The WHAT, HOW, WHY of UnFederalReserve
Purchased this recently, all thanks to Crypto Mobster. He did a wonderful job explaining this in a recent video. Definitely recommend watching that. AND FOLLOW HIM. He’s brilliant. You can learn a bunch of stuff about cryptocurrencies from his videos.
So here’s my take on this project. Again the intent here is to try and breakdown what this project is, how it is trying to do what it is aiming to do, and why this could be a big big project going ahead. As always do your own research. I’m sharing here what I’ve understood about this project and trying to put it down as simply as I possibly can
What eRSDL does?
In their own words, “Our banking products are designed for smaller U.S. Treasury chartered banks and non-bank lenders in need of greater liquidity without sacrificing security or compliance“.
This may look complicated at first glance but it need not really be.
Let’s first look at the typical working of a bank,
- A bank borrows money, by accepting deposits, and lends money, by giving out loans.
- On deposits, it pays an interest. On loans, it charges an interest. Obviously, the interest it charges on loans is higher than the interest it pays on deposits. The difference is its profit.
Taking an example, let’s say you set up a bank called ABC Bank,
- You accept deposits, paying 5% per annum as interest. You get your first client who deposits $1000 in your bank. Against this at the end of one year, you will pay the client $50 of interest on his deposit.
- You now get a client who wants a personal loan of $1200. You’re willing to give out a personal loan at a charge of 10% per annum. So you stand to earn $120 at the end of the year from this client.
- But you’ve got a problem. You have only $1000 at your disposal – the amount that came through from the deposit (your first client). How do you manage the balance of $200?
And that’s where liquidity management comes in. Cash is considered to be a liquid asset because of easy access. Liquidity simply refers to the availability of cash. Banks, big or small, do something called liquidity management, ensuring that there’s always access to liquidity or cash. Going back to the case of your bank. We saw you’re currently facing a shortage of $200, which restricts your ability to lend money. So how can you make up for this shortage?
Typically, banks have a number of avenues that can get them there. For one they can borrow from other banks. They can also borrow from the Central Bank. Obviously, the terms and conditions vary depending on the size of the borrowing bank. In your case, this clearly is a question mark for obvious reasons – you have only two clients, you’re new and you’re an extremely small set-up. If you manage to get someone to lend to you, that’s going to come at an expensive cost.
Here’s where eRSDL comes in.
(Please note, the one client bank was only an example to make it easy and by no means a definition of the eRSDL target client. Besides, if you actually think of yourself as a bank with that setup, you’ve got bigger problems than just liquidity)
Go back to what was quoted above of what they are doing. It may now make some more sense. Breaking it up, they are simply offering a platform for smaller banks and lenders to access liquidity easily without having to make compromises (high costs, security, and so on). At the same time, in case a bank is sitting on excess liquidity, it can use eRSDL to park those funds there and earn better returns.
How eRSDL does it?
eRSDL is building,
• A Decentralized Finance (DeFI) platform,
• A cash management dashboard,
• A credit Vs cash spot market, and a
• Banking ALCO (Asset-Liability Committee) dashboard to monitor product’s usage
If this sounds complicated or too much, don’t fret about it. If that example earlier of your bank made sense, then simply what eRSDL is building is a platform that allows,
- Business to Business (B2B) lenders (the banks or lenders which provide fund to small businesses. So not those which may give out personal loans or home loans, etc.) to manage their liquidity. This can help them in case they’ve got excess funds (allowing them to earn a return) or if they need funds
- Allow companies to access funds in a safe and secure manner. Think blockchain here. All transactions are recorded on the blockchain. Records are maintained.
Specifically their products are:
- Thunder®, which is a product that returns a high yield on deposits made
- Lightning®, which is a loan received that comes at a low charge or rate, short term, and does not need a security against it
Who’s behind eRSDL?
Just to reiterate, having an experienced team is a big big plus in any project. The team at eRSDL is incredibly strong. It is founded by Howard Krieger and Ryan Medlin. You could check out their Linkedin profile. In summary, Howard has loads of experience in this field with stints at names including HSBC, Wells Fargo, KPMG and the likes. Ryan’s got nearly 25 years of experience within the field of tech and entrepreneurship.
You can check the rest of the team and advisors here.
Why eRSDL makes a great investment case?
Besides a very strong set of fundamentals, business model and team, what works for eRSDL currently is how undiscovered it is. At the time of writing, there are 10,504 holders in eRSDL. For a perspective, and this is pretty random here (the following selection of names), AAVE has 74,270 holders, YEARN has over 36,000 holders, REEF has over 20,000 holders. So it’s a very nascent stage to get into this. Not many know about it.
While it has definitely had a nice run over the past two months, at its current price of 91 cents, it is still just a $300 million market cap project. AAVE, again just for a perspective here, is an over $6 billion project.
It is looking ahead at packed quarters of development. This is what its current quarter is looking like,
- Reserve Lending® Alpha testing and product launch, with single-side staking and Chainlink® price oracle integration
- Voting on Tier 1 exchange listing and key relationships
- Develop Treasurer’s Toolkit (KYC-Chain integration, ALDash and members-only USD Stablecoin maker/taker protocols)
While some of that may sound technical, exciting takeaways here, are the working on and possibility of an exchange listing. Currently, it is listed on Uniswap, Bilaxy and BitMart. A possible listing on a top tier exchange could be a major trigger. Besides, staking is coming soon which is estimated to have an initial APY of 1000%!!!!!
In summary, personally I think this has enough to make an exciting investment case. Looking forward to how this project scales up. As always, do your own research. Just sharing here what I like about this and why. Not financial advice.