Title: Deploying ‘Meridian Mint’, USDM algorithmic stablecoin on the Metis chain.
Author(s): TJ & Yair from Meridian Finance
Submission Date: 08/11/2023
Summary
Deployment of Meridian Mint, which is the provider of USDM stablecoin. This addition will provide a native over-collateralized stablecoin option for users within the Metis ecosystem.
Meridian > https://www.meridianfinance.net/
Docs> https://docs.meridianfinance.net/
Overview:
Meridian Mint is a decentralized, non-custodial, governance-free borrowing protocol that enables users to obtain interest-free loans against whitelisted collateral. Loans are paid in USDM, which is a USD-pegged stablecoin. Meridian adopts an over-collateralized lending architecture that maintains a minimum collateral ratio of 110% which is algorithmically validated and assured by a Stability Pool to maintain the pegged value of USDM. As a direct fork of the highly successful Liquity protocol, Meridian shares the exact same smart contract code base. All contracts are fully verified and can be reviewed here on sourcify .
USDM offers lucrative features & advantages, that make it a highly appealing choice for both users and protocols looking to integrate:
- Zero interest rate — Borrowers can hold USDM for as long as they wish. As there is no interest to pay there is no need to worry about constantly accruing debt
- Efficient use of capital — By using a blue-chip asset such as METIS users only need to maintain a minimum collateral ratio of 110% providing more efficient usage of deposited collateral.
- Governance-free — all operations are algorithmic and fully automated, and protocol parameters are set at the time of contract deployment
- Directly redeemable — USDM can be redeemed at face value for the underlying collateral at any time
- No price/oracle manipulation —Given that USDM is always redeemable at a 1:1 ratio on the Meridian Mint protocol, there is no requirement for an Oracle price feed, and it can maintain a hard peg to $1. The same principle applies to the concern of thin liquidity. If the price of USDM were to drop below $1 on a DEX, arbitrage opportunities would bring it back to $1, since it can be redeemed for $1 worth of METIS. Therefore, there’s no need to update the price on projects that integrate USDM; it remains hard pegged to $1.
- Fully decentralized — The Meridian base contracts can be accessed by multiple third parties. This allows for different frontend operators and ensures that the protocol remains resistant to censorship
Full USDM Technical documentation and risk assessment can be found here: https://docs.meridianfinance.net/resources/technical-and-security/usdm-technical-overview
Motivation
The team behind Meridian, previously ran OmniDex, the largest exchange and lending service on Telos EVM. OmniDex was directly impacted by the failure of the Multichain Bridge collapse, which made the team acutely aware of the hazards of supporting only bridged assets. Our experience at OmniDex motivated us to create USDM—a genuinely decentralized stablecoin that addresses the pitfalls and vulnerabilities of wrapped bridged stablecoins.
We now want to proliferate the adoption of USDM within the Metis ecosystem to ensure the network does not become overly reliant on either bridged or centralized stablecoins. We believe as developers in this space we have the ability to guide the industry toward a decentralized future, as it was originally intended. Small decisions made today have the potential to have great effects in the future. Meridian’s robust infrastructure has been rigorously tested, we believe it can significantly aid the shift towards genuine decentralization on Metis.
~ Growth
USDM saw impressive growth in the last months. The image below illustrates the amount of ETH deposited to Meridian in order to mint USDM. Each USDM token is currently 183% collateralized by ETH.
In a few days, we will be deployed on the TelosEVM mainnet, while partnering with the Telos Foundation closely to make USDM a major native stable asset on their chain.
You can read more about the partnership here:
Use the following link to see a live version of the TVL deposited to back up USDM via troves:
https://defillama.com/chart/protocol/meridian-finance?denomination=ETH&include_borrowed_in_tvl=true&theme=dark
Implementation
As a general rule of thumb, Meridian is dedicated to working with the Metis team in the following work timeline, which we found to be the most prosperous:
Stage 1: Define Objective and Explore Options
Define your network’s goals, and explore the different products and solutions Meridian offers to advance your network’s objectives.
Stage 2: Customize Stablecoin Parameters
Work with Meridian to establish conditions for USDM on your network, including the choice of collateral type and the minimum collateral ratio.
Stage 3: Establish Incentive Programs
Collaborate with Meridian to create tailored incentive campaigns aimed to boost your network’s Total Value Locked (TVL) and enhance USDMs adoption within the network ecosystem.
Stage 4: Liquidity Bootstrapping
Provide initial liquidity to enable USDM to be tradable from the get-go.
Stage 5: Collaborate on Co-Marketing
Partner with Meridian to launch a joint marketing campaign that will effectively raise awareness for USDM within your blockchain ecosystem.
Technicals Brief
State of Development:
- Live on Base Mainnet for 3 months
- Expanding our service to other promising networks (such as Metis)
- Over the coming few years we aim to build USDM into the most secure, decentralized liquidity layer available across all prominent ecosystems in the space.
Use of on-chain primitives:
- Chainlink/DIA oracle
- LayerZero for bridging MST (the platform’s reward token)
Revenue:
- We charge a one-off borrow fee when users initially mint USDM tokens.
Contract addresses (Base) -
USDM: 0x5e06eA564efcB3158a85dBF0B9E017cb003ff56f
MST: 0x2F3b1A07E3eFb1fCc64BD09b86bD0Fa885D93552
Sourcify Links:
Since our contracts are direct forks of Liquity, we have not conducted independent audits. Nevertheless, it’s important to note that Liquity contracts have undergone extensive audits and have been thoroughly tested in real-world scenarios.
Metis Liquidity Expansion
Network liquidity can be significantly expanded using just $METIS through the creation of a METIS/USDM pair.
Metis User Growth
Incentivised USDM staking can enhance stability and drive demand for METIS from new investors
Deadlines and Milestones:
Deadlines:
- Deployment on mainnet within 4-6 weeks after approval.
Milestones:
- Milestone 1: Deployment and testing of contracts
- Milestone 2: Integration of oracle service (DIA or Chainlink)
- Milestone 3: Deployment on mainnet and integration with UI
