Proposal: Save. Earn. Borrow w/BancorP2P (includes: licensing fees, increased LP activity, new product, more engagement)

EXPECTED VOTE: Sunday, November 13, 2022


  • Residual Token, Inc. proposes to build, launch and maintain, BancorP2P, a savings, lending and borrowing tool that will integrate into the existing Bancor ecosystem.
  • Residual Token, Inc. will not charge Bancor development or maintenance fees, and Bancor will not incur any out-of-pocket licensing or whitelisting fees.
  • Bancor - at its own expense - will add hyperlinks to its website that point to BancorP2P, and will advertise BancorP2P to its users.


Residual Token, Inc. (dba unFederalReserve) proposes to offer Bancor a license to BancorP2P, a front-end interface to the ReserveLending Core.

The ReserveLending Core (hereafter, the ‘Core’) is an overcollateralized Pool-to-Peer lending protocol that brings together savers, lenders and borrowers from a variety of cryptocurrency ecosystems, platforms and brands. This global connectivity is facilitated by the use of multiple front-ends that each provide access to the Core’s single set of liquidity pools.

The Licensor, Residual Token, Inc. (hereafter, ‘Residual’), will build and maintain the BancorP2P front-end, and will not charge the Licensee, Bancor, development or maintenance fees (development is estimated to cost around $50,000 of Residual’s own capital, and maintenance is approximately $3,000/mos). Bancor will not incur any out-of-pocket licensing or whitelisting fees for hosting BancorP2P.

Bancor’s treasury will earn 10% of the reserves generated from borrowers connecting through BancorP2P. In other words, it will earn a portion of the APY that BancorP2P borrowers pay on loans, and in the case of loan defaults, it will earn a portion of the recovered collateral.

Additionally, revenues from existing Bancor trading tools are projected to increase due to higher trading volume. Residual projects a 30-40% increase in Bancor’s trading volume as users take advantage of interest paying deposit accounts and affordable loans available through BancorP2P. Detailed projections are available in the Forecast section below.

Note, the extent of work required to be undertaken by Bancor - at its own expense - will be:

  • Adding hyperlinks to the Bancor website that point to BancorP2P.
  • Advertising BancorP2P to both existing and future Bancor users.

At the user level, BancorP2P will:

  • Empower Metamask, Wallet Connect and Coinbase Wallet users to earn APY - without relinquishing custody of their cryptocurrency to a third-party - via BancorP2P‘s Supply or Deposit function;
  • Allow users to borrow a select set of cryptocurrency types on an overcollateralized basis at reasonable APYs; and
  • Provide users the ability to leverage up, short sell certain assets, or increase purchasing power using safe, reliable and easy-to-use features.

Bancor’s users will also have the added bonus of combining the above benefits with the robust trading tools already offered by Bancor, thus spending more time in the Bancor ecosystem, and increasing overall engagement with the Bancor product suite.

The BancorP2P user interface will be custom designed to fit Bancor’s existing brand style. Below are sample images of Residual’s own front-end, ReserveLendingTM. The BancorP2P front-end will share a similar overall layout, along with custom Bancor theming across multiple webpages. (See also:

Example I: User View of Current Deposits and Loans Outstanding

Example II: Market Overview

Example III: Liquidations

Example IV: Education Center

Also included with BancoP2P will be a range of “how-to” videos, along with user access to experts in the DeFi community. These experts will provide knowledge to the Bancor community on strategies to employ depending on Bancor’s users’ wishes and market conditions.


Onboard Bancor as a Licensee to BancorP2P, a front-end of the ReserveLending Core. Residual will build the customized front-end for Bancor at no cost to Bancor. BancorP2P will provide Bancor users access to the ReserveLending Core in an experience simpatico with the Bancor platform today, and will earn Bancor 10% of reserves generated through BancorP2P. Bancor - at its own expense - will add hyperlinks to its website that point to BancorP2P, and will advertise BancorP2P to its users.


Do not onboard Bancor as a Licensee to BancorP2P.


In business since 2017, Residual Token, Inc. is a Fintech SaaS company specializing in banking, Web3 and DeFi software development. Licensing software is Residual’s primary source of revenue, and a live utility token, eRSDL, is used as part of its Licensing-as-a-Service (LaaS) model, which is explained in detail here: Licensing as a Service (LaaS) for blockchain enterprise solutions | by unFederalReserve | Medium

The ReserveLending Core is a retail DeFi protocol for overcollateralized Pool-to-Peer1 lending and borrowing that is owned by Residual. The Core is based on the Compound® Protocol, which is non-custodial, meaning that Residual does not have control over supplied assets, and users are not exposed to the typical risks inherent in centralized custodial lending. The Core is also permissionless, meaning that any address is free to access the Core’s liquidity pools. A review of the Core’s activity can be found here: unFederalReserve - Key Metrics

Front-ends (interfaces) to the Core allow users to supply assets to earn APY, and optionally use their supplied assets as collateral to borrow on margin. Users across all Core front-ends share access to the same Core liquidity pools. This means that a user accessing the Core from one front-end can supply assets to a liquidity pool; while a user accessing the Core from another front-end can borrow those assets from the same liquidity pool (assuming the borrower has supplied enough collateral to satisfy this key condition to the loan).

Residual hosts a front-end to the Core, branded ReserveLending™. Residual also offers front-end licenses to third parties (Licensees). Front-ends are custom-themed for Licensees, allowing for seamless integration with existing branded ecosystems.

Residual will build and maintain a customized front-end for Licensees, and will not charge Licensees development or maintenance fees. Furthermore, Licensees will not incur any out-of-pocket licensing or whitelisting fees for hosting a front-end.

The extent of work required to be undertaken by a Licensee - at its own expense - will be:

  • Adding hyperlinks to its website that point to the front-end.
  • Advertising the front-end to both existing and future users.

Allocation of Reserves

The reserves accumulated by the Core are allocated to:

  1. Rewards paid to Licensees
  2. License fees collected by Residual Token, Inc. (aka unFederalReserve)

Rewards paid to Licensees

The total allocation of Licensee rewards is divided amongst Licensees in amounts reflecting the percentage of the total TVL that is borrowed from the Core through each Licensee’s front-end. Residual tracks and reports on these amounts using URL-related analytics and activity mapping. In this case, Residual will track Core activity tied to the BancorP2P front-end - using its URL - when estimating the licensing fee. Please refer to the Forecast section for detailed reward projections.

License fees collected by Residual Token, Inc. (aka unFederalReserve)

Given that Licensees do not pay any out-of-pocket licensing fees, Residual collects licensing fees from the Core reserves. In line with the Licensing-as-a-Service (LaaS) model, part of the licensing fees will be directed to reimburse Residual for its costs and profit expectations, and part will be used to conduct open market purchases of eRSDL tokens (eRSDL tokens are digital markers representing license state, and are burned as licenses are consumed).

Licensee benefits of hosting a Core front-end:

  • Rewards. Licensees are rewarded part of the Core reserves. A Licensee’s rewards reflect the TVL that is borrowed from the Core through its front-end. The greater the amount borrowed, the greater the rewards.
  • No out-of-pocket licensing or whitelisting fees.
  • Residual will not charge development or maintenance fees.
  • Expansion of product offerings to both existing and potential users.
  • Removal of the need to build, test, maintain and audit a similar platform in-house.
  • The Core has undergone extensive security tests and audits; most notably Trail of Bits successfully completed an audit just a few months ago.
  • In-house Core access means that a Licensee’s users no longer have to visit potentially risky third-party lending services.

User benefits of accessing the Core via a front-end:

  • Users can access global liquidity pools that are also accessed by users of other front-ends. As more users are introduced through new front-ends, the size of these liquidity pools is expected to grow significantly.
  • Users can earn APY by supplying assets.
  • Users can earn profits by shorting assets:
  1. Supply asset
  2. Borrow asset to be shorted
  3. Swap out of borrowed asset into a stable coin on a DEX/CEX
  4. Swap back into borrowed asset at a lower price
  5. Pay off borrowed asset
  • Users can take advantage of arbitrage opportunities:
  1. Supply asset
  2. Borrow asset
  3. Use borrowed asset to invest elsewhere. Profits or APY earned elsewhere should be greater than the Core spread (spread = borrow APY less supply APY, which is the effective cost of borrowing in the Core).
  • The Core has undergone extensive security tests and audits.
  • The front-end templates used to access the Core are designed for optimal user experience and ease-of-use.

Diagram I: Global Liquidity Pool “Core” Schematic


There are a variety of key performance indicators (KPIs) to consider when measuring the success of the Bancor-Residual collaboration. The key driver of value for Bancor will be the Total Value Locked (TVL) borrowed from the platform. Residual expects approximately a third of Bancor’s users to be interested in using BancorP2P’s deposit capabilities alone, without necessarily leveraging themselves or executing one of the shorting strategies discussed earlier. Given where Residual has seen market rates for borrowing, Residual expects Bancor’s treasury to earn a 10% royalty on the estimated 3% reserve fee revenue (refer: Table 1). This 30bps is almost double to triple the standard 0.125% broker fee other borrowing lead-generation platforms receive.

Table 1: Pro Forma Licensing Revenue for Bancor Treasury

The figures above represent estimates made by the management of Residual for the purposes of illustrating the potential revenue stream for Bancor’s treasury. These estimates should not be relied upon as anything more than Residual’s best guess as to the volume the Bancor user base would generate. Residual started with an aggressive growth curve for 2023, assuming a general market turn-around and increased adoption of Bancor as BancorP2P and other products are added to Bancor’s offering.

In this model, for instance, Residual assumes that average borrows can reach $200 million by the end of year 2, and continue experiencing significant growth in the following years. One way to verify or validate this assumption is by extrapolating from current usage trends. If just a tenth of the current daily trade volume went into deposits and was held there, then by year-end, the outstanding borrow balance would be around $50 million.

Additional to the above projections, BancorP2P saving, lending and borrowing activity is estimated to result in a 30-40% increase in Bancor’s trading volume, thus resulting in an increase in its trading-derived revenues. The basis of this estimate is as follows:

The main use cases for borrowing off Pool-to-Peer lending platforms at present are for shorting from one of the liquidity pools and/or for leveraging into another purchase (note: debt consolidation, one-time purchases, “quiet selling”, etc., are all considered, but are not the main drivers behind margin borrowing in crypto). Also, Cointelegraph reports that, “… utilization rates, or the percentage of stablecoins taken out as loans versus total supplied, have also fallen to around 30% to 40%… “. Thus, Residual foresees similar metrics for Bancor; whereby its users will supply onto BancorP2P, borrow stables, wBTC or ETH and use those funds to swap into new tokens through Bancor.

Interest Rate Models and Pricing Oracle

The Core’s current APY model for USDC, DAI, and USDT is a JumpRate Version 2 model described in detail here: Interest Rate Model - C.R.E.A.M. Finance

The model calls for the following inputs when calculating an APY:

Base Rate (Borrow) that includes a floor borrow rate, and logic to increase the borrow rate depending on utilization. At a certain utilization, or percentage of borrows vs total supply, the rate “jumps” to provide a repayment and supplying incentive.

The jump rate for borrowing includes factors such as:

  • A multiplier based on utilization;
  • A JumpMultiplier when utilization exceeds a “Kink” amount; and
  • A Kink amount or utilization rate above which triggers the JumpMultiplier.

The existing factors for each pool that determine its utility include:

  • Collateral Factor: The Collateral Factor is the percentage of value that one is able to borrow against their total supply value. Looking at historical price data, Residual found a 90% collateral factor on stables to be a sensible choice. This higher collateral factor helps protect accounts’ positions from volatility of asset prices, and from liquidations. This assumption is based on Gauntlet’s simulation risk report done on the Compound protocol. (Gauntlet).

  • Reserve Factor: The Reserve Factor is the percentage revenue the platform earns from its borrowers based on current borrow APYs and outstanding balances. Residual has lowered reserve factors to 15% to align with and beat other market participant’s settings. (The reserve factor is used to calculate the reserves collected, aka the Reserve Fee, whereby the Reserve Fee = Borrow APY * Reserve Factor).

The Core relies on an accurate token price oracle to constantly confirm margin balances versus borrowing limits (i.e. token price values in USD are also used for reporting purposes). Token prices in the Core are derived from a Chainlink® oracle. The Chainlink oracle was chosen for its accuracy and reliability - to avoid sudden hiccups in value accidentally triggering liquidations. As part of this proposal, Residual will bear the cost of maintaining the oracle as well as other elements of the infrastructure requiring regular maintenance and payments.

Here is an example of the USDC interest rate model:

Diagram II: Interest Rate Model (Example)

Changes to the interest model are controlled via Residual’s policies and procedures. These procedures include internal governance meetings to review the overall performance of the Core. Residual compares its rates and utilization to its competitors, along with the other factors mentioned above. It is Residual’s goal to maintain a leading position in terms of the highest supply APYs and the lowest borrow APYs available. Residual does not control all the market conditions required to meet those goals, but Residual does monitor and market the Core and its front-ends accordingly.

If through the governance process, a decision is reached regarding a factor adjustment, then the impact of the change is socialized across a variety of channels. If the impact of the change will result in an inattentive user being negatively impacted, then the change is voted on by members of the eRSDL (unFederalReserve) community. As a software provider, Residual strives to abstain from making changes to the Core’s parameters, in favor of letting market conditions play out.


Residual considers user and product security a top priority. The implementation team, in collaboration with third-party auditors and experts, has worked hard to build a Core that is secure and dependable.

The Core is managed in-house by Residual and has governance and security protocols in place that prevent corruption of its contracts. From a process perspective, changes to the Core’s key terms and provisions require management review, approval, and robust testing before publishing. Most changes fall into the category of adding tokens to the platform or adjusting interest rate pricing factors to optimize utilization.

Furthermore, the Core shares the same codebase used by unFederalReserve’s institutional permissioned and overcollateralized Pool-to-Peer platform, ReserveLending+, which has also undergone multiple rounds of security testing including an audit by Trail of Bits.

List of audits

The addresses for the Core’s contracts are listed below:

Name Initializations Address
unFederal eRSDL uneRSDL 0xE4cC5A22B39fFB0A56d67F94f9300db20D786a5F
unFederal ETH unETH 0xFaCecE87e14B50eafc85C44C01702F5f485CA460
unFederal USDC unUSDC 0x6b576972de33BebDe3A703BfF52a091e79f8c87A
unFederal DAI unDAI 0x2dbA05B51eF5A7DE3E7c3327201CA2F8a25C2414
unFederal USDT unUSDT 0x6e2aA5bB90ac37D9006685AFc651ef067E1c7b44
unFederal WBTC unWBTC 0x5D446FC8DBd10EBAcfE9A427aB5402586af98cD4
unFederal AAVE unAAVE 0xD837eCa6C91c67D98461A411BA2f00bdA9960a9D
unFederal YFI unYFI 0x9e29Ce9cD25F4141dF6BB85b27Ef6933a16A5824
unFederal LINK unLINK 0x031002d15B0D0Cd7c9129d6F644446368deaE391

The following were security audits performed over these contracts. Please note that these audits do not include the 5,000+ hours of Q&A performed by an internal, independent team dedicated to that function.

Regulatory Compliance

Residual Token maintains a robust AML policy consistent with its role as software provider for a self-custodial product. We are FinCEN registered as a general entity; which means that we are not obligated to report suspicious activity, but choose to do so in order for the ecosystem to present to regulators in a manner consistent with expectations. We maintain consumer lending counsel among other attorney groups for this such purpose, and users of BancorP2P should expect to checkbox their understanding and agreement to end user terms of use. Users are also subject to the platform’s privacy policy which may change time to time to align with evolving regulations.

Bad Borrowers and Recourse

Over-collateralized borrowing and lending reduces concerns around an individual’s willingness and ability to pay, and instead focuses on the use of collateral as the security interest against borrower default. The technology of the Core allows for liquidation bots to pay off loans whose outstanding balance as a percentage of its related collateral exceeds the collateral factor. However, there are instances where highly volatile collateral will drop too quickly for the bots to liquidate the loan. In those instances, vast amounts of loans may become unsecured. Worse still, as the value of the collateral rises, bots may re-engage and liquidate default loans as the price of the collateral rises; thus, putting sell pressure on the collateral token until all the liquidations have been cleared.

Options are limited here, but thankfully, the instances where enforcing recourse are few. One concept toyed around with by permissionless lenders is the dropping of forgiveness letter NFTs into the offender’s wallet, informing the borrower of the tax implications of a forgiven loan in an effort to encourage paying back the loan. In general, the best way to limit these occurrences is to only allow stable collateral at reasonable borrow caps in those wallets. Residual does not currently cap the amount of a given token that can be borrowed, but this might be a feature to consider leveraging if utilization reached and held a rate untenable for long-term platform viability.

A development for which Residual advocates includes “Supplier’s Rights”, where supplier’s en masse can vote to: impair bad debts on the platform, encourage an offending party to repay its loans, or split the collateral that remains on a pro rata basis.


Residual is excited to offer this opportunity to the Bancor community. Residual has been involved with Bancor for over a year, and believes that the increased utility of Bancor’s tools via BancorP2P will make it a leader amongst its peers. Thank you for taking the time to read through this proposal, asking questions and allowing us to address any concerns you may have.


1 Overcollateralized Pool-to-Peer (P2P) Lending vs Centralized Alternatives

In Overcollateralized P2P Lending, users (lenders) supply assets to a liquidity pool. The lenders can also use their supplied assets as collateral to borrow assets from the pool (thus becoming borrowers). The borrowers are overcollateralized, meaning the value of their collateral exceeds the value of their borrow. The Collateral Factor determines how much a borrower can borrow relative to their supplied collateral. The borrowers are charged interest (borrow APY), and the Reserve Factor determines how much of this interest is awarded to lenders (supply APY), and how much is collected by the operators of the protocol (in the protocol’s ‘reserves’).


Although the material contained in this website was prepared based on information from public and private sources that Residual Token, Inc. d/b/a unFederalReserve believes to be reliable, no representation, warranty or undertaking, stated or implied, is given as to the accuracy of the information contained herein, and Residual Token, Inc. expressly disclaims any liability for the accuracy and completeness of information contained in this or any article.

This article, our website, social media posts and other public forum materials are distributed for general informational and educational purposes only and is not intended to constitute legal, tax, accounting, or investment advice. The information, opinions and views contained herein have not been tailored to the objectives of any one individual, are current only as of the date hereof and may be subject to change at any time without prior notice. Residual Token, Inc. does not have any obligation to provide revised opinions in the event of changed circumstances.

All investment strategies and investments involve risk of loss. Nothing contained in this website should be construed as investment advice. Any reference to an investment’s past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.

Any ideas or strategies discussed herein should not be undertaken by any individual without prior consultation with a finance, tax or legal professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal objectives, needs and risk tolerance. Residual Token, Inc. expressly disclaims any liability or loss incurred by any person who acts on the information, ideas or strategies discussed herein.


While I am not opposed to Bancor offering a form of collateral management in the future in general, I don’t see how this proposal makes sense for the DAO.

The defi loan market already has significant incumbents, and I didn’t see anything in this proposal to lead me to believe that a Bancor skin of a compound fork would have a competitive edge against them or lead to any amount of market share. Assuming that 10% of trading volume would convert into using the platform seems extremely unrealistic. I don’t see how significant numbers would be achieved without expending immense marketing resources - which again would be an uphill battle with no competitive edge.


I don’t see how a simple member of the DAO could understand all this.It’s too much complicated.A simplified version might help.


I second this. To add to It, I think it potentially introduces smart contract risk in its implementation at a time where we don’t need the additional risk (to whatever degree, its non-zero) while also seemingly going in a different direction of what Bancor offers. We’re also waiting on details of the upcoming new AMM design, so my focus is really there.

1 Like

We will drop a video next week where I walk through the proposal in plain english. Thank you for the comment.


Hi, so there is di minimus smart contract risk. Our global liquidity core has been operational for over 18 mos with over $700mn in cash flows and 31.5k transactions without incident. We have recently completed an audit by Trail of Bits, the U.S.'s foremost smart contract audit firms (the report can be accessed in the body of the proposal). 5,000 hrs of QA and excited to report a great user experience. Thank you for the comment and we are looking for a Snapshot vote sponsor!

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Hi, thank you for the thoughtful response! This is why we thinks it makes sense.

We want Bancor users to spend time at Bancor and not bounce between myriad products and different customer experiences. From our market research, we now that institutions and sophisticated traders increase their purchasing power through leveraging stables, shorting tokens and just earn interest on excess cash requires the bond between exchange and pool-to-peer platform.

We are offering to pay to build it, service and operate it, and pay the DAO 10% of annual revenue. Even if Bancor wanted to build it themselves, we know from experience you are talking about a multi-million dollar investment. We like the Bancor team and the community.

Thank you again for your comment, and we are definitely interested in a Snapshot vote sponsor!!!


Yeah, I think the last thing Bancor needs to do now is outsource additional smart contract risk, we were repeatedly assured that Bancor was the safest, most impermanent-loss protectin’ platform out there, far ahead of all other DEXes and DeFi, and we know how that turned out.

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Our Trail of Bits audit (performed by one of the leading U.S. blockchain security audit firms) validated the safety of our core smart contracts. Additionally, we have had over 10,000 users complete over $700 million in transaction through 31k+ actions without incident. We have had over 5,000 hrs of QA and are safer than 90% of the crypto projects out there.

I hope this addresses the concern, but we can provide more information, including Compound’s security audit history. When you consider the universe of applications using this logic, there have been hundreds of thousands of transactions and billions and billions of dollars safely conveyed on almost identical rails. Thank you for your support!


This will be beneficial to all parties involved and improve both projects. :+1:


As a holder of both tokens I see this as a win and a great oportunity for growth. Looking forward for this.


A good step for a brighter future!


That would be ideal. Brand loyalty and brand stickiness are observed AFTER the fact. Simple google analytics will give both projects a sense of how much additional time folks are hanging out now that they can play with time-based transactions and not just spot trades.

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Trying to make a video as fast as I can.


Zoom w/recording is our go-to … Windows basic video editor. The unFederalReserve team has over 100hrs of videos on our youtube channel. Check out the content today! Welcome to unFederalReserve - YouTube

Good luck on making your own video.

Unfederal reserve will keep building until becomes one of the best platforms in the market. Big congrats to the co-founder of the ERSDL. find out more at and Please don’t keep your stablecoins idle, instead gain interest by borrowing them.


Got you fam: Crypto Lending Markets, The BancorDAO, & The unFederal Reserve - Analysis - YouTube


Great video! Please see our response in the comments below the video.

We want to see Bancor provide greater utility to it’s customers today. That means collaboration on things that can’t be built overnight, are costly to operate or require a skillset not native to DAOs. We bring technology, support, marketing and growth opportunities meant to propel Bancor to the next level. Thank you for the support!

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For the purpose of record keeping I am going to include screenshots of some conversation had about this on telegram.

response 4
response 5


response 9

And this is all of the major discussion.