Was a bit afk last weekend, so just catching up on last week’s May 21st Community Call now. Gonna be a long post with some ramblings, so I decided to take it to Forum as opposed to Discord. Feedback always encouraged.
First off, I’d have to say that I really agree with what Java and Camel commented in the #community-call-chat. If we’re being honest, any time you create a stablecoin that’s a basket of other stablecoins, you’re inherently increasing your risk surface. There’s no way around that. USDC has really created a stronghold as a US-regulated, secure, 1-for-1 backed stable for institutions and DAI as the go-to more decentralized option. I think holding either of these alone, especially USDC, is less risky than any basket you can possibly create, due to the risk surface issue I raised above. Therefore, it would be difficult to brand any basket as “more secure.” Further, you’re not going to outcompete any of the leading stables in network effect at this stage of the game, which has already been well established.
Instead, I think our focus should be on tuning and positioning our current product for greater success. I think we’d be too quick to forget that we have 60 mil TVL, consistently mid teens APY for imUSD, and process millions in swap volume per day–hardly something to scoff at. All while we have the higher fee structure than our competition for swaps.
As we all know, the beauty of mStable is its reflexivity, capital efficiency, and composability. imUSD is effectively an LP token. The swapping, flexible basket weights, and movement around those weights drive incentives for arbitrage → generating volume & fees → increasing imUSD APY → more imUSD minting → more fees → further increasing imUSD APY. Swapping/arbitraging and minting also accrue value to MTA via buy & make, generating value for mStable and token holders and incentivizing more TVL to the platform with greater value of MTA rewards. This feedback is the whole reflexivity mechanism that everyone loves about mStable. The capital efficiency for Savers/imUSD minters (i.e. LPs) by having their assets lent out while simultaneously earning providing liquidity and accruing trading fees is incredible design. The ease of composability/integrations using imUSD & imBTC offer much promise.
Therefore, the factors hampering growth lie not in the existing product or the market vertical we’re targeting, but rather the need for logical improvements like a reduced fee structure, more coherent marketing/messaging around imUSD as a capital-efficient LP token accruing 90% of swap fees, and greater utility/additional features like an Alchemix-style loan offering for Savers that another community member suggested.
I understand that mStable is trying to redefine its identity, but the worst thing we can possibly do is de-emphasize swap, which will hamper our future capabilities, remove tools from our tool box, and drastically decrease reflexivity, capital efficiency, and composability.
If we’re worried about the UX possibly being too complex/straying from our roots too much, we can offer a simple UI that’s just for savers who want to use it as a basic pseudo-bank account. Can play up the security and simplicity to those users. Then, offer a more advanced UI as well, where we can market imUSD as a “capital-efficient LP token earning 90% of fees” for deep-pocketed crypto natives. This is a way to cater to all users and simplify things a bit without hurting our flexibility and agility moving forward. Let’s keep the reflexivity mechanism intact. Let’s keep all the tools in the Swiss army knife. Let’s just (1) allow ourselves to compete by reducing fee structure (2) better communicate to users the Swiss army knife tools we offer and how/when to use them (3) continue to refine and make the tools more useful.