Posted by a representative of the mStable protocolDAO
It is proposed that MTA’s long term utility and tokenomics can be improved by implementing a buyback-and-make strategy driven by an MTA/ETH/mAsset liquidity pool on Balancer Finance v1. In future, this pool could also be used in mStable’s re-collateralisation mechanism (in the event of an asset de-pegging) or as an incentivisation tool.
Note that it is possible to enable this in the very short term, providing there are no large changes proposed here.
A new smart contract will be deployed that deposits a portion of mAsset into a Balancer MTA/ETH/mAsset pool. A percentage of protocol fees that would normally go to savers is proposed to be be diverted into this pool, which will serve as a source of demand for MTA already in circulation.
The Protocol DAO proposes that the pool have the following specifications:
- Private Balancer pool, with the protocol as the only valid liquidity provider. Its utility will be voted on in future governance polls.
- MTA/ETH/mUSD/mBTC, initially at a 50/10/20/20 and sliding to 78/20/1/1 over time as the pool matures. Feedback is sought on the ideal ratio to maintain longer term.
- A percentage of revenue generated across all mAssets on the mStable protocol will be deposited directly to the pool.
- Pool swap fee - 5%, sliding to 2% as the pool matures
- As mAssets build up in the pool, it will effectively buy MTA to return it back to the correct MTA/ETH composition.
This pool would be created and maintained by by the mStable protocolDAO and its signers. Consequently, the mStable Genesis team will not have control over how this buyback-and-make strategy is implemented or improved upon over time. Any significant changes here could be proposed and voted on by Meta Governors and ratified by the mStable protocolDAO.
This proposal creates long term value for the protocol, through bolstering of MTA liquidity and the reflexivity of capturing system value. Buyback & make provides the following key benefits:
- Immediate effect on token liquidity and demand. This causes both immediate and sustainable demand for the system token. As opposed to simply burning the token and taking it off the market, this value can be re-cycled and used as a liquidity pool to support trades through Balancer
- In addition to the immediate effects on liquidity, the value can be used to fund mAsset re-collateralisation for example. This is a decision that could be made by MTA governors as the pool grows in size.
- The reflexivity caused by an increased demand for the token causes a positive feedback loop between other incentives across the protocol, for example providing more powerful rewards for EARN pool participants
- The capturing, storing and utilisation of fees provides long term system value, as opposed to only providing immediate incentives for SAVE participants, which has little lasting impact
Full implementation details available here
Which portion of system revenue (if any) should be diverted to this Buy and Make pool? Proposal is somewhere between 20-40%