MIP 33: dHEDGE Acquisition of mStable
This MIP is following on from the RFC discussion.
dHEDGE proposes to acquire mStable and grow it to a leading yield vault aggregator across chains. mStable would become the primary source for yield vault strategies. This proposal is subject to the dHEDGE Governance proposal passing, which is currently under discussion.
dHEDGE has been in contact with mStable since the early days, and would like to see mStable continue to grow.
If mStable is not acquired and its development funded, there would be little chance that a lean mStable team could compete with other protocols. This would likely lead to a slow demise of mStable as its runway goes to zero.
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, relevant protocol multisigs and offchain support infrastructure.
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. The floor would be set with a liquid asset (stable or ETH).
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.
dHEDGE would also acquire key mStable contributors to continue building out the vision of mStable.
dHEDGE wants to see the revitalisation of mStable Vaults & draw upon the mStable brand and expertise of key stakeholders.
Running a lean mStable team will likely mean that mStable is unable to compete with other protocols. This option would continue the mStable treasury burn and likely result in little innovation. As a result, it could be a slow demise of mStable
Another option would be to shut down mStable and disperse its liquid treasury 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.
The dHEDGE proposal creates a floor price for MTA holders, whilst also generating an upside for mStable, by continuing to build the protocol into a leading yield vault aggregator.
Revitalizing mStable Vaults
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
Users can choose their yield aggregation vaults based on risk ie. the chain, underlying assets, protocols, hedge margin positions etc. 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:
- Stablecoin Yield
- Ethereum Yield
- Delta Neutral Yield
These can be migrated into mStable, creating a trifecta of vault brands:
- mStable: Yield Vaults
- Toros: Volatile Vaults
- dHedge: Asset Management
Propose to migrate low yields (from imUSD in particular) to a higher yielding strategy with a low risk profile. Toros Finance has a Stablecoin Yield strategy on Optimism earning ~30% APY on mainly USDC and sUSD. This is partially boosted by OP token rewards.
If practicable, dHEDGE would work with the mStable team to migrate the imUSD yield to the Toros yield. This would need to be done via migration smart contracts ensuring that the vault remains non-custodial.
dHEDGE wants to see mStable and MTA thrive. The proposal is to set a floor price on MTA while having it open to 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.
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.
dHEDGE would need expertise from the mStable core contributors and can provide salaries for key roles at mStable. Resources would be allocated to fast-track development of yield vaults, including building mStable as a cross-chain yield aggregator.
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 to realize 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.
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.
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