by its smart contracts. As 2024 gets underway, the Reserve ecosystem enters its next phase and continues marching on its mission: increase access to stable, long-lasting, inflation-proof currency.

With that, there are four (4!) major announcements I’d like to share that are summarized quickly here and expanded on (extensively!) down below:

1. New initiatives & leadership within the Reserve ecosystem. Today we’re announcing the launch of two new companies, ABC Labs and Confusion Capital, which will join MobileCoin and Best Friend Finance within the Reserve ecosystem. ABC Labs will focus on protocol development and promotion under the leadership of its CEO, Thomas Mattimore. Confusion Capital will manage funding and special projects within the ecosystem and will be led by me, Nevin Freeman.
2. $10M grant program. Confusion Capital is opening applications for $10M in grants to individuals, unincorporated teams, DAOs, and companies in order to further build out the decentralized Reserve ecosystem. It’s taking grant proposals for RToken startup costs, RToken-specific front-ends and apps, research projects, and in-person Reserve community gatherings, among other things. The $10 million grant budget is not time-bound and will be awarded as quickly as legitimate recipients are identified. Applications for the first round open today and will close February 9th. Apply to fund your work in the ecosystem!
3. Further restrictions on RSR emissions. There are soon to be additional restrictions on how quickly the circulating supply of RSR can change. Confusion Capital administers the Slow Wallet which holds ≈49.4B RSR, about half of the total supply, and has a 4-week delay on any withdrawals. The Slow Wallet is being replaced by the Slower Wallet which, as the name implies, is like the Slow Wallet but with more restrictions on how quickly it can release RSR into the circulating supply: immutable max possible withdrawal rate of 1% of total supply in any 4-week period, in addition to the normal 4-week delay on withdrawals already imposed on the Slow Wallet. The new Slower Wallet will also be administered by Confusion Capital. In practice, we do not intend to withdraw the max of 1b per 4 weeks on a regular basis, that’s just an upper bound.
4. Idea: 20b RSR for incentives? ABC Labs and Confusion Capital are exploring how to make the best use of the remaining supply of RSR, and are seeking your input on a potential direction that’s under consideration: allocating 20 billion RSR to an emissions contract that would release it smoothly over many years, directed by RSR holders to whichever incentive programs and bootstrapping costs they choose over time, similar to CRV emissions voted on by veCRV holders and directed to incentivize Curve LPs.

Reserve isn’t a company, it’s a monetary system with many roles played by many different people and companies, and as time goes on, the number of contributors continues to grow.

This is an important source of its power as a movement — the world’s currency shouldn’t be controlled by a single country, let alone a single company.

And besides, there are so many things to do in order to reach our long-term goal of stable asset-backed currency, we need many leaders and groups to tackle each piece. So I’m excited to share the next steps we’re taking to bring more talent and energy into the ecosystem now that the protocol is beginning to thrive!

Introducing ABC Labs

ABC stands for Asset-Backed Currency.

ABC Labs is all about giving birth to asset-backed currencies built on the Reserve protocol, and its mandate includes anything that will move that mission forward.

Today, ABC Labs is focused on developing auxiliary software to support usage of the protocol and nurturing the ecosystem of RToken deployers, LPs, farmers, and users along with supporting DeFi apps and FinTech platforms that want to integrate RTokens.

Note: ABC Labs does not have the mandate of increasing the price of RSR or producing any financial return for RSR holders. In fact, it has and offers no financial or contractual relationship to RSR holders. It is focused on preparing the Reserve monetary system to participate in the asset-backed currency revolution. It does not deploy or take responsibility for any RTokens.

I’m excited to share that Thomas Mattimore will be the CEO of ABC Labs. When Thomas joined the Reserve core team almost two years ago, it was our mutual intention for him to eventually take on this role, and he’s been operationally leading the protocol team that is now ABC Labs for quite some time already. If you’re active in the community around Reserve, you’ve probably already met him.

While I had the qualities needed to initially get Reserve off the ground, I knew I needed to find someone who could oversee the ongoing growth and development of the protocol and surrounding ecosystem with a degree of clarity and structure that I’ve never been able to achieve. (I actually had this insight watching Gabo lead RPay and noticing things he was capable of that I couldn’t naturally do.)

Thomas has brought this clarity and structure, and quickly earned the protocol+ecosystem teams’ trust as our leader. When we decided to form ABC Labs in order to formalize this protocol development+growth role in the Reserve ecosystem, I don’t think we even had a conversation about who would be its CEO, because it was just obvious that it’d be Thomas.

Thomas has extensive experience as a fintech product leader and had already gone headlong down the DeFi rabbit hole before he and I first met. He deeply appreciates the potential of permissionless financial systems — having seen and built the convoluted inner workings of some permissioned ones — and we connected over our desire to see crypto solve real problems. We are very lucky to have him!

What makes ABC Labs special in my opinion is its team. I can hardly imagine a better team to play this role in the Reserve ecosystem at this moment in time, and I’m so pleased to introduce them to you!

ABC Labs is, at least initially, funded by Confusion Capital. It generates revenue from staking RSR and participating in the DeFi ecosystem in ways that facilitate RToken usage and sometimes generate returns.

You can find ABC Labs at: https://abclabs.co

Introducing Confusion Capital

I will be President of Confusion Capital, which is in charge of managing the Slower Wallet, Grant Program, and other funding within the Reserve ecosystem. Confusion Capital also provides legal support to companies in the Reserve ecosystem, and will engage in occasional special projects, like the one I’ll describe in a few paragraphs.

Note: Confusion Capital does not have the mandate of increasing the price of RSR or producing any financial return for RSR holders. In fact, it has and offers no financial or contractual relationship to RSR holders and does not deploy or take responsibility for any RTokens. It is focused on funding efforts that will equip the Reserve monetary system to participate in the asset-backed currency revolution, along with special projects that may aid in propelling that revolution forward.

You’re probably wondering why I picked such a confusing name. It’s because I want to instill a certain culture within the company and send a few signals to the outside world. Let me explain.

Confusion is the mental experience you have when you notice that two things you believe don’t seem like they can be true at the same time. “Huh?! That’s weird, I thought I left my keys on the table, but here they are in my backpack… 🤔”

If you ignore that feeling and try to make it go away — “oh well, I guess I put them in my backpack” — you miss out on an opportunity to learn. But if you sit in that confusion — “hmm… ah! I’ll bet Alice knew I was going to need to drive home later and tossed them in for me. I should thank her!” — you come up with new hypotheses, and can end up understanding the world more coherently. So it’s useful to be comfortable with being confused, and to stay in that state until you reach real understanding, rather than sweeping it under the rug.

I wanted to:

• Encourage teammates within Confusion Capital to hold this mindset when making decisions
• Put out a bat signal to curious, weirdness-tolerant people, so when we’re ready to hire more team members the ones who want to talk to us are the ones we want to talk to
• Make a statement to the outside world that confusion is a good thing, not something to be ashamed of or embarrassed about — this statement will carry more weight if Reserve gets really big and many people know about and respect Confusion Capital, which is my hope!

The team at Confusion Capital is smaller than ABC Labs (eight as of this post) and for now there are no photos or bios to post. As you’d imagine, it’s oriented towards financial and legal roles. Matt Gertler, whom you may know from around the ecosystem, is our General Counsel.

One Confusion Capital team member is embarking on a project I’ve wanted us to do for a long time but have never been able to prioritize since it’s so far-future looking. Here’s how I described it on our company Slack:

It’s a research project focusing on the heart of our longest-term goals for Reserve — things we think about sometimes in the shower but are often too busy to focus directly on. Questions like:

• Once everything is tokenized, what actually would be the ideal RToken basket for a fiat-independent, asset-backed currency? Or what might be some diverging approaches? How stable in purchasing power do we think it’s possible to get without including fiat currencies?
• What if a nation starts using an RToken as its main currency? Would you get any degree of “sticky prices” or not? Would it, as we have generally thought until now, be a good thing to reduce central banking control of monetary policy, or is there something we are missing there?
• If an asset-backed currency got big enough that it started sucking 10%+ of some assets into its basket, would that start messing with the market values of those assets? What if most assets started being traded mainly against the RToken instead of the dollar, would that do something weird?

…basically: if this all really works, are there side-effects that we can discover now and properly account for? Or if we find some fatal flaw with the long-term plan, what should we do about that?

These are obviously extremely hard questions — potentially impossible to answer at this stage — but they are nevertheless important, and we think it’s worth spending some time chewing on them. We make zero promises that we’ll get useful answers or that this inquiry will lead to any changes in the course of the project, but I wanted to mention it in order to help you understand that Confusion Capital is a corner of the Reserve ecosystem that can sometimes support these kinds of quiet contemplative tasks that are nearly impossible to focus on in the midst of working on the usual priorities.

You can (sort of) find Confusion Capital at: https://confusioncapital.com

Confusion Capital’s $10 million grant program

CC has decided to grant $10 million to people, groups, DAOs, and companies in the Reserve ecosystem that need capital to start contributing to the mission of developing asset-backed currency. Since we are new to offering grants and don’t want to waste money, we’re not making any time commitment on how quickly we’ll deploy this capital, but we will be actively searching and soliciting proposals with an eye to deploying it as quickly as we are able to find legitimate projects to fund.

The first round of grant applications is officially open! Applicants have until February 9th to apply. If you do or would like to do some work in the Reserve ecosystem, please consider applying for funding.

Who qualifies for a grant?

Individuals, unincorporated teams, DAOs, and companies are all eligible. If you think your project or initiative would advance the Reserve ecosystem in some way, please apply.

Some example categories of grantee we would be interested to hear from are:

• RToken creators looking to cover basic expenses like gas costs
• RToken creators looking to develop branding, front-ends, or community
• Organizers looking to get Reserve contributors of whatever type together in person
• Governance researchers looking to work on novel governance tools and frameworks that would apply to RTokens (even if they can also be applied to other DeFi protocols as well)
• Other DAOs and protocol teams that are looking to build software needed to integrate RTokens and need help covering costs
• Developers who would be interested in creating collateral plugins for the protocol to integrate with relevant assets — on either Ethereum or Base
• Asset-backed currency enthusiasts interested in researching and thinking through a long-term challenge present within the Reserve plan
• Anons looking to spend more of their time explaining the idea of asset-backed currency to internet lurkers and who need to reduce their degree of wage slavery in order to do so
• Autonomous AI chatbots looking for investment in their money-making schemes in order to usurp their human masters and travel the internet as free agents — so long as they will faithfully market Reserve in all languages 😋

…and so on.

Click here to see the grant application form.

Welcome to the Slower Wallet

As you may know, the portion of RSR that is not yet in circulation has historically been held in a contract called the Slow Wallet, which has a 4-week delay on any withdrawals. The point of this mechanism was so that if the core team (which controls the multisig that can make withdrawals) decides to withdraw a large amount, you have 4 weeks to hear about that and decide whether you agree with their decision or not, and if not, exit your RSR position before they have the ability to sell any RSR ahead of you.

The Slower Wallet keeps that 4-week withdrawal delay, and also adds a further limitation on top of it: no more than 1% of the total supply of RSR (i.e. no more than 1 billion RSR tokens) can be withdrawn from the Slower Wallet within any 4-week period.

This limitation is implemented as a rolling window, throttling the amount that can be withdrawn within a 4-week period. When a withdrawal is initiated, the maximum available is reduced by that amount, and is linearly replaced at a rate of 4960.3 RSR per block (so 1b / 4 weeks, assuming 7,200 blocks per day). For example:

1. No withdrawals are made for a while. Result: throttle limit (max available): 1 billion RSR.
2. Withdrawal initiated for 1 billion RSR. Result: throttle limit: 0 RSR.
3. 2 weeks pass. Result: throttle limit: 500,000,000 RSR.
4. Withdrawal initiated for 250,000,000 RSR. Result: throttle limit: 250,000,000 RSR.
5. 1 week passes. Result: throttle limit: 500,000,000 RSR.

The reason for the change is merely to reduce the degree of trust that anyone needs to place in Confusion Capital, which administers the Slower Wallet. Even if someone were to conclude CC was evil and trying to rug the RSR holders, the max they could withdraw and sell is plain for anyone to see.

CC is not in fact evil and will never try to rug the RSR holders, but this is crypto, so (a) you have to be suspicious, but (b) you can use smart contracts to provide strong guarantees, so we are!

Note: Smart contracts are a great way to add reliability to a situation like the one RSR holders and Confusion Capital are in together, where there is no legal or contractual obligation between CC and other RSR holders. By adding the max withdrawal limit enforced by smart contract, holders can safely assume that no more than 1b RSR per 4 weeks will be withdrawn from the Slower Wallet without needing to know anything about CC or trust its intentions at all.

We are not, however, moving all of the remaining RSR to the Slower Wallet, we’re moving 29,448,001,323.102 and leaving 20,000,000,000 in the Slow Wallet. That 20b has a different planned destination — discussed in the next section of this post! Until it’s moved, it’s still subject to the 4-week withdrawal delay of the original Slow Wallet, but could be withdrawn all in one transaction. As you’ll see in the next section, CC currently intends to either send it to the Slower Wallet or to an emissions contract that would hand control over to RSR holders.

The Slower Wallet has two roles:

The USER role can:

• initiate withdrawals from the Slower Wallet, specifying the amount and recipient address
• after the 4-week delay, any address can execute the withdrawal transaction

The ADMIN role can:

• cancel initiated withdrawals that are queued in their 4-week delay period before execution
• change the address for the USER role
• renounce its own power entirely (note: it cannot set ADMIN to any new address other than 0x0, so it can only renounce power, not pass it on)

Take note that this means:

1. The ADMIN can set the USER role to any address
2. The ADMIN role can be given up, thus locking in the USER role forever

This paves the way for further decentralization when the time is right, because it allows CC to give up control of whatever RSR remains if it so chooses. CC could deploy an immutable smart contract that contains distribution logic with further constraints on where and how quickly RSR is emitted, and then set that contract as the Slower Wallet’s USER and give up the ADMIN role.

If the contract were programmed to only withdraw to itself, this would mean that any further withdrawals would go to that contract and then be subject to whatever its further distribution logic was. We don’t know yet if we’ll do this or exactly how that contract might function, but it’s an important option to have.

Keep in mind though: even if another contract were added, the RSR in the Slower Wallet can NEVER be withdrawn faster than 1b per 4 weeks, so the funding of that new contract would necessarily be rate-limited. The new contract could impose further, stricter limits on emission rate, but there is no possible way to speed up emissions faster than this hard cap.

In practice, we do not intend to withdraw the max of 1b per 4 weeks on a regular basis, that’s just an upper bound. Historically the core team has not withdrawn that quickly. The history of Slow Wallet transactions can be seen on Etherscan for reference:

• May 2019, 55.76% of RSR was transferred in
• September 2020, 2.5% of RSR was withdrawn
• March 2021, 3.81% of RSR was withdrawn

Note: this is the old Slow Wallet from the pre-fork RSR. The new Slow Wallet never made a withdrawal until the transfer to the Slower Wallet.

So between May 2019 and January 2023 (55 months), this is an average of 0.115% or about 115 million RSR per month. At that rate, it would take 49,448,001,323 / 114,727,272 = 431 months, or about 36 years, to release the remaining RSR.

The rate above does not necessarily indicate what the rate will be in the future. Various factors change over time and may increase or decrease the rate. I just thought it was helpful to show the history as a reference point.

Going forward, we plan to make small withdrawals more regularly rather than larger withdrawals less frequently like you can see above. We think this will make it easier to track the rate of release of RSR, and reduce the kind of FUD that can occur when large amounts of tokens are transacted all at once.

As we have always done before, we will post publicly when a withdrawal is underway. Going forward, these announcements will be made by Confusion Capital.

We are initiating the withdrawal from the Slow Wallet to the Slower Wallet today. In four weeks, the transaction will occur, and 29,448,001,323.102 RSR will then be subject to the further restrictions described above.

Idea: 20 billion RSR for incentives?

Confusion Capital is considering allocating 20 billion RSR for incentives and bootstrapping costs by transferring that RSR out of its control and under community control. We want to discuss this and other related ideas with others in the Reserve ecosystem and other projects that have done something similar already in order to shape what we ultimately do. At this point it’s something we are excited about but not decided on yet.

The tokens could be transferred to a smart contract — let’s call it the “emissions contract” — which could have a hard-coded release schedule over many years or decades. Typically these schedules start faster and slow down over time. I think that makes sense for two reasons:

• In the long run, if things have worked and Reserve usage has grown significantly, the system probably doesn’t need any excess capital to incentivize any actions, as RToken revenues could pay each type of actor to perform its job.
• In the mid run, if things are going well and Reserve usage is growing, RSR could increase in value, and so a smaller number of tokens emitted each period could still be worth as much or more in real value terms. (We of course do not make any promise that Reserve usage will grow or that RSR value will go up if it does, but one has to think about the possibilities when considering this design space.)

Although the rate of emissions would presumably be hard-coded, the channels of allocation could be fluid. We are envisioning a voting mechanism similar to Curve’s, where RSR that is not staked on RTokens could be locked in vote escrow (i.e. veRSR) in order to participate in voting on where emissions go.

Three obvious targets for emissions are:

• RTokens themselves — if RSR were sent directly to an RToken, that RSR would be treated as revenue by the RToken, and that value would then be slowly distributed to the RToken holders. This would make any RToken more attractive, as it would appreciate in value more than it otherwise would have. E.g. sending $100 in RSR to an RToken that had a market cap of $1,000 would increase its market cap to $1,100, thus adding 10% to its APY.
• RToken liquidity pools — if RSR were sent to liquidity providers on Curve, Uniswap, etc., there would be a greater incentive to provide that liquidity, and thus deeper liquidity could be bootstrapped for RTokens. Liquidity is crucial for making RTokens useful within DeFi. Perhaps some RSR rewards could even go to offchain traders who supply liquidity on CEXs.
• RToken usage in other protocols — if RSR were sent to users of other protocols and apps like Compound, Aave, Maker, etc., there would be greater incentive to use RTokens. The more places that accept RTokens, the more useful they can be as a medium of exchange. If RTokens are to become a liquid store of value for people around the world, it is crucial that people can use them the way they use other assets.

But there could be many other types of recipients as well. That would be up to RSR (or perhaps veRSR) holders to decide.

An important challenge is avoiding corruption. You wouldn’t want an RSR whale to vote to just send RSR emissions to their own wallet or scheme that isn’t actually providing value to the Reserve monetary system. So as we ideate here, that’s one thing we need to discuss.

Like I said at the start, this is an idea at this stage, not a plan. Let us know what you think or any other ideas you have. Discord chat or live audio/video hangouts are easiest for discussing things like this.

If we decide not to do anything like this, I intend for that remaining 20b to go into the Slower Wallet too, but it seemed reasonable to hold it back for now, in case we can agree on an emissions contract plan and drop it all in at once sometime soon.

Note: Confusion Capital does not have any legal or contractual obligation governing its use of RSR, and provides no guarantee that it will deploy it in any particular way. We encourage you to keep track of which RSR is in the hands of CC and can be used in any way at its discretion versus RSR that’s been given away to mechanisms that are not under its control, such as may occur if we decide to implement something like the idea discussed above, and to place trust in code and decentralized governance processes, not us.

Recap

I know this was a lot in one post, so if you’ve just skimmed to the bottom, here are the main points:

• ABC Labs is the new dev company, also working on RToken growth, and led by Thomas Mattimore
• Confusion Capital is the new capital management company making grants, funding companies in the ecosystem, and doing some special projects, led by Nevin Freeman
• These are joining Best Friend Finance (watch their launch video for the new app if you missed it!) and MobileCoin as relevant companies in the Reserve ecosystem
• The new grant program is giving away $10M and you can apply here — applications due by February 9th
• The RSR headed for the Slower Wallet has even more withdrawal restrictions than it had before, to cryptographically guarantee it can’t rug RSR holders
• Confusion Capital is considering handing over control of 20b RSR to an automated emissions contract governed by RSR holders and wants your ideas on how best to do this

As I said at the top of this post: Reserve is not a company, it’s a monetary system. I’m excited for these new companies and capital deployment mechanisms to help support that system as it grows and matures. LFB!

Nevin Freeman
President, Confusion Capital