May 21st Community Call Reaction

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.

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Additional ramblings:

The Alchemix-style feature, which would effectively make us an Alchemix that also captures yield from swap fees (i.e. we should be able to outcompete them on risk-adjusted yield), would make mStable a “pseudo-bank,” really furthering that simple UI concept where savers could access some of their capital as needed, all while earning leading risk-adjusted yield–giving them traditional bank functionality except with an improved UX and yield/earning potential.

Additionally, the “advanced UI” could offer greater granularity for LPs (Savers) in terms of where their idle bAsset is being lent out. This would allow for us to cater to all. We could have the standard safe offering of Aave and/or Compound (this could be default for the simple UI), but also allow users to choose other places with higher yield, such as yearn or yAxis’s vaults or better yet even fPools, allowing us to bet on ourselves improve liquidity on the platform. Could even go down the risk spectrum as well and offer the choice of depositing into Saffron’s AA tranche for risk adverse players. Lots of optionality there.

Adding features like these will attract all types of defi users and improve platform utility. Also very marketable as well.

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Some very deep thoughts here, and I hope @stonp89 will chime in on some of his suggestions he already made on Discord.

What I really enjoyed with Alchemix was the guarantee that my loan would pay itself back, but it felt that by utilizing only Yearn as a source, it was not really unleashing it’s full potential, something that we already have a distinct advantage on.

To harp on some earlier reflections made in the Discord, I think that we’re trapped somehow in the middle of two distinct product offerings, both of which have an important part to play, yet can’t play their part because they’re constantly being overshadowed by the other one, so we’re right in the middle of both and the necessity to have both creates the quandary that one is always under attack, though that need not be the case in my opinion once we zoom out and give both sides space to breathe and allow each part to play out their role successfully on board the suite of mStable offerings.

What I would like to personally explore after having read through all the feedback, suggestions, reflections, and pros and cons given by the community is to try and solve this issue completely on the UI/UX level first, to see if this can be done and satisfy both the “easiest to use DeFi savings account” camp, as well as the “swiss-army knife of DeFI” camp.

In music creation, synthesizers are often complex instruments that allow for a magnitude of depth based on their inherent design, either having a fixed amount of buttons and wheels, or being modular in design, having buttons, wheels, but also connection points to connect anything to anything else. However, there are also a semi-modular synthesizers that combine the best of both worlds, and I feel this is where mStable rests in the ecosystem.

With a semi-modular synthesizer, you can get started right away by simply ignoring the extra routing options and fiddling only with the set amount of given knobs and wheels.

Once you’re ready, though, and you have gotten the basic jist of it all, you can use the modular options present on the circuit board to exponentially increase your musical freedom of expression and create sounds that would otherwise not be possible with a normal synthesizer.

Thinking in this way, I feel we could solve our issue by making a “simple” view of the mStable “circuit board”, very much reminiscent of the old v1 mStable where Savers only had to press “Save” and that was it, without worrying about anything else.

If you really want to unpack the composability, depth, options, and opportunities with mStable, you go to “advanced” mode, and you’re presented with the full circuit board of options, swapping between assets, putting stuff in the vault, using other native mAssets, and become a fPool LP if you so desire.

That way, we can still be the best DeFI savings account, but we’re also so much more than that once you got onboard and took the red pill to see how deep mStable really goes.

2 Likes

Amazing points. Completely agree. By retaining focus on swapping, we ensure continued optionality and modularity for users. We shouldn’t inherently limit our capabilities, rather let users choose which features they want to use through UI design. As we’ve been discussing, if we refine the UI to a “simple” view for basic Save functionality as an easy deposit and forget savings account (and also add potential for these users to access their capital with an alchemix-style loan, giving them a traditional bank account experience), then we can cater to the more casual retail user with no prior knowledge. Think like a clean Save v1 UI/uniswap-type UI where anyone can use it.

By also offering an advanced UI (in addition to current UI features, I mention other potential granularity in rambling above), we allow DeFi power users to really take the fullest advantage of all the optionality we offer and generate a better UX for experienced LPs, which tend to also provide the majority of liquidity.

Let’s ensure we leverage this liquidity to its fullest extent. Swapping also ensures that we drive fees to consistently outperform Alchemix (and others), which doesn’t have swapping in house and thereby doesn’t benefit from the same capital efficiency and reflexivity that mStable offers. We truly can be the “one-stop shop” with these added features and UI design, attracting more liquidity and improving our swap execution, so we can charge higher swap fees and accrue more value to the Protocol and holders.

We truly are in an amazing position to fine tune and build on our existing product to cater to all users with unmatched capital efficiency and optionality, while retaining an easy, intuitive UX for those who prefer it.