Reserve Protocol to buy DeFi governance tokens worth $20 million

Reserve Protocol is purchasing $20 million of governance tokens for the DeFi platforms Curve Finance, Convex Finance and Stake DAO in a move to boost liquidity of RTokens.

Reserve has "invested across CVX and sdCRV so far," it told The Block in an email. "Investment is ongoing so amounts are not finalized."

"We have already begun with CVX, sdCRV and veSDT," Reserve added. "We plan to continue accumulating veCRV governance power in what we deem to be the most efficient way possible."

The investment represents less than 5% of the governance of the respective platforms.

Reserve Protocol is a platform that enables the creation of asset-backed currencies called RTokens and is currently the seventh largest holder of Convex Finance’s CVX tokens. By increasing its investment in DeFi and acquiring additional governance rights within the ecosystems, Reserve aims to increase RToken liquidity, according to a statement.

DeFi governance ecosystems

Curve Finance is a decentralized exchange protocol designed for the efficient trading of stablecoins and the third-largest DEX by trading volume, according to The Block’s data dashboard. Convex Finance is a platform that boosts rewards for CRV stakers and liquidity providers, and Stake DAO enables users to access yield across multiple DeFi protocols, including Curve.

"This $20 million strategic investment in DeFi governance ecosystems will help bootstrap liquidity, reduce risk and support RToken adoption," Reserve Protocol head of platform Thomas Mattimore said in the statement.

RTokens created through the Reserve platform are 1:1 asset-backed, “inflation-resistant” currencies, providing revenue-sharing from yield-bearing collateral. For example, the Electronic Dollar is backed by a basket of yield-bearing stablecoin derivatives from Compound and Aave, with proof of reserves available on-chain. EUSD has generated $5.7 billion in transaction volume via the RPay app in Latin America, Reserve Protocol said.

High-yield savings dollar

Other examples include High Yield USD, which offers a high-yield savings dollar that's backed by yield-bearing stable assets from Convex Finance and Flux Finance. ETHPlus, an ether staking index with up to 4.5% APY, is supported by Lido Staked ETH and Rocket Pool ETH.

Reserve Protocol said the liquidity boost would benefit various applications, such as collateralized loans, wallet products and real-world asset tokenization while helping protocols, DAOs and hedge funds to optimize capital allocation and risk management.