mStable assets are designed to generate a native interest rate. This is done through the mStable smart contracts programatically depositing bAssets to decentralised lending markets such as Compound or AAVE, combined with mStable's swap fees and other sources of income (such as token liquidations described in MIP2).
As interest and fees accrue, new mAssets are minted and sent to the relevant Save contract. This means that the
mAssetis always fully backed with very little deviation. This deviation occurs when the basket does not have an equal weight distribution, and is due to the bonding curve. The parameters are set in a way so that the deviation is smaller than 1%, 99% of the time. Weight limits ensure that the backing ratio will never drop below 95%.
The one-to-oneness of
mAssets is in contrast with other Automated Market Maker LP tokens which accrue swap fees implicitly and appreciate in value. Thus,
mAssets can be used as a pegged crypto assets in its own right, whereas LP tokens cannot. Users who opt in to receive interest by depositing a mAsset balance into the Save contract receive these newly minted mAssets. The user then receives another token, a interest bearing mAsset or
imAssets, which can be redeemed for the original deposit plus any interest earned, at any time.
All savers are given the option to participate in protocol governance. Every saver has the option of depositing their
imAsset in the "Vault", a place where savers can store their
imAsset and earn
MTA. As mStable is a collectively governed protocol, it is important that those receive system revenue as yield have a say in protocol governance. The vault is designed to incentivise savers to participate in governance and become Meta Governors (users who participate in protocol governance earn more
A basket with a total value of 1000
mUSD, comprised of equal parts DAI, USDC, USDT, and TUSD earns interest at the following APY derived from the mStable smart contracts automonously lending deposits onto decentralised lending protocols, currently AAVE and Compound.
DAI - 5%
USDC - 4%
USDT - 3%
TUSD - 2%
A user deposits 100
mUSD into the SAVE contract, alongside others who have already deposited 400
mUSD. The SAVE contract has a total of 500
mUSD (50% of mUSD supply) in it, and over the course of 6 months accrues interest.
At the end of 6 months, assuming no bAssets have breached their max weights, the basket is comprised of the following: 256.25 DAI, 255 USDC, 253.75 USDT, and 252.5 TUSD. In total, the basket has accrued 17.5 USD of value in interest at an average rate of 3.5% APY.
During this period, the platform also collects 10
mUSD in total as fees across swaps and redemption activity. This brings the total USD value accrued in the savings contract to 27.5 USD.
During this period, the protocol also received $10 worth of Compound tokens from lending on that protocol and $10 worth of AAVE tokens from lending on that protocol. This $20 worth of tokens are autonomously liquidated into
mUSD. This brings the total USD value accrued in the savings contract to 47.5 USD.
Our user, having contributed one fifth of the total USD in the savings contract over 6 months, earns a corresponding 9.5
mUSD in interest.
NB - This example assumes most of the system to be static over this 6 month term. Realistically, the mStable system is a dynamic one, and returns will be influenced by multiple factors in the system changing on a regular basis, such as users minting and redeeming every day.