Mars Ecosystem is building a new currency system. It combines the creation and use of the reserve currency. The major components of the system constitute a positive feedback loop and generate a flywheel effect. It is set to grow with Defi ad infinitum.
The decentralized stablecoin era is coming
The market cap of decentralized stablecoins (DAI, sUSD, etc.) grew 20 times last year. This may seem a large number, but it is just the beginning. To understand why and when decentralized stablecoins would take over regulated stablecoins (USDC, BUSD, etc.), you should read Haseeb Querashi’s excellent analysis of the evolution of stablecoins. Today centrzlized stablecoins market cap is 26 billion USD and decentralized stablecoins is 2 billion USD, these numbers will flip in 3 to 5 years.
Decentralized stablecoin calls for better design
Money is the blood for finance. Decentralized stablecoin is at the very basis layer for DeFi stack. But currently, there is no stablecoin design that simultaneously meets the needs of price-stability, decentralization and scalability. This is why we developed Mars Ecosystem.
So what is Mars Ecosystem?
Mars Ecosystem has 3 major components: a stablecoin, a volatile token and a stablecoin AMM DEX.
The relationship between the 3 components constitutes a positive feedback loop and generates flywheel effect.
Mars Ecosystem combines the creation of stablecoin and the use of it together. It introduces a new decentralized stablecoin paradigm.
Mars Stablecoin is price-stable, capital-efficient, scalable and decentralized.
Mars Stablecoin DEX incentivizes the use of Mars Stablecoin, which generates more TVL, volume and transaction fees for Mars Stablecoin DEX compared to the Curve model.
Mint/Redeem Mechanism of Mars Ecosystem
Two token system: One is stablecoin (Mars Stablecoin, USDM), the other one is volatile token (Mars Ecosystem Token, XMS).
Mint/Redeem: USDM can always be minted and redeemed from the system for $1 worth of XMS. When minting USDM, the XMS used is burned. When redeeming USDM, new XMS is minted.
Epoch: A fixed period of time mainly for oracle purpose.
XMS Support Ratio: This ratio measures the effective supportiveness of XMS for the full redemption and price stability of USDM. It is set by protocol governance.
USDM Supply Cap: This cap is equal to the circulating market cap of XMS divided by XMS Support Ratio.
USDM Mintage Control: At the beginning of each epoch, the USDM Supply Cap is calculated. USDM can only be minted up to this cap in this epoch.
For example, suppose that the XMS Support ratio is set at 500%, the circulating market cap of XMS is 100 million, then the USDM Supply Cap is 20 million.
Mars Stablecoin DEX
Mars Ecosystem has a Stablecoin AMM DEX(Mars Stablecoin DEX).
DEX incentivizes liquidity provision and trading, particularly for USDM.
XMS can be staked at DEX to earn part of transaction fees generated at DEX.
This new value capture model solves the following important design problem in all stablecoin protocols: the economic benefits generated from creating a stablecoin are captured by other use case specific protocols instead of the stablecoin protocol.
This design generates more value and price support for XMS.
The flywheel effect of Mars Ecosystem
The Flywheel Effect is positive feedback loops that build momentum, increasing the payoff of incremental effort. In normal English: When good things you do lead to more good things “just happening”.
The Mars Ecosystem intentionally designs the whole system so that its 3 major components (stablecoin USDM, volatile token XMS and stablecoin DEX) constitute a positive feedback loop and generates flywheel effect.
This flywheel effect accelerates the growth of the Mars Finance Protocol and widens its moat.
Mars Ecosystem Features
Price stability: Mint/Redeem mechanism ensures that the price of USDM is pegged to $1. The market cap of USDM is backed by the market cap of XMS by multiple times.
Capital efficiency: It always takes $1 worth of XMS to mint one USDM.
Scalability: The supply of USDM scales with the market cap of XMS.
Zero reliance on centralized collateral: The price stability of USDM is built upon XMS and the system.
Value capture of stablecoin adoption: Part of transaction fees generated at Mars Stablecoin DEX is captured by XMS.
Extensive integration: USDM will be integrated into other DeFi protocols as well as crypto payments.
Flywheel effect: The relationship between the USDM, XMS and Mars Stablecoin DEX constitutes a positive feedback loop and generates flywheel effect.
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