mStable is heading towards a high growth phase with the upcoming launch of its V2 this year.
In order to do this, the project needs to make sure it secures two major things:
a) Maintain mUSD’s industry-leading yield (which is closely linked with Save utilization Rate and mUSD liquidity stickiness), at least until users and integrations can migrate to v2
b) Protect MTA’s value to give more firepower to V2 incentives and to prepare for a major capital raise later in the year which can happen only if MTA trades at a decent price (the team puts this figure at least $1-2/MTA)
We believe these two key goals, both oriented to the long-run sustainability of the protocol and MTA value, can be achieved by smart governance.
Save, mStable flagship product is powered by a complex and wide ecosystem: Feeder pools, mUSD / Curve 3CRV pool, lending rewards, native AMM fees. One of the reasons why Save APY has historically outperformed its peers is the relative low Save utilisation rate i.e the fact that a decent part of the total mUSD supply is held outside mStable Save and leveraged.
More here (https://mstable.app/#/musd/stats)
In this framework, retaining and attracting sticky mUSD liquidity outside Save in the high TVL pools of the mStable ecosystem is important. This can be done with smart MTA incentives allocation. More on this after.
mStable released earlier this year its Emission Controller, inspired from Curve’s Gauge controller, which dictates reward distribution in the mStable ecosystem for the next 6 years (~30m MTA) . All the current Vaults in mStable are represented as dials. Dials represent voting destinations within the Emissions Controller contract, $MTA stakers can determine the amount of MTA which are sent to a dial’s recipient contract.
As we speak, the Emission Controller distribute 160,768 per week towards 17 different dials. It’s fundamental that this distribution are done in the best interest of the project. For instance, the Treasury DAO dial is currently solely 6.1% of total emissions while being the ultimate protector of MTA value. An optimised allocation of the weekly rewards would give more firepower to incentivise V2 (by allocating MTA back to the Treasury DAO) and optimise a major capital raise later in the year (reduce emission by sending MTA back to Treasury DAO).
Rationale / Analysis
To retain mUSD liquidity in a cost-efficient manner and strengthen the existing high TVL pools, mStable governors could choose to allocate MTA weekly rewards towards selected dials for the ecosystem.
By doing this, mStable would send a strong market signal to its existing partners/pools and potentially even increase the liquidity in highly efficient liquidity pools by rewarding market participants. The ROI of 1 MTA reward in a high TVL pool is far most important than in one with low liquidity.
Please find below a tab showcasing the current weekly rewards allocation vs. the TVL brought by the recipient’s contracts and the assessment of the dial economical output.
Core contributors group believe that with a more thoughtful strategy (explained above), we can achieve a higher mUSD TVL, retain our industry-leading Save rate while emitting fewer MTA which will support its value.
Executing this strategy is even more important in the context of us building mStable V2.