Introduction
Since the launch of mStable, the protocol has undergone a number of changes and improvements. One area that has seen significant change is the role of mStable’s Governance Token (MTA). In this post, we aim to explain some of the developments of the MTA token and what the future might hold for it.
The original role of MTA was to align interests of users, token holders, investors and other stakeholders and bootstrap a decentralised community of governors. In order to achieve this, MTA was distributed to users in the form of rewards, which could be earned by participating in the protocol.
As the protocol grew and the ecosystem around it developed, it has become clear that this model is no longer sustainable. In particular, the high rate of token issuance was not conducive to long-term value creation, and the rewards were not always aligned with the interests of the protocol.
The need for change
Token emissions fuelled the DeFi summer, but were unsustainable long-term. mStable joined the effort like many protocols to distribute its governance token this way. While great at bootstrapping growth at the beginning, it was highly addictive because it fuelled deposits into the protocol and the total deposits into the protocol depended on it partially.
On the flipside, lowering emissions would reduce yield and correspondingly deposits and TVL, a metric that was artificially inflated to keep a protocol relevant in the ranking list. The short-term bootstrapping force and long-term healthy protocol growth goals did not fully align with one another.
Recent Proposals adjusting tokenomics
As a result, the mStable team has been working on a number of changes to the MTA token and its associated economics. The goal of these changes was to create a more sustainable token economy that aligns the interests of users, token holders, and the protocol.
There are four proposals in total that were recently implemented that address these short-term issues:
MCCP 22: Disable underutilized dials & MCCP 23 Disable underutilized dials II
These two proposals reduce the number of Vaults and Pools that receive MTA rewards (by disabling their associated dials in the Emissions Controller). This ensures that only pools that are long-term aligned with the protocol’s value receive MTA. If a pool does not generate revenue on its own and the sole reason to stay in the pool for the user is the MTA rewards, then it’s not additive to the protocol’s value. Additionally, third-party dials that allocate MTA outside of the mStable protocol were disabled as well.
MCCP 24: Reduce weekly MTA emissions
This proposal reduces the current emissions from the Emissions Controller by 45% and extends the emissions to 12 years as opposed to 6 years before this change. This ensures that less and less MTA hits the market on a weekly basis. This is important to curb token emissions and to retain value for holders and stakers by not further diluting their position. The total amount of MTA that is in the Emissions Controller remains unchanged.
MCCP 25: Increase Governance Fee Flow to Treasury
This proposal aims to direct 100% of protocol revenue to the treasury to provide an easier path to profitability and ensures that building long-term value is prioritized over short-term payouts to MTA stakers. This will allow the treasury to be the owner of the protocol’s revenue of the current and future products and to be able to decide how the funds are utilized. The treasury is now able to reinvest the revenue in the protocol development, which is necessary to ensure that the protocol is sustainable and continues to build new and exciting products.
MTA token holders are still in control of the protocol and benefit from the protocol being sustainable and profitable in the future.
The future
These actions create the conditions for MTA to become part of a successful ecosystem around our suite of products. By focusing and reducing emissions, and ensuring protocol value capture, the success of our future products and protocol can equate to MTA’s value.
We plan to continue building out the role that MTA plays in our ecosystem as we move towards the Meta Vaults product launch. Clearly, these are only the first steps. More has to be done, and more will be done. We will continue to explore the role MTA can take in the future and are excited to share more with our community as we progress.
