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Good morning, happy new year.

The Reserve project is going to operate pretty differently in 2026.

In my view, no Reserve DTF has yet shown strong signs of truly organic product-market fit. This has to change.

It's obvious that funds will operate onchain eventually – everything financial is in the midst of being tokenized, so why wouldn't they? The question is when and how the transition will happen.

The near-term question for the Reserve project is: will we lead the way, figuring out which types of onchain funds will get big first, so we can build those on the Reserve platform? Or will we let the opportunity to lead slip by?

It’s critical that we capitalize on the opportunity because our strategy for building asset-backed currency is to be the leading platform for DTFs.

We've built a solid foundation – the Reserve Yield and Index protocols, which have brought many millions in value to RSR holders and have held hundreds of millions in value with no exploits.

If we've attracted hundreds of millions in assets, why do I say there are no signs of product-market fit on Reserve DTFs? Because of the incentive payments that have driven Reserve DTF usage so far.

As we've discussed here and there in the past, some incentives have been onchain (see https://app.reserve.org/earn/defi) and some offchain. I'd like us to calculate the total combined cost of incentives for each Reserve DTF so we can compare that to its revenue from fees. I suspect nearly all are running the decentralized equivalent of negative gross margins, i.e. operating at a loss. Gathering and displaying these data will take some effort, but will pay off in how it helps us focus.

This year, we need to launch DTFs that asset allocators want to hold without any external incentive, so they reach positive gross margins (i.e. fees exceed costs) and grow organically and sustainably.

This will be my personal top priority, and I will do everything in my power to make it happen. I will also steer every part of the Reserve ecosystem in this direction as much as I can.

If and when we reach this point, the dynamics will really change. If we achieve exponential growth in DTFs that bring more value to RSR holders than they cost, that can start a positive economic engine that's based on fundamentals, not speculative demand.

When we look at the terrible RSR chart, we worry about what others will think of it. But you have to remember: a protocol that buys and burns RSR doesn't care about the chart. If massive platform fees generate massive RSR buying and burning, that's a direct input to the system that isn't subject to any narrative forces – it is a creator of narrative forces.

To make this happen, we must adopt a shrewd approach to new DTF design, treating each one as its own startup and making sure:

- it solves a real problem for a specific class of asset allocators

- it is branded in a way that conveys its value and has the right vibe

- it’s marketed through a channel that connects with the target allocator

- it’s available for purchase on at least one platform the target allocator is comfortable using

You may think: wasn't that the plan already? Yes and no, there are a lot of important nuances here.

I'll be sharing the details of how I plan to make this happen on a community call next Thursday January 15th at 9:30am Pacific. See the link in the next post, below. If you can’t make it, the video will be shared and likely chopped up for you to see the whole thing or a few highlights.

This will be a wartime year. We have much to do. If you are part of the DRF or otherwise highly engaged in Reserve, please try to make it to the call so we can get in sync.