✅ [RFC] dHEDGE Acquisition of mStable

Request for Comments
#1

Summary

dHEDGE proposes to acquire mStable and grow it to a leading yield vault aggregator across multiple chains. mStable would become the primary source for yield vault strategies.

dHEDGE has been in contact with mStable since the early days, and would like to see mStable continue to grow.

Abstract

dHEDGE would like to help mStable continue in its vision of becoming a leading yield vault aggregator. Starting with single chains, and moving to becoming a cross-chain vault protocol.

Propose that all of mStable’s current products, which are uncompetitive in yield, are migrated to ~20% APY offered by Toros Finance stable yield strategies. This would boost the mStable TVL immediately and offer better returns. The Toros Finance yield strategies can then become mStable vault strategies. (see below image)

dHEDGE would acquire the mStable Treasury as part of this acquisition.

dHEDGE would set a floor price for MTA, equal to liquid treasury (excluding MTA) at the time of the acquisition divided by the circulating supply (adjusted for unvested investor/advisor tokens), giving existing MTA holders a limited downside and unlimited upside potential.

On acquisition, mStable governance would migrate to dHEDGE governance until a new MTA governance structure is in place. A new MTA governance staking mechanism would tie MTA closer to the success of its underlying vaults. dHEDGE has already been developing this for the DHT token. Stakers would tie their MTA together with mStable vault tokens. Stakers are then rewarded based on the performance of the vaults. This would happen within 12 months.

Motivation

dHEDGE wants to see the revitalisation of mStable Vaults & draw upon the mStable brand and expertise of key stakeholders.

dHEDGE proposes to acquire mStable and grow it to a leading yield vault aggregator across chains.

mStable would become the primary source for stable yield vault strategies including:

  • Stablecoin LP yields
  • Delta neutral yields
  • Basis trading
  • ETH and BTC yields

These single chain vaults can then be aggregated into a full cross-chain vault protocol, switching to best yields across chains.

dHEDGE’s automation arm, Toros Finance, has already built successful yield strategies:

These can be migrated into mStable, creating a trifecta of vault brands:

MTA Token

dHEDGE wants to see mStable and MTA thrive.

The proposal is to set a floor price on MTA while having unlimited upside.

dHEDGE would set the MTA floor price to:
mStable liquid treasury / MTA circulating supply
Liquid treasury excludes MTA. The circulating supply is adjusted for unvested investor/advisor tokens
The price would be locked in at the time of the acquisition and deployment of contracts. Allowing MTA holders to acquire their fair share of the treasury assets if they wish.

dHEDGE is confident that it’s able to generate revenue from new mStable vault strategies to grow mStable and MTA value well into the future.

Governance would move to dHEDGE and DHT stakers for a period of time until a new MTA governance system is in place.

Resourcing

dHEDGE would need expertise from key mStable core contributors and can provide salaries for key roles at mStable. Full requirements TBD.

Resources would be allocated to fast-track development of yield vaults, including building mStable as a cross-chain yield aggregator.

About dHEDGE

The dHEDGE DAO is a permissionless on-chain asset management protocol that has also created a vault automation arm; Toros Finance.

dHEDGE has been building through the bear market and is in a strong financial position with an extensive runway to realise mStable’s vision with MetaVaults.

dHEDGE and Toros have seen rapid growth especially on the Optimism network, offering some of the best yield vaults on stables and ETH, as well as enabling Synthetix stakers to hedge their SNX debt.

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Bringing mStable into the dHEDGE ecosystem means that there can be better focus on yield vault strategies using both Toros and mStable expertise in the area.

Pros

The dHEDGE proposal creates a floor price for MTA holders, whilst also generating unlimited upside for both mStable and MTA, by continuing to build the protocol into a leading cross-chain yield vault aggregator.

If mStable is shut down and its liquid treasury is dispersed to MTA holders. This would give MTA holders exit liquidity at close to the current price, but there would be no upside. It would also be the end of mStable.

Cons

None

1 Like
MIP 33 - dHEDGE Acquisition of mStable
#2

Read through the offer, it looks very interesting.

Does anything in closing/going through with the offer depend on any governance vote within dHEdge to succeed? Has the dHedge community been briefed on mStable and our situation?

1 Like
#3

That’s right, the same proposal is live on the dHedge forum also.

It’s sparked some interesting discussion and concerns about value add to dHedge. I do think it’s a win-win, not zero sum.

#4

Here is the corresponding post as reference:

1 Like
#5

Many thanks for posting this RFC, and happy to see the interest in pursuing a way forward with mStable.

The community of Meta Governors and core contributors will be reviewing this RFC in the coming days, and get back with questions and feedback.

It is imperative that this RFC be turned into a MIP (including a submitted GitHub PR) by the deadline, which is the 17th of March, 23:59:59 UTC. Any submission after this date will not be considered, and the draft proposal be removed as a voting option from MIP 30.

You can find more information surrounding the submission process here and here.

Thank you very much for understanding, and wishing you guys the best of luck in the coming days spearheading the proposal amongst all stakeholders! :sunglasses:

#6

Hey Ermin,

This proposal looks very interesting. In particular the only-upside for MTA looks like a no brainer. I look forward to talking to you and understanding your plans for the team.

However, in practice this means that dHEDGE will acquire mStable’s treasury and put these assets in a smart contract to “buy back” MTA at a given price. This also implies that dHEDGE has enough runway to acquire mStable team and pay both teams until both protocols are sustainable. I’m checking dHEDHE treasury holdings - is this the only dHEDGE treasury address?- and it looks like you have a significant treasury, but I’m not sure if it’s big enough to sustain two teams. Some questions:

  • What’s the size of the team, the current burn rate and how much are you willing to increase it to grow the team and products?
  • At this point, after having seen MTA drop 99.7% from ATH and +90% in the past year, is securing a floor price the most efficient use of the funds, or adding them to the treasury, increasing the runway and ensuring that it lives until the next bull market would be a better use of them? I might have a conflict of interest here for being a core contributor of mStable, so I invite the community to voice their thoughts about this - here or in the Discord channel.
#7

Thanks @nesk for bringing up great points.
I think it’s important to give MTA holders the security of a floor price whilst also showing a clear path into the future. As an MTA holder, I would want to see value built on mStable and MTA to capture a premium, whilst also having a firm floor option. I firmly believe we can do this together.

Zapper needs to be updated here, liquid treasury is ~$7m, ~5yr runway at current burn. This doesn’t include revenue generated from the protocol and yield. dHedge is in a good position. We will consider each and every contributor from mStable. Now that the other proposals are published, I believe our proposal is strong and we’re kicking off conversations with core contributors.

(Just re-iterating here that the proposal will also need to pass dHedge governance)

1 Like
#8

Hey Ermin, thanks for putting this RFC forward. Happy to see dHedge initiating this conversation.

Personally, I would be most persuaded by seeing the current team that has been building Meta Vaults continue to work on the vision and see a continuation of the products in some capacity.

A few remarks on my side:

  • Migration of ALL products towards Torus Finance is not very feasible. The majority of the Feeder Pools have very little liquidity left. The main product bulk of TVL is in mUSD mainnet and Polygon, while on Polygon a majority of the mUSD is the Frax Feeder Pool.
  • Any TVL migration should be only towards a similar product or products with very similar risk profiles.
  • TVL migration should be carefully weighed against the risks of technical issues or security.
  • TVL migration should be carefully considered against setting custody precedents.

What I like:

  • Continuation of the mStable brand and the direction of yield vaults.
  • dHedge seems to have enough resources to not only survive the bear but come out of it stronger.

Questions:

  • I’m curious about the team structure. How and who will migrate to the team? (I understand that this is not determined yet, but this is something I am giving importance to for my vote).
  • Do you see a possibility of the current team being able to work closely with dHedge while maintaining some independence? Having two product teams working alongside has many benefits such as improved efficiency and innovation.

Thanks for considering my feedback. Please let me know if there’s anything I can do to support.

2 Likes
#9

Thanks @dimsome, I strongly agree with all your points regarding migration. Especially maintaining risk profile, using best practices to minimize technical risk, and remaining non-custodial.

On the team flows and communication, working closely is the key.
For vaults, I think we should be end product driven first. Toros is currently split between building indexes, protocol hedging (like Synthetix), leveraged tokens, and yield strategies. I think there should be more focus on yield vaults. And you’re right, to do that we need more good people so that we can stay ahead. Looking forward to speaking more as this progresses.

1 Like
#10

Hey Ermin, thanks so much for putting this proposal, it’s very interesting.

MTA Token

Floor price

I have double feelings about this strategy.

Pros

  • Gives some sort of security to MTA holders as a floor price
  • Gives arbitrage opportunities to bots and others to trade MTA token

Cons

  • Locks the current treasury to defend the MTA floor price
  • It doesn’t help the protocol to grow
  • It doesn’t create any value for the protocol

To be honest, I would rather see this money spent on growing the protocol and focusing on increasing the value of DHT.

1 Like