In this tutorial, we will delve into the concept of Mento 2.0, a sustainable stable asset protocol. The goal of this presentation is to explore the design of a new version of the stability protocol, focusing on its economic and social sustainability. We will examine the motivations behind the need for Mento 2.0 and the perspectives gathered from various stakeholders. By structuring the requests, learnings, and proposed solutions, we aim to foster community collaboration in shaping the future of Mento 2.0.
Mento 1.0, the current stability protocol, has been functioning as intended since its launch. However, with the increasing number of partnerships and participants in the ecosystem, the need for improvement and evolution arises. We have engaged with users and institutional partners, receiving diverse perspectives and specific requests for enhancements. This tutorial will help us understand why investing in Mento 2.0 is crucial for addressing these evolving needs.
To comprehend the underlying structure of the requests and feedback, we have identified five core goals that drive the development of Mento 2.0:
- Improve long-term stability and crisis robustness: Enhance the stability protocol to ensure its resilience in the face of challenges and unforeseen events.
- Increase participation and democratize profits: Provide users with more opportunities to contribute to the system’s improvement and earn rewards beyond simple buying and selling.
- Support sustainable growth: Accommodate the specific requirements of institutional partners, such as enabling large-scale and cost-efficient transactions.
- Further decentralize the reserve: Foster decentralization by distributing the reserve among various participants in the ecosystem.
- Better support natural capital reserve assets: Align with the commitment to allocate a significant portion of the total reserve to natural capital assets.
It is worth noting that these goals are interdependent, with long-term stability and crisis robustness serving as a prerequisite for achieving the other objectives.
During the exploration of the stability protocol, several key learnings emerged. These insights shed light on the challenges and areas for improvement. Some notable lessons include:
- The need for alternative methods to support the reserve beyond direct sello donations.
- The importance of addressing the equilibrium problem in incentive mechanisms to prevent system crashes.
- The realization that liquidity and collateral may not be readily available during black swan events.
To address the goals and learnings, we have identified three fundamental solution principles for Mento 2.0:
- Time-based liquidity farming on collateral: Allow participants to lock up additional collateral committed to the reserve and reward them accordingly.
- Good-to-bad state value transfer: Introduce mechanisms, such as hedging, to transfer value from good states to mitigate potential losses during bad states.
- Participation incentives: Enable users to contribute to the stability protocol and earn rewards by assisting with its operations and improvements.
By incorporating these principles, we can explore innovative solutions that enhance the stability, robustness, and participation in Mento 2.0.
Among the proposed solutions, two innovations stand out as promising improvements to the stability protocol:
- Collateral Farming: Participants can lock up additional collateral committed to the reserve, contributing to its stability and earning rewards in return.
- Interaction Farming: Users are incentivized to provide uninterrupted interactions within the protocol, ensuring its continued functioning even during crises.
These two innovations tackle the challenges related to collateral and interactions, offering potential solutions for Mento 2.0.
Apart from the main innovations, the community has put forth various notable improvement proposals for Mento 2.0. Here are a few additional proposals that have been suggested:
Governance Enhancements: Improve the governance structure of Mento 2.0 to increase transparency, decentralization, and community participation. This can include implementing voting mechanisms, community forums, and clear governance rules.
Enhanced Risk Management: Develop robust risk management mechanisms to mitigate potential vulnerabilities and black swan events. This can involve stress testing, scenario analysis, and the integration of insurance or hedging mechanisms.
Incentivizing Natural Capital Contributions: Create incentives for participants to contribute to the natural capital reserve. This can involve rewarding users who contribute to environmental initiatives, promote sustainability, or invest in natural capital assets.
Interoperability and Integration: Explore opportunities for interoperability and integration with other blockchain protocols and decentralized finance (DeFi) platforms. This can enable seamless asset transfers, liquidity provision, and collaboration with other ecosystems.
Improved User Experience: Focus on enhancing the user experience of Mento 2.0, making it more intuitive, accessible, and user-friendly. This can involve improving the user interface, simplifying processes, and providing educational resources for new users.
Research and Development: Invest in ongoing research and development to stay at the forefront of stable asset protocols. This can involve exploring cutting-edge technologies, economic models, and sustainability practices to ensure the continuous evolution and improvement of Mento 2.0.
It is important to note that these proposals are not exhaustive, and the community’s input and feedback will play a crucial role in shaping the future of Mento 2.0. By considering these suggestions and fostering collaboration, we can build a more sustainable, resilient, and inclusive stability protocol.
We have explored the concept of Mento 2.0, a sustainable stable asset protocol. By identifying core goals, understanding the lessons learned, and proposing innovative solutions, we aim to address the evolving needs of the ecosystem and its stakeholders. The main innovations of collateral farming and interaction farming, along with other improvement proposals, provide a solid foundation for the development of Mento 2.0. Through community collaboration and continuous improvement, we can create a stability protocol that supports long-term stability, increases participation, and aligns with the principles of sustainability. Together, let’s shape the future of Mento 2.0 and build a more resilient and equitable financial ecosystem.