There are currently 3 different types of reserve that you can choose from, namely, the Fed Price Reserve, the Automated Price Reserve and the Orderbook Reserve.
Fed Price Reserve (FPR)
A Fed Price Reserve utilises an off-chain component (Eg. a script running on a server) that pulls price feeds and calculates conversion rates. These rates are sent via on-chain transactions and stored in a pricing smart contract. A separate smart contract storing reserve funds will refer to the pricing smart contract for the expected token conversion rate.
It is complex to setup and maintain, and requires Ether for making the periodic price updates on-chain.
Automated Price Reserve (APR)
This reserve type relies on a predefined algorithm written in a smart contract to automatically provide rates for the token being served liquidity for. The initial rate is set based on the initial liquidity provided, and only adjusts after each executed trade.
The ease of maintenance and low development cost of this reserve comes at the expense of high financial liquidity requirements. You can read more about the APR in our blog post.
Orderbook Reserve (OR)
As its name suggests, this fully on-chain reserve type allows anyone to provide liquidity to the ecosystem for any token of their choice through the placement of limit orders. It is also the first reserve type that can be listed permissionlessly, where no action is required from Kyber (such as the network administrator or operators). A caveat that comes with the trustless setup is that the KNC fees that is to be burnt will be locked up in advance when the order is made and subsequently burnt when the order is taken from.
Reserve Type Comparison
Permissionless vs Permissioned
A reserve can be added to the network and have their tokens listed either by a network operator (Eg. someone from the Kyber team), or automatically by a smart contract (Eg. the PermissionlessOrderbookReserveLister contract). The former involves KYC and legal processes while the latter does not.
In order to comply with regulatory requirements, services using the Kyber protocol implementation may choose to only use permissioned reserves, such as KyberSwap. The table below highlights what services are supported for both permissioned and permissionless reserves.
|Area of Comparison||Permissioned||Permissionless|
|Parties integrated through their own smart contracts||Yes||Yes by default|