3.4.2 SOURCE Reserve and stable coin pegging mechanism

In the most naive protocol implementation, rUSD never leaves the trading network and is not listed on external exchanges. In such a scenario, the only way for members to export value from within the trading network to the open market is to convert their rUSD to SOURCE via the network’s Reserve as explained above.

Such an arrangement has the obvious upside of simplifying the network’s monetary dynamics. The export of value via rUSD to SOURCE conversions can be tightly regulated to support the health of the trading network, while rUSD’s peg to the US Dollar is cost effectively achieved by the following factors:

1. The rUSD supply matches the demand exercised on it by outstanding debt

2. rUSD deficits convert 1:1 into debt denominated in USD if not paid in time

3. rUSD surpluses can be converted into a liquid asset (SOURCE) at the pegging price (1 cUSD).

This “stick and carrot” arrangement organically drives members to regard their rUSD balances, positive as well as negative ones, as akin to USD balances, and consequently price their goods and services within the network accordingly.

The goal of the ReSource Network however, is to expand the utility of rUSD and to generalize its value to exceed the confines of the trading network. Achieving a stable rUSD:cUSD peg outside of the ReSource Network has the added benefit of expediting the Network's growth, adoption and utility, while introducing a new kind of stablecoin which bases its stability on organic market forces.