Stablecoin Swap, MUSD, Self-repaying loans and more
Hi Burrow, our team has been hard at work behind the scenes for more than a few weeks now. We constantly contemplate the missing pieces in our ecosystem that would complete us, that would ensure greater sustainability across our different platforms. Today, we bring our largest update yet, the addition of a stableswap, coupled with the introduction of our ecosystem stablecoin — the Mad USD (MUSD) token. We top it off with the creation of a self-repaying loans platform that allows you to mint MUSD with the use of interest-bearing tokens as collateral. Sounds overwhelming? Sounds about right, let us take you through each of the pieces.
Stablecoin Swap
All chains require the existence of a stableswap pool with deep liquidity to facilitate more efficient swaps across different types of stablecoins, and to allow for better rates for arbitrageurs that help to balance out market liquidity. This typically means that swaps between stablecoins such as DAI/USDC/USDT can be conducted at ultra low fees and slippage — better experience for users of a chain. Less liquidity (less TVL) is needed in order to achieve low slippage trading as opposed to how traditional LP pairs work, hence lesser emissions required.
Building up a strong stableswap ecosystem eventually also allows for other projects to build on top of. This is why we see so much stablecoin innovation within of Ethereum Mainnet where there are all sorts of stablecoins that serves different purposes.
At MM Finance, we seek to be the number 1 DeFi ecosystem. To get there, a stablecoin swap is a necessary endeavour. With a strong stablecoin ecosystem, we will be able to net huge trading fees which are largely used to form Protocol Owned Liquidity (POL) as per our whitepaper. This results in stronger and more stable pricing for our native $MMF token. A stablecoin swap will be deployed in the coming days as the first layer of the foundation, where users will be able to stake a “3MM” LP of DAI/USDC/USDT to earn $MMF rewards.
MUSD Initiative
With the creation of a stablecoin swap, we are now able to issue out our own native USD token that is strongly pegged to the USD. Having a USD token allows us many benefits such as — deeper liquidity, more trading fees, ability to bridge our USD cross-chain. The possibilities are endless!
The MUSD token will be issued out through a system where interest-bearing tokens (ibTokens) are taken as collateral. This means that when a user deposits their USDC/DAI/BTC/ETH/MMF/SVN assets into platforms such as Mimas Finance and Tectonic, they will receive ibTokens. These tokens are generally invisible to the end user, but are received as a form of a “receipt” that is returned back to the lending platform to redeem your initial collateral. These tokens are generally illiquid, but our platform will precisely allow users to gain liquidity from such illiquid assets.
For more information about interest bearing tokens, have a look at Anchor Protocol and Compound Finance.
The bullish case for MUSD? With the ability to deposit your MMF and SVN assets into a lending platform such as Mimas, you will be able to earn close to ~900% APY due to the interest rate model that is applied. These are rather crazy juicy yields. The best part of this, when more users actually loan out their MMF and SVN tokens into Mimas, they can take out a loan from our MUSD platform to get instant liquidity in the form of MUSD. This changes the playing field for tokens such as MMF and SVN, because these tokens are now no longer tokens that you simply farm and dump. But that they are strong tokens that you can take a loan against to get liquidity to earn more yields. In this manner, we believe that the overall net selling pressure will be reduced!
To take this a step further, this also opens up a possibility of leveraged yield farming with $MMF that applies buy pressure on $MMF. Imagine the scenario where you deposit your $MMF tokens into a platform like Mimas, and you receive mmMMF tokens as receipt. You drop the receipt into our platform to redeem MUSD tokens. These MUSD tokens are automatically used to buy more MMF tokens to deposit into Mimas, to get more receipt, which are once again supplied for MUSD. This act can be done several times to net perhaps 2–3x leverage. This bumps your APY from 900% to over 60,000%.
The above describes the generic minting mechanism for the $MUSD token. Our team is currently researching/working on a minting mechanism similar to FRAX as well. Ideally, we wish to allow minting $MUSD tokens through a partially collaterised behavior. The general mechanics would be to mint $MUSD tokens by supplying a portion of USDC and MMF tokens, where the MMF tokens are burnt. With this such implementation, it will be strongly bullish for the MMF token as this will reduce MMF supply when users wish to mint MUSD tokens.
Self-repaying loans
The MUSD initiative we described above definitely sounds bullish for the platform, but you will question, what is in it for you as a user? The idea of such a platform exists to help you leverage your assets to get liquidity that you need for your daily yield-farming/trades. To sweeten the deal, we will orientate the platform into a “self-repaying loans” platform. This means that any loans of MUSD that you take out gets repaid overtime (and you net a gain).
Let’s say you decide to take a loan of USDC through the use of USDC (as collateral). You will typically get close to > 3% APY on supplying your USDC liquidity into platforms such as Tectonic and Mimas. Thereafter, you will deposit your interest-bearing USDC (receipt tokens) into our MUSD platform. You will be able to get close to 90% LTV for a stablecoin. You will be charged 0.5% upfront, and < 0.5% per annum on your loans (the lowest rates on most money markets). Our team is considering the best interest rates to apply on loans (generally the lower is the better). This will net you a loan that is self-repaying by nature of how supplying and borrowing works.
One of the best parts of using stablecoins is that you can perform a leveraged borrowing of MUSD to supply more USDC back into the money markets. Typically you will be able to get over 20% APY with a good leveraged strategy (and you typically are at very low-risk when you leverage stablecoins). These kind of gains on a stablecoin is super juicy, and beats the yields on popular protocols such as Anchor.
The aim of our platform is to take as low fees as possible on the loans, so that users can net faster gains, so as to promote heavier usage of Cronos ecosystem products — Tectonic, Mimas. This will create a flywheel effect where more capital enters into Cronos chain, and plenty of such liquidity will find its way into buying some of our favorite ecosystem tokens in MM Finance. With the collected fees, they will be redistributed to holders of the share token for this new platform — $BURROW holders.
So, wen launchpad?
With the above self-repaying loan platform, we introduce the $BURROW token. This token will receive $MUSD dividends that is generated by the platform. The $BURROW token will eventually find its way as a governance token to the self-repaying loans platform. The $BURROW token is intended to be a limited supply token, and its utility differs from typical money market platforms.
For most money market platforms, they issue out the native token as rewards, but because our platform already allows a borrower to earn juicy yields from these money markets (as the Layer 1 solutions), there is no need to further incentivise lending (on our L2 solution) by diluting our native token holders. Upside will be limitless as the platform grows, and earns more fees. The $BURROW launchpad will be launched after the above initiatives have been deployed: Stablecoin swap, MUSD, and loans platform. Launchpad will be conducted in SVN, and expect the launchpad soon.
In our next article, we will be providing more info on the launchpad!
Adding it all up
Creation of a stablecoin swap, issuing of a platform native USD token (with burns on MMF?!), self-repaying loans, new launchpad — sounds mad? That’s about right. Our team strongly believes that this set of developments will place MM Finance at the forefront of all DeFi applications as the biggest (and strongest) DeFi ecosystem with huge amounts of stablising mechanisms for our native token holders. This is our maddest, most bullish development yet. As we allow you to digest this huge article, our team preps for the impending launchpad, and preps the next article to shed more on the tokenomics of the $BURROW token.
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