MetaCoin – A New Alternative To DeFi’s Stablecoin
For essentially the most half, Dai has been the one crypto-native stablecoin inside the DeFi ecosystem. While others like USDC have garnered a good quantity of traction inside the area, they’re largely centralized, fiat-backed that go towards the core ethos of decentralized, permissionless finance.
As such, Dai has established itself because the de-facto permissionless stablecoin inside the DeFi ecosystem. It’s been massively profitable, so why suggest a brand new different?
MetaCoin outlines a couple of potential drawbacks with the Maker design. First is Maker’s centralized level-of-failure which might outcome within the lack of all ETH locked inside the system in a single transaction. In brief – if a single entity had sufficient MKR, they may leverage it’s concentrated voting energy to steal the entire collateralized ETH inside the system (together with the entire ETH/DAI liquidity). As it stands, there are 4 entities that might pull off the heist as we speak – the Maker Foundation, a16z, Polychain, and DragonFly.
The solely purpose this has but to happen is that each one 4 of those entities have invested vital capital (each monetary and human) for Maker to succeed. Therefore, it’s unlikely for any of those entities to break down the system and destroy their funding, regardless of that the inducement is bigger to take action. Regardless, it does spotlight the reliance on the belief of those 4 custodians for Maker to proceed to succeed.
The different main Maker criticism outlined within the specification is the introduction of latest collateral varieties with Multi-Collateral Dai. By introducing completely different collateral varieties, just like the Basic Attention Token (BAT), the system requires a excessive diploma of belief for these belongings to accrue worth and achieve the long run. To use BAT for example, whereas it’s pretty liquid, the token largely depends on the Brave Browser and Brave as an entity to succeed. This concept additionally holds true for different off-chain belongings, comparable to actual property and fairness. By permitting a lot of these belongings to be collateralized, there’s a level of belief required by completely different counterparties to ensure that the collateralized belongings to take care of their worth.
This was not true in Single Collateral Dai (SCD) as solely Ether – a trustless asset – was allowed to be collateralized. The notion of a stablecoin solely collateralized by a trustless asset drives enticing attributes to the underlying asset – particularly the power to stay permissionless and trustless. The solely different trustless crypto-native asset in existence is Bitcoin.
MetaCoin presents a brand new different for DeFi customers as a trustless, permissionless stablecoin. Anyone on the planet with an web connection will have the ability to entry secure worth within the type of MetaCoin’s stablecoin, collateralized by a single trustless asset.
MetaCoin Design Choices
As an govt abstract, listed here are among the key design selections with MetaCoin.
- A twin token mannequin: governance token (META) and stablecoin (COIN)
- Ether-only collateral
- Uniswap oracle on a basket of fiat-backed stablecoins
- Algorithmically set rates of interest
In phrases of similarities, each Maker and MetaCoin leverage a twin token mannequin. The first token, a unstable governance token shall be used to manipulate the basket of fiat-backed stablecoins used within the Uniswap oracle. In addition, META shall be used to manipulate whether or not or not a system shutdown is critical with extremely comparable fallbacks for COIN holders. Lastly, each techniques leverage a stability price and a financial savings fee for its debtors and holders.
MetaCoin focuses solely on a single-collateral sort, Ether, whereas rates of interest are algorithmically set moderately than dynamically by way of govt votes. With Maker, MKR holders are persistently governing the system’s borrow and financial savings charges by way of knowledge-pushed and incentive-pushed choices. In MetaCoin, META holders don’t have the appropriate to vote on the completely different rates of interest as they’re decided algorithmically by a PID controller.
The PID controller takes the present worth of COIN and compares it to the quantity-weighted common worth of the fiat-backed stablecoin basket on Uniswap. The controller will then alter the rates of interest based mostly on the distinction to make sure COIN maintains its $1 USD peg. More particularly, if the controller finds that the peg is under $1 USD, it lowers the rates of interest to drive an incentive for extra folks to purchase (bringing the peg again to $1), the place if it’s above the peg, the rate of interest is elevated to drive an incentive for much less folks to borrow.
In phrases of incentive design, that is an identical to Maker’s besides the execution of those incentive choices. Maker’s is human-pushed whereas Meta’s is machine-pushed. This attracts the attribute of a human governance-minimized stablecoin.
There’s additionally a couple of different attention-grabbing design selections with MetaCoin. The first is moderately than having an public sale for MKR on the surplus curiosity accrued to Dai minter, MetaCoin surplus charges are used to immediately buy META on Uniswap to burn.
MetaCoin has taken a web page from Synthetix‘s success and implemented native liquidity incentives for Uniswap’s COIN/ETH pair into the protocol. While the precise design hasn’t been fully fleshed out, there are a couple of proposals included within the specification. In brief, liquidity incentives will be sponsored by the next:
- Splitting surplus charges between META holders and COIN/ETH Liquidity Providers
- Adding native inflation into META to direct in the direction of LPs
- Accepting shares of the Coin/ETH liquidity pool as collateral for minting COIN
All three of those are attention-grabbing potentialities and it does present that the MetaCoin founding crew is ready to leverage Uniswap’s permissionless liquidity protocol to its fullest.
Lastly, MetaCoin is permitting a extra numerous vary of ecosystem contributors to manipulate the overarching system. Rather than strictly permitting for MKR holders to manipulate the Maker system, MetaCoin is permitting COIN minters, COIN holders, COIN/ETH liquidity suppliers, and META holders to all have an equal proper to vote on the platform.
The preliminary META token distribution shall be cut up 50/50 amongst MolochDAO and MetaCartel contributors in addition to a brand new MetaCoin-specific DAO, SweatDAO. With that, 50% of the preliminary tokens shall be distributed to MolochDAO and MetaCartel members who’ve funded ETH-aligned grants. Rather than merely distributing them professional-rata to shareholders of every DAO, MetaCoin will distribute META tokens to those that have “bled” for the higher success of Ethereum. As such, 50% of the preliminary META shall be distributed based mostly on the member’s share of whole ETH spent on grants.
The different 50% of preliminary META shall be distributed to the SweatDAO, the place tokens shall be given based mostly on the quantity of “sweat” contributed. In different phrases, SweatDAO members will obtain a proportional quantity of META based mostly on the worth of their contributions. If any fundraising is required, potential traders will have the ability to supply tribute to SweatDAO in return for META.
The introduction of MetaCoin proposes a brand new, streamlined different to Dai wherein the tokens should not aggressive, however merely supply completely different design selections. All in all, the announcement of MetaCoin is a web optimistic for the DeFi ecosystem because the business may have a couple of choice for a crypto-native, permissionless and trustless stablecoin.
In the approaching 12 months, we’ll be protecting an in depth eye on how MetaCoin suits inside the broader DeFi narrative and the way it’s introduction impacts Dai’s market share inside the stablecoin area at giant.
For anybody interested by studying extra about MetaCoin, be happy to learn by way of the official specification right here. If you’re trying to become involved, be happy to go to the official Telegram channel right here.
Director at Fitzner Blockchain Consulting. Lucas additionally has expertise working with a number of blockchain-based mostly startups as head of group, blockchain strategist and mission supervisor the place he targeted on token economics, writing, and advertising.