Ines AissaniYou have heard of Bitcoin,Ethereum and a whole bunch of other cryptocurrencies. It is a fact. You also know how fluctuating and volatile this market is. Many people seek to maximize this volatility by telling themselves that cryptocurrencies will increase in value. However, in the meantime, prices fall often and periodically. It is very difficult, if not impossible, to predict prices. And, we stand there, looking at our graphs with fear in our stomachs.
This is why the Stablecoins (cryptocurrencies that are stable because they are indexed to fiat currencies like dollars, for example) have enjoyed real success. Stablecoins are a type of cryptocurrency whose value is tied to another asset, such as fiat currencies, such as the US dollar, cryptocurrency, precious metals or other commodities. Fiat currency seems to be the most popular option on the market right now, meaning that one unit of a stablecoin is equal to $1. This will always be the case, no matter what.
Since their appearance in 2018, they have attracted a lot of interest from cryptocurrency holders and the trend continues to grow.
Thus, stablecoins like Tether and MakerDao are very popular because - for the USA in particular - they are not included in the taxation of taxes. Beyond taxes, it is mainly for the fact that they are not subject to as many fluctuations as classic cryptocurrencies.
Stablecoins as an escape route for governments
Before talking about Reserv Protocol in more detail, we should recall what is currently happening in countries like South Sudan, Ghana,Zimbabwe, argentina, Turkey and Brazil.
What is happening in these countries?
Many middle-class and poor people (even upper-middle class in many cases) have lost much (or almost all) of their savings. Why that? Simply because of a bankruptcy or failure of the bank.
There are particularities depending on the country, for example, for Argentina, it is mainly a question of monstrous inflation which has caused Argentinians to lose a lot of money.
Imagine for a moment. Yesterday you bought your baguette for 10 cents and overnight you would have to buy it for €0,60. Or even more. However, it is not just the baguette that has become expensive, but everything around you has multiplied its price by 6 times. What will happen if such a price effect occurs across all sectors and commodities in your country? This is clearly a crisis.
That's hyperinflation and it can cause you to lose what you've spent a lifetime saving.
Thus, for countries prone to inflation such as Argentina, Venezuela, Ghana or Zimbabwe (to name only the most publicized), this is a highly dramatic situation. Monetary power diminishes to the point where it no longer exists at all. The smallest salary can sometimes be enough to pay for just 2 liters of milk.
It can be as excessive and hard to believe as that.
When people have to come and pay for soap by bringing a wheelbarrow full of bills, you know, this is not just an old myth resulting from the crisis of the 20s in Germany. (The hyperinflation of the Weimar Republic is the period of very strong price increases experienced by theGermany between June 1921 and January 1924 and which resulted in...the creation of the 3rd Reich..)
Of course, it is the poorest households that suffer the most.
I am certainly going astray in saying this in this article, but very concretely, there is nothing more unfair than a depreciation of the currency. The worker still worked. His salary is reduced drastically while his workforce is not reduced in any way. A high-level injustice, even.
Thus, the poor worker loses doubly. Its energy and purchasing power.
It is even more frightening to think that these people usually do not have the power to protect themselves from currency depreciation, because they simply do not have the opportunity to purchase stable, foreign currencies.
It is in fact the most widely used defense mechanism when an inflationary crisis appears; Households seek to buy other currencies, generally the strongest and most stable.
This is what is happening in many countries in Africa, Latin America and even Europe.
But, what if there was a way to prevent currency depreciation?
This is where the Reserv Protocol comes in. So let's go for an explanation of this (terrific?) project.
Introduction to Reserve Protocol
The Reserv Protocol project will operate in a substantially centralized manner and, over time, each component of the protocol will be migrated on-chain and released from control by the founding team, eventually becoming fully decentralized.
The Reserv network then includes three phases:
- The centralized phase – where the reserve is backed by a small number of collateral tokens, each being a tokenized US dollar.
- The decentralized phase – where the reserve is supported by a basket of assets changing in a decentralized manner, but always stabilized in price against the US dollar.
- The independent phase – where the reserve is no longer linked to the US dollar, with the aim of stabilizing its real purchasing power regardless of fluctuations in the value of the dollar.
Reserv Protocol's token will initially have a target value of $1,00, but is designed to move outside the US dollar in the long term.
The reserve protocol interacts with three types of tokens:
- The Reserv token (RSV) – a stable cryptocurrency that can be held and used in the way we use US dollars and other stable fiat currencies.
- Reserv’s rights token (RSR) – a cryptocurrency used to facilitate the stability of the reserve token.
- Collateral tokens – other assets held by the Reserv smart contract in order to strengthen the value of the Reserv token, (much like when the US government used gold to support the US dollar).
The protocol is designed to hold collateral tokens worth at least 100% of the value of all reserve tokens. Many of the collateral tokens will be real assets like bonds, property and commodities.
The portfolio will initially be relatively simple and will diversify over time as more asset classes become indexed.
What is interesting about this project is that the founding team has already done a lot of communication work. The project is in fact supported (financially) by industry giants such as Silicon Valley investment funds, PayPal founder Peter Thiel, YCombinator president Sam Altman, and even Coinbase Ventures.
“With millions of financially displaced people watching helplessly as their currencies debase every day, stablecoins can help inflation-ravaged populations through the financial stability of the developed world.”
“Bypassing local banks, an ecosystem with widely adopted stablecoins disables the financial surveillance capabilities of corrupt regimes. With a competently deployed stablecoin, individuals and businesses can transact peer-to-peer, using electronic money with a higher intrinsic and predictable value than their struggling local currencies.”
These are the objectives of the founders of the Reserv Protocol project. Ambitious, isn't it?
What are the advantages of this project?
Reserv Protocol uses an application that connects to the blockchain which, through a smart contract, keeps the price of the RSV token (a stablecoin) at one dollar. An end user who is ready to exchange their money for a stablecoin will be able to log into the application and, with the press of a few buttons, obtain RSV tokens for their national currency.
This would indeed be ideal for many African countries. And, it is in Latin America and Africa that Reserv Protocol wants to develop soon.
As the price of RSV is always stable, a person is protected from all price movements and other inflation-related issues. When users want to spend their money to buy something, they can easily exchange the VRS into the national currency.
There you go, I simply wanted to talk to you about this project which I find relatively interesting in several respects. If I share this idea with you, it is also in the hope of nurturing other types of projects of this kind, directly in countries in difficulty.
If I was so keen to talk to you about this project, it is because it demonstrates the fact that we are starting to target, thanks to cryptocurrencies, the real challenges that arise in the traditional economy. It's as if with the Reserv Protocol project, we were finally starting to tackle the real problems. However, I realize that this is only the beginning….
