Stablecoins have emerged as the cornerstone of the decentralized finance (DeFi) landscape. As the space matures, a plethora of options have sprouted, each offering unique solutions while grappling with their own sets of challenges. I mean, as a % of the total cryptocurrency market capitalisation, stablecoins command upwards of a respectful ~10%.
Let's break it down: First up are the fiat-backed titans - $USDT and $USDC. These are akin to the popular kids in the DeFi school. Their value proposition is pretty straightforward: a coin that's pegged to traditional fiat currencies, primarily the US dollar, and is also directly backed 1:1 by the underlying fiat. But here's the twist – these coins are anchored by centralised entities, and hence, they’re subject to the whims and fancies of centralised regulations.
A case in point is the recent USDC debacle that followed a banking crisis earlier this year (SVB ahm). Such incidents shed light on the precarious balance these stable assets strike; their stability, ironically, can swing based on the ever-changing state of their backing reserves. One could say that for these coins, it's not always "stable" sailing.
On the other side of the spectrum, we've got stablecoins such as $LUSD and $DAI. These aren’t backed by traditional fiat currencies but instead, use the might of ETH and other blue chip cryptos as collateral. These are what are known as over-collateralised stablecoins. This approach has its merits, leveraging the decentralised ethos of blockchain networks through reliance on smart contracts. It sounds ideal, right? However, every silver lining has its cloud. While they champion decentralisation, they face headwinds regarding capital efficiency and scalability.
Enter Mori. This forward-thinking protocol postulates that what the market really craves is a fresh form of stable asset. Imagine a coin that's not playing footsie with the US dollar but rather stands tall on the robust shoulders of native $ETH assets. Mori envisions an asset that's pure DeFi – governed exclusively by smart contracts, ensuring both stability and freedom from centralised puppet strings.
In essence, as the DeFi space evolves, it’s evident that one size doesn’t fit all. Whether it's the age-old tussle between centralisation and decentralisation, or the quest for scalability, the future of stablecoins promises to be both challenging and exhilarating. Strap in, folks. The journey's just getting started!
What is Mori?
Mori Finance represents an advanced system within the realm of DeFi, operating on Ethereum. It introduces a cutting-edge approach to stable assets crafted natively. By leveraging the collateralisation of $ETH and LSDs, the protocol generates stable assets with remarkably low volatility. Additionally, Mori offers users the unique ability to craft asset twins, safeguarding against $ETH price fluctuations (more on them later). This strategic feature enables users to establish cost-free, secure long positions on $ETH, effectively mitigating liquidation risk.
The origin of Mori stems from recognising the limitations inherent in existing DeFi solutions. Despite their significance, stablecoins face substantial issues and rely heavily on trust. Conversely, stablecoins supported by ETH encounter scalability limitations, curtailing their ability to support forthcoming financial ecosystems adequately.
Mori introduced a unique stable asset framework. This system cleverly splits $ETH's inherent volatility between a low-volatility stabilised asset and a high-volatility derivative. For instance, users have the autonomy to choose either the more volatile ETHC (ETH Coin) or, the steadier ETHS (ETH Stable), depending on their risk appetite. Currently, Mori is undergoing rigorous internal trials, with sights set on expanding its token variety, enhancing asset integration, and eventually debuting on a Layer-2 network.
Essentially, Mori endeavours to present a diversified risk-return option, grounded in a primary fund mirroring the dynamics of a designated foundational asset. At its core, it leverages $ETH LSDs. For now, the system's backbone consists of ETH staking derivatives, courtesy of Lido Finance, with stETH being a pivotal component.
Protocol Overview
stETH offers the flexibility to be bifurcated into two distinct tokens - ETHS (ETH Stable) and ETHC (ETH Coin), allowing users to align with their individual risk profiles. Where ETHS functions akin to a stablecoin with reduced volatility characteristics, ETHC serves users who seek a more aggressive stance with a leveraged position on $ETH.
ETHS - The Low Volatility Player: ETHS is crafted as a stable asset with subdued volatility, underpinned by native assets within the blockchain ecosystem. Unlike traditional stablecoins that hitch their value to the US dollar, ETHS stands out by championing the merits of decentralization. Moreover, it packs a punch with its impressive capital efficiency and robust scalability.
- Conceived as a stablecoin-esque token underpinned by the strength of $ETH.
- Prioritises dampening price fluctuations to present a steadier asset.
- Beyond stability, holders can tap into supplementary liquidity provider (LP) opportunities, specifically from the ETHS/USDC pair.
ETHC - The Leverage Enthusiast: ETHC is architected to soak up the primary fluctuations of $ETH, positioning itself as a turbocharged derivative of ETH. While there are other ETH derivatives out there, ETHC boasts standout perks, including minimal fees and a diminished liquidation threat. It's an ideal match for enthusiasts with a bullish long-haul perspective on $ETH's trajectory.
- Crafted for those seeking a more amplified stance on $ETH.
- Offers the thrill of going long on $ETH without the constant dread of mandatory liquidations.
- Comes equipped with an "emergency brake" feature, which in high-risk scenarios, can dial down the leverage associated with ETHC, acting as a safety net for users.
Mori’s collateral framework currently finds its foundation in $stETH. However, it provides users the autonomy to customize the partitioning of $ETH into ETHS and ETHC. Additionally, there’s an avenue for users who wish to journey back, letting them convert their ETHS or ETHC holdings back into $ETH.
During the protocol's debut, both ETHS and ETHC were introduced with a starting price of $1. The unique aspect of ETHS's pricing model is its reactivity to 10% of ETH's price fluctuations.
To paint a clearer picture: should ETH experience a 10% uptick, ETHS would gracefully rise by just 1%. Conversely, a 10% descent in ETH would result in a modest 1% decrease in ETHS. It's noteworthy to highlight that while ETHS remains relatively stable, most of the turbulence seen in ETH's market behaviour is captured and mirrored by ETHC's price trajectory.
User Journey
Mori unlocks unprecedented opportunities for DeFi degens. Let’s explore an ideal user flow to understand the flow of value better.
- User deposits $ETH to mint & borrow either ETHS or ETHC
- Mori deposits the $ETH with an LSD protocol such as Lido to acquire $stETH
- As such, the Mori treasury earns rewards from $ETH staking
- The treasury then funds an insurance fund that could come in handy in case of any crises and also shares a portion of the rewards with the user
- On the user’s end, they can utilise their newly acquired liquidity to provide liquidity in the ETHS/USDC pool
Here’s a visual representation:
Risk Mitigation
From an architectural viewpoint, the system can face challenges if ETHS starts dominating a disproportionately large chunk of the entire protocol’s value. This scenario can turbocharge volatility in ETHC, especially given its relatively lesser valuation. If this occurs, ETHC might struggle to fulfil its mandate of echoing only 10% of ETH's value swings. To counteract such deviations, the system is armed with robust risk management blueprints and is primed for quick interventions during crisis periods.
A particularly sensitive indicator is the CR (Collateral Ratio) value. If it drops significantly, ETHS's capacity to effectively mirror just 10% of ETH’s price gyrations could be compromised. When such imbalances surface, corrective measures are immediately deployed to reinstate market equilibrium.
For clarity, the protocol employs varying risk response measures contingent on the prevailing market risk:
When CR is less than 130%:
- ETHS minting from ETH is paused
- ETHS comes with a zero redemption fee
- ETHC benefits from a zero minting fee
- On the flip side, the ETHC redemption fee sees an uptick
When CR dips below 120%:
- Again, the minting of ETHS from ETH is halted
- ETHS continues to have no redemption charges
- Minting of ETHC remains cost-free
- The redemption fee for ETHC, however, is jacked up even further
- As a last-resort strategy, the protocol's insurance reservoir is tapped into. Funds are used to acquire ETHS from secondary markets, which are then converted back to ETH.
This tiered approach ensures that the system stays agile and resilient, even in fluctuating market conditions.
$MORI
$MORI sits at the heart of Mori Finance. Once users lock $MORI, they're rewarded with xMORI. Think of xMORI as a sort of VIP pass - a non-transferable, escrowed governance token that mirrors the value of staked $MORI. xMORI can either be the fruit of profitable staking positions or can come from directly converting $MORI. This implementation is similar to the vote-escrowed tokenomics we’ve become accustomed to.
The magic of xMORI lies in its versatility:
- Profit Sharing: It enables holders to get a slice of the mint/redeem fee pie, generated in the form of ETH/LSD. This mechanism promotes synergy, cultivating win-win scenarios for both everyday users and xMORI holders.
- Yield Amplifier: It's like a supercharger for ve-token enthusiasts' yield, syncing their aspirations with the overarching vision of lasting protocol growth.
- Democracy in Action: xMORI isn’t just a token; it’s a voice. It serves as the governance token, granting its holders a seat at the decision-making table of the protocol.
By weaving together these facets of revenue distribution, yield enhancement, and active governance, a robust incentive mechanism is carved out. This not only propels active involvement but also harmonizes vested interests, fortifying both the resilience and the decentralized ethos of Mori.
Token Offering
Prioritising fairness for its foundational members, Mori has consciously sidestepped traditional routes like presales, VC engagements, or team token distributions. Rather, they’re embracing a community-centric paradigm.
As a nod to their loyal supporters, Mori is rolling out two exclusive token sale windows. These will serve as golden opportunities to snag $MORI tokens during the debut phase.
Note: Both rounds have been completed.
Round 1 Breakdown:
- Kick-off: 20th July
- Exclusive Entry: The first 60 minutes catered exclusively to the whitelist members, which included testnet contributors and the community's OGs.
- Public Participation: The subsequent 23 hours were a free-for-all
- Sale Details: A stash of 30,000 $MORI was up for grabs. This represented 3% of $MORI's entire arsenal, broken down into 1% reserved for the OGs and 2% earmarked for the public.
- Pricing: The sights were set on 1 MORI for 0.005 ETH
- Outcome: A total of 150 ETH was raised in just under 5 minutes.
Round 2 Rundown:
- Kick-off: 10th August
- Entry Requirements: First come, first serve
- Sale Details: Another 30,000 $MORI was sold to the public, 3% of the total supply.
- Pricing: For the 2nd round, the price was 1 MORI = 0.0058 ETH
- Outcome: The round was a massive success, with Mori raising 174 ETH in a mere 34 seconds.
Across both rounds, they’re channelling 6% of $MORI’s entire cache into the sales. If, hypothetically, the inaugural round doesn't hit its maximum target, the team will recalibrate the token stash for round two.
Lastly, a key note for participants: $MORI tokens bagged during these sales will be dispatched following Mori's mainnet launch, dovetailing with the Token Generation Event (TGE). An approximate timeline was shared recently. Once the Halborn audit is complete, expected to be by mid-September, the TGE is tentatively planned to occur about a week after that.
Conclusion
Ultimately, I’m incredibly hyped about Mori and excited for the future. Decoupling from the clutch of $ USD-denominated stablecoins is paramount to the success of DeFi. Centralised or otherwise, USD stablecoins still depend on the policies of the FED and the US government. Furthermore, Mori also seamlessly plays well with the booming LSDfi sector. The value proposition is immense. Collateralise your LSTs, and gain exposure to either a stable asset backed by $ETH in ETHS or a derivative product offering up to 4x leverage in ETHC.
Furthermore, the multiple audits also instated my confidence in the protocol. Although it’s important to remember that an audit isn’t the be-all and end-all for all security measures, it’s still a confidence booster to see major audit firms being brought on board to critique the code. The PeckShield audit has been completed, while Halborn is currently undergoing rigorous checks to ensure all the smart contracts are as safe as possible. You can read the PeckShield report here: https://github.com/mori-defi/mori-protocol-audits/blob/main/PeckShield-Audit-Report-Mori-v1.0.pdf
As for what’s next, I’m looking forward to the TGE of $MORI. The token offers some novel utilities and will accrue real yield, whilst aligning incentives among key stakeholders, thanks to the vote-escrow mechanism.
That’s a wrap, frens! I hope you had fun learning about Mori.
Resources
Testnet: https://testnet.mori.finance/
Alpha Mainnet: https://app.mori.finance/
Twitter: https://twitter.com/Mori_Finance
