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Stablecoin payment app Reserve helps individuals protect their savings against inflation in Latin America

November 11, 2021No Comments


One cryptocurrency-powered under-the-radar payment app that has been gaining traction in Latin America is Reserve. The platform acts as a convenient way for people to convert their local currencies, which may be experiencing high levels of inflation, to the US dollar through the Reserve. stablecoin (RSV). The network also has the reservation rights token (RSR), which is used for the governance of the protocol.

From launch in march 2021, the platform says it has seen a total of 367,000 subscriptions. Meanwhile, the number of weekly active users has exceeded 100,000, the majority located in Argentina, Venezuela and Colombia. In the last 30 days, the application has handled approximately 547,000 transactions. Additionally, more than 8,000 companies, predominantly based in Venezuela, now accept Reserve as a payment method for goods and services.

In a live demo of the Reserve app to 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 could spend the bolivars immediately, such as in online transactions, or swipe debit / credit cards to use the cash. However, liquidity providers, who are vetted by Reserve, charge a margin on the initial foreign exchange transaction. Below is the full interview between Cointelegraph, Freeman, and Reserve Community Manager Yens Michiels.

Cointelegraph: With the rise of the blockchain industry, there are numerous crypto-to-crypto and crypto-to-fiat money payment solutions. In your opinion, what makes the Reserve protocol unique?

Nevin Freeman: The Reserve app is a custodial stablecoin wallet in the cloud. We keep crypto in the background and users transact in our database. In the future, we will switch users to chain transactions, but due to [high] Ethereum gas rates, in this way the only way we could offer this use case in countries like Venezuela. In answer to your question as to what makes it different, it is the ability to deposit and withdraw with all these different currencies. These top five [options in the app] there 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 encryption options that people use. We have also recently added Axie Infinity tokens as many people in Venezuela play Axie Infinity. So it is an easy way to convert that money into dollars.

CONNECTICUT: How does the Reserve app help customers hedge against inflation in the aforementioned countries?

NF: It is a very common practice for users of the Reserve application to collect and convert their money in our stable currency into dollars so that they do not have to worry about the devaluation of their money. And then, during the week or the month, they will periodically conduct small transactions in the local currency to transact with the local economy. And then more and more, due to the increasing number of merchants, we are seeing more and more transactions that people don't have to convert to again; they can pay directly in stablecoins in US dollars.

So it's not really rocket science. The concept is very basic. It's like saving in dollars and living your life in dollars, which is something a lot of people want to do, but the change here is making [task] significantly easier to do and more accessible.

Let me add a more interesting point here: In Venezuela, for example, a lot of transactions are done through Zelle, which is like the American banking way of quickly sending money between American bank accounts. The 1% in Venezuela all have US bank accounts, and they all have a lot of money in their US bank accounts. So there are a lot of transactions that happen back and forth with Zelle. So everyone in Venezuela would love to have a Zelle account. The thing is, you can't get a Zelle account unless you fly to the US and physically create an account in the US. And many Venezuelans do not have the opportunity to do that. 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.

CONNECTICUT: Until now, we have mainly been discussing RSV and fiat money. But what about the RSR token? What are your development plans in this regard?

NF: The primary function of the reservation rights token is governance. The basket that backs any R token, which is our name for Reserve stablecoins, will have to evolve over time. And you need a very secure and robust method to handle that evolution in a decentralized way in the long term. Therefore, RSR has a key role to play in governance. The other main role RSR plays is offering insurance. to some stable currencies of the Reserve. The fundamental mechanism, the economics, and the purpose of how this all works have remained the same, but the exact mechanism of how RSR provides this insurance has evolved a bit in the version of the protocol that we are close to releasing.

The way it all works is that as an RSR holder, you can choose any Reserve stablecoin, or a combination of them, to stake your RSR tokens. And when I say bet, I really mean bet; it is actually putting them into play. Because what you are doing is, you are saying, okay, I am willing to provide my capital as backup in the event that any collateral that supports this Reserve stablecoin defaults and loses value. And in exchange for putting my capital and risking it, I will get a part of the income or return that the stable currency generates.

It is truly a decentralized insurance method, where many blockchain protocols require token holders to vote and decide how they want to pay; this is not how it works in this case. Actually, there are on-chain mechanisms, where in case there is a depreciation and the tokens are replaced by other tokens, the reserve rights tokens that have been wagered are confiscated and automatically exchanged to offset that value. Therefore, it is really a more decentralized version of the secure blockchain.

CONNECTICUT: Would you like to include a vision or mission statement on the future of the Reserve protocol?

Yen Michiels: What we do now is provide a solution to hyperinflation through a stable currency in US dollars. However, in the long term, we believe that the US dollar could also lose some of its value. Because when you look at the history of coins, every time a great empire issues a coin and loses power, or gives that power to the next empire, that coin loses a lot of its value. So right now, I think we have the solution for these countries, like Venezuela and Argentina, as we have that strong US dollar stablecoin to give them an escape from hyperinflation. But you can also think ahead, what will happen if the currency we trust, the US dollar, loses its value. And then no one has an escape coin to turn to.

So the long-term vision is to create a currency that is stronger than any fiat currency out there now. In our view, that coin is obviously a cryptocurrency, which will be backed by more than 50 on-chain assets, ranging from digital currencies, maybe even fiat currencies at first, and commodities like gold, maybe even stocks. Then it will be a super large basket. Finally, the idea is that the value of this basket would follow the global GDP [Gross Domestic Product]. If you look at world GDP, you will find that it is very stable; even during the financial crisis of 2008, it only fell by 2%. If you can create a currency as stable as global GDP, it would be superior to any fiat currency that exists now. We are starting to focus on that now in small steps, but obviously it will take a few years. [to accomplish].