mStable is a protocol that has three main functions:
- Act as the ultimate source of re-collateralization
- Coordinate decentralized governance
- Encourage Liquidity of mStable Assets with Rewards
These features uses an MTA (Meta) token which is used for the reward system. The total amount of MTA is 100 million and the distribution of the token is shown below:
mStable aims to create assets that are stronger than the sum of their parts.
Currently, most stablecoin pools carry risk for their liquidity providers. If an underlying stablecoin loses its value, users are incentivized to completely fill the pool with a stablecoin , redeem anything of value, and ultimately withdraw all value from the pool, potentially leaving providers liquidity with nothing.
In the long term, users will demand a risk-adjusted return.
mStable strives to achieve this goal by first setting maximum weightings for each underlying asset. A maximum weighting thus limits the exposure of a liquidity provider to this asset.
The MTA token will insure against this loss. It has a contingency value, so mStable is effectively over-collateralized. The value of the token corresponds to the percentage of all revenue that mStable generates in compensation for the governance and the risk that the actors of the MTA assume to ensure the system.
If a collateral asset permanently loses its value, mStable will be able to purge that asset and recover the lost value by selling the MTA for the remaining mStable asset.
For example, if the TUSD falls to 60 cents, the governors may choose to remove it from the mUSD basket. During this process, the system for that particular mStable asset halts, swaps are paused, and minting is restricted. The mStable asset is re-collateralized by selling the MTA for mUSD until the amount of mStable assets in circulation equals the amount of collateral in the basket.
2. Decentralized governance
The MTA token aims to coordinate decentralized governance by incentivizing stakeholders to act in the best interests of mStable. Governors must stake their MTA to get a percentage of all interest and platform fees.
Governance decisions will initially be determined by the core team, but will gradually transition to a community proposal system ( DAO ) once mStable’s network activity has reached a sufficient degree of adoption.
Governance will ultimately relate to the addition and removal of mStable assets, exchange fees and MTA income. The weight of the user’s vote is proportional to the amount of staked MTA.
3. Liquidity and rewards
The awards on June 26, 2020 and will last for 5 years. A total of 20 million MTA (20% of total MTA supply) will be issued through rewards to directly incentivize resource providers to initiate stable asset creation and fund their liquidity and usefulness.
Rewards increase over the first 15 months, then slowly decrease until the supply is depleted. This pool of rewards is open to everyone.
For those who are interested, it is possible to deposit USDC against mUSD on the pool: 0x72Cd8f4504941Bf8c5a21d1Fd83A96499FD71d2C At the time of writing this article, there are already 13 million US dollars on this pool. You can find more information about this pool in the sources of this article.
This solution is part of the DeFi movement (Decentralized Finance) on Ethereum. The objective is clearly to provide a stable store of value that is based on several stable assets and to limit the risk of mStable asset holders.
There are already several projects, including Maker, which have the same objectives and the competition is fierce in the field. In other words, there are always risks in joining a project at these early stages and its success will depend on its integration into the most used platforms.