/biz/ - Business & Finance

I’ve been thinking about the economics for a while now and come to the conclusion it’s just a huge scam.

If you don’t know about RSR I’ll explain it in simple terms:

1) RSV is a stable coin that maintains a peg of $1 because it is redeemable for $1 worth of real world assets
2) RSR has value because it can be used for arbitrage opportunities ($1 worth of RSR can be redeemed for 1 RSV so if RSV is trading above $1 you can redeem your RSR and market sell your RSV)
3) But arbitrage opportunities don’t create money out of thin air! Like any market, it’s a zero sum game
4) For an arbitrage opportunity to present itself someone has to be willing to pay more than $1 for something that is worth exactly $1
5) Any money made in arbitrage by holders of RSR is essentially money lost by users of RSV

Reserve is trying to achieve a noble goal, a truly decentralized, denationalized, fair money. But they are creating a solution that will never work in the long. There does not exist Nash equilibrium point because the holders of RSV and RSR have opposing, irreconcilable goals. RSV users want the currency to be as stable as possible. RSR holders want the currency to be as volatile as possible.

If RSV actually is stable, then price of RSR will go to zero because there are no arbitrage opportunities. If RSV is unstable enough to present significant arbitrage opportunities people will use a different stablecoin, because who wants to use an unstable currency?