✅ [RFC] mStable merge into Spool DAO

[Taxel]

Summary

In light of MIP 29 with this RFC it is proposed that mStable is merged into Spool DAO. All MTA holders will be able to swap their MTA tokens to SPOOL tokens and, therewith, become members of a growing and sustainable community/DAO with complementary products to what mStable is currently offering. Basically, keeping the idea behind mStable, to offer easy yield optimization and making DeFi more accessible, at a new home with a strong probability of success.

Abstract

With MIP 29 mStable stakeholders voiced concerns about the future of the project and the open community was asked to come up with potential solutions.

This proposal was prepared by the working team behind Spool DAO and offers a strong path forward.

Spool in a nutshell:
Spool is a permissionless DeFi platform that connects Capital Aggregators with DeFi Yield Generators.

With one deposit you can access multiple yield farms of your choosing managed by DAO-curated Risk Models, Spool will auto-rebalance, auto-compound, and maximize yield. Set and forget. Additionally, Spool allows you to build your own yield strategies and risk models with a few clicks. According to the chosen risk tolerance level, portfolios are auto-rebalanced and capital is automatically compounded. Spool minimizes transaction costs, optimizes DeFi yields, and brings DeFi risk management to the next level. (more at docs.Spool.fi)

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The guiding principle behind this RFC is to offer all involved parties a beneficial and effective outcome from the current situation.

Summary

• MTA holders will be able to swap their MTA for SPOOL tokens worth up to a converted 1.25 million USD - providing a new and vibrant home in Defi
• Currently vested MTA permission will be discussed with the team to be as fair as possible on all ends
• The mStable community will merge into the Spool DAO community to thrive together
• All assets of mStable, including the full treasury, will be transferred to Spool DAO to make the most efficient use for the benefit of the joint mStable and Spool community
• The mStable product sunset could follow the approach outlined in MIP 31
• Spool DAO is in discussions with some mStable team members to join the team behind Spool to develop the future together. More clarity will come with the MIP.

Note: Spool has had thoughts about a Spool stablecoin for over a year. To fully scope out such a stablecoin based on Spool’s Smart Vaults following the mAsset approach, there was simply not enough time within the given 4-5 weeks. But the Spool team is more than happy to discuss possibilities further. Funds for this endeavor would be provided accordingly. A product meeting with the team is planned for the upcoming week.

Motivation

Since its initiation mStable has built a good brand and great community around a product that did not yet find its full product market fit in the ever-changing DeFi space, as relayed by the stakeholders in MIP 29. In the understanding of the Spool team the new underlying idea behind mStable, providing optimized yield in a decentralized and non-custodial protocol, is great but, unfortunately, it did not work out with the given resources to make mStable the success the investors and team desired.

At Spool DAO, we are building since two years a comparable solution with a slightly different approach and already offering more features to our users in current Version 1 of the protocol.

With this proposal, all MTA holders would find a new home which caters to their beliefs and expectations of the future in a similar manner but on a more sustainable and promising path forward. Here are some facts about what we mean by that:

• The current treasury of Spool DAO allows further development until 2027 and beyond
• Smart Vaults at Spool can be created by everyone
• Already 20 yield strategies to build upon are integrated and more are coming with every month
• The protocol had a Total Value Routed of >70m and never got hacked
• Version 2 with a vast expansion of possibilities is currently being audited by Trail of Bits
• In the partnerships pipeline are multiple signed LoIs which show the interest from 3rd parties in the product
• With the additional launch on Arbitrum at the end of February the expansion and outreach process started which will unfold over the upcoming months
• … to keep it short, an outstanding product is out and trusted, is going to be extended and evolved with the upcoming v2, and will be very hard to compete with by others

At Spool DAO we love efficiency, which is one of the core reasons why we build our DoHardWork function which rebalances and auto-compounds millions of funds on a daily basis, and in our understanding, it makes more sense to merge the mStable brand, community, and treasury into one offering to increase the probability of success. Offering and developing two comparable solutions leads to capital inefficiency, which is why we aim to combine energies and move the space forward in a joint manner now and not when it may be too late.

At the same time, we love the DeFi space and aim to move it forward as much as we can. In the light of this RFC, the end of one attempt to pursue the same can mean the acceleration of another, seemingly more fruitful approach and we are looking forward to combining forces to achieve our vision of providing the DeFi users a true value-add via the growing Spool ecosystem together.

With this proposal we want to provide a beneficial way out of the current mStable situation for all involved parties including a higher value add than e.g. shutting down dors later or a simple treasury payout, to drive the future of DeFi together.

Specification

Outlined here are more details of the merger from mStable into Spool DAO.

Swap of MTA to SPOOL

• Spool creates a smart contract that allows the deposit of MTA until a certain point in time. We propose one year after the final decision is made
• Spool will create a deposit/claim page for this
• All deposited MTA will receive SPOOL converted up to a total of 1.25 million worth of USD
• The exact MTA/SPOOL ratio will be fixated when the claim page is live
• The payout will follow a cliff and vesting period
• We propose a cliff of 2 (4) months and a vesting period of 3 (6) months for retail investors (team & early investors) in MTA
• When the swap is claimed and until the start of the vesting period or until SPOOL is claimed afterward, the SPOOL tokens will receive staking rewards and accrue voSPOOL
• Currently vested MTA permission will be discussed with the team to be as fair as possible on all ends

Merge of mStable into Spool DAO

• The mStable community will flow over to the discord, telegram, government forum, and other social channels of Spool to become a member of the new family and thrive together
• All assets of mStable, including the entire treasury and the in calls mentioned ~1.75m stablecoins, will be transferred to the Spool DAO treasury multisig to make the most efficient use of it. As costs will arise at Spool DAO for the aftermath of the transition, these transfers will be done two weeks after the final decision from both sides.
• All socials and the brand will be merged into Spool’s and the mStable team will provide best efforts to increase the value add as much as possible and to make this process as frictionless as possible
• If possible, Spool would be interested in becoming a member of the 4626-Alliance and taking mStables seat there to contribute and drive this endeavor forward
• Owners of funds that are currently deployed in the mStable vaults will be kindly asked from mStable side (via announcements and direct comms with known parties) to move the deposited funds to the Spool Smart Vaults (with potentially higher yields) to increase the TVR and show trust in the multiple audited infrastructure of Spool DAO

Technical Sunset of mStable

• The general mStable product sunset could follow the approach outlined in MIP 31

Next steps

If this proposal is accepted by the mStable stakeholders, a similar proposal will be brought to Spool DAO to accept these terms. Further discussions after the two decisions, in the event that the stakeholders of both projects agree to the merger, will be held by the respective team members with the best interest of the mStable and Spool DAO community in mind by acting in an efficient and effective way.

[mZeroNine]

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!

[nesk]

Hey Taxel/Spool team,
Could you clarify how would the swap work? Let’s see the numbers:

• There’s ~2M USD worth of non MTA assets in our treasury
• There’s 60M-70M circulating supply of MTA (depending on what you consider circulating)
• This means that each MTA should be worth at least $0.028 to $0.03 for this proposal to even be considered by an MTA holder; otherwise it’ll be convenient for them to just redeem for the treasury assets (and swap to $SPOOL if they want to become part of the Spool community).

Your proposal implies distributing ~2.76M $SPOOL (worth $1.25 M) for all MTA that enters the swap, and getting $2M of non MTA assets, meaning that if more than 62.5% of all floating MTA are swapped for $SPOOL they will be getting less than by redeeming for treasury assets.

Am I getting this right? Why would any MTA holder prefer this option rather than redeeming for treasury assets?

[0xloth]

Hey,
Echoing @nesk here not really understanding which incentives an MTA holder has to see this proposal resolved.
The way the proposal reads (and feel free to correct me if I am misreading it) $1.25M of locked SPOOL is offered (vesting over 3-6 months) in exchange for full control of the mStable treasury which currently holds >$2M of liquid, non-MTA assets.
So, in this setup, it looks like Spool would be buying a non-vested liquid asset against a vested illiquid one, at a 35% discount and MTA holders would be getting 65c on their potential redemption value

[dimsome]

I concur with the two previous post and I don’t want to reiterate the same points.

However, I would add these additional points of concerns:

• This proposal does not leave room for a continuation of our product, as you said the sunset will proceed as outline in MIP 31. This does not acknowledge the value, time and effort we put into our new product.
• This seems like it’s a win situation only for Spool.
• I am concerned the mAsset concept is somewhat the one product you are interested in. There was a deliberate choice to move away from that concept and focus on the parts of the product that did work and that users did use. Stablecoin market is a tough place and without any ecosystem to build it into it and to generate demand for it, it ought to repeat the same trajectory as mUSD.

[Taxel]

Thanks for your input, questions, and suggestions.

We’ll make sure to acknowledge them in the MIP with our best efforts. Here are some answers already to provide a better understanding of our thoughts.

Starting from the top

Our thoughts behind the numbers:

• Underlying: SPOOL are not just tokens that laying around in our treasury but SPOOL is a valuable asset and the DAO treasury would not give it out for free or under market value but only in exchange for value-add

As described in the RFC the value of mStable for Spool would come from merging the two communities and brands into one and growing from there stronger together. This entails the current mStable treasury. The third part of the value lies in the expertise of the mStable team when it comes to building a stablecoin foundation.

We set aside around 500k from the mStable treasury in our calculations for this endeavor, to keep parts of the current mStable team members employed and let them fulfill their duty to the investors of building a great and valuable product (what the funds were originally meant for), now, jointly with Spool. This portion would, obviously, be topped up with funds from the Spool treasury for further development and growth (provided that Spool DAO would accept the overall merger as well). If these efforts are actually smaller than we expect, the proportion of the SPOOL offer would increase. Unfortunately, the mStable team, so far, wasn’t open for a discussion or eager to learn more about this part, so, also we weren’t able to clear open questions and numbers but we’ll try our best to include this continuation of the mStable team in the MIP.

There are additional costs stemming from the aftermath and operations of the actual merger activity (paying the helping M&A advisor, paying team members who help with the transition, …) which would be shared between the remaining funds of the current mStable treasury and additional Spool funds. These numbers all together are above the current mStable treasury.

Obviously, it would not make sense to offer a deal that would weaken the overall value of Spool DAO after the merger is concluded. If e.g. the whole treasury goes to all (un)vested MTA holders, where would be the value for Spool DAO at which cost? Why should anyone build out the product for free and pay for continuous development, while mStable is paying MTA holders every liquid treasury fund, while the other side pocket fund onboarding the mStable team? This proposed merger of ours gives MTA holders a good value (with plenty of potential up-side), would make Spool stronger in the future, and, therefore, the new Spool DAO members aka former MTA holders themself.

Parts of the mStable team would stay employed and can build, MTA holders would take a cut as the original idea failed, but would grow stronger again in the future under the new roof of Spool DAO.

In our understanding, the mStable team received funding from various investors at different valuations and times to build a valuable and successful product and has the responsibility to deliver. We all know that in the crypto sphere, not much regulation exists (yet) to spare retail investors from malicious behavior. In regulated markets for example it would be impossible to unlock vested interests for the purpose of including them fully in a liquidation value as they were vested for a reason. Or, if a project fails to deliver, this clearly comes with a cut in valuation. Due to the processes in many projects’ token distribution life cycles, old investors that are well off already and team members directly offset for their efforts via salaries, often have the largest junk of governance tokens left at or near the end of it and sometimes decide what seems to be best in short sight for them but people start to pay attention when they look at builders before start investing or in co-workers to get a better understanding of underlying mindsets. With our MIP, we hope to make an offer that includes all possible viewpoints of stakeholders as fair as possible.

We believe in the open nature of the crypto space which comes with necessary self-regulatory mechanisms and we wanted to contribute to this as transparently as possible from the beginning by e.g. including numbers from the start.

In short: In our thinking, the rest of the mStable treasury is put to best value-add use if exciting and promising things are been built with it. With our proposal, we want to offer the possibility of building a great product together and merging as efficiently and effectively as possible to directly let every MTA holder participate in the value-add.

This leads to the next point, also raised by dimsome:

• This proposal does not leave room for a continuation of our product, as you said the sunset will proceed as outlined in MIP 31. This does not acknowledge the value, time, and effort we put into our new product.

Firstly, as said in the RFC, we fully respect the time and efforts that went into building the current version of mStable. But from our point of view, it does not make sense to maintain two kinda similar products and even the current version of Spool’s Smart Vaults is already more composable and allows for many more use cases than the mStable Meta Vaults. It is only efficient to move forward with the more advanced product.

On top, Version 2 of Spool is coming, currently being audited by a team that many call the best auditing company out there, with a massive improvement on various ends. Yes, there is space for alternative products and services but we want to move forward as efficiently and effectively as possible (I know, I repeat myself but this is economically important). Any other vault creator would have to compete with what we worked on for more than two years and a runway for more than four years even without any revenues. With our recent product launch on Arbitrum we slowly started our going out and we’ll show what Spool is made of and has worked on in the past in the upcoming time more and more.

Spool DAO was built up as a DAO from the very beginning and different thinking is engrained at the core in comparison to e.g. VC funded projects. We would be happy if the MTA holders and the team of mStable would join the journey ahead with the upcoming MIP. On the other hand, the Spool DAO would not accept a deal that would come at the cost of its investors by giving away SPOOL tokens with no matching countervalue. Therefore, it is maybe not nice to hear but, again, these are the reasons from our perspective to sunset the Meta Vaults as much as it hurts to see putting so much effort and time to rest as sunk costs.

Number-wise this means Spool can’t put a premium for the product in the offer which other projects might do (as we did not see any numbers in the other RFCs, we simply don’t know). This is how it is but we also know that a potentially new-formed conglomerate still has to compete with what Spool is building and if the net value of the deal is bad for the mid- to long-term it would not be wise to do it from any participant (who thinks and acts mid- to long-term).

• This seems like it’s a win situation only for Spool.

I hope it became clear by reading until here that this is not the case. We tried to include as many perspectives from various stakeholders as possible. Additionally, if the MTA holders are becoming an integral part of Spool DAO to keep shaping the future into a better one, they/you are directly participating in it.

• I am concerned the mAsset concept is somewhat the one product you are interested in. There was a deliberate choice to move away from that concept and focus on the parts of the product that did work and that users did use. Stablecoin market is a tough place and without any ecosystem to build it into it and to generate demand for it, it ought to repeat the same trajectory as mUSD.

Firstly, great thanks for these first-hand insights and the warning, much appreciated!

We do understand that the stablecoin market is not an easy one but we also know what partnerships we have signed and the ecosystem we are building for the past year(s) and what will come for Spool DAO and that’s why we are confident in going down this route. For obvious reasons, we can’t lay out the details in full public.

So, yes, a stablecoin built on top of Spool is definitely the product side of mStable that is more interesting to Spool (for the same reasons mentioned above about the Meta Vaults and v2 of Spool’s Smart Vaults).

This became a way longer text than initially expected but I hope it helps to clear up some of the questions and thoughts.

Thanks again for your feedback, we’ll try our best to implement the mentioned topics in the MIP but also to make it not too wordy.