This blog post on Mento is based on the talk “Planetary Inclusion: Natural Capital & Sustainable Stable Assets” by Markus and @Slobodan on Day 1 at Celo Connect. We would like to engage the community in a broader discussion about the future of Mento.
Mento’s mission is to create a world in which the economy is denominated in local, natural capital-backed stable assets that strengthen communities, preserve the environment, and help to bring prosperity for all.
Why stable assets?
Low volatility removes a barrier for using digital assets for remittances, payments, saving, lending and borrowing. The global remittance market size alone was valued at $702 billion in 2020, and it is constantly growing, projected to reach $1,227billion by 2030. The transaction value of the gig economy is estimated at $248billion, the mobile point-of-sale market $1.4 trillion, and the peer-to-peer lending market at $34billion. Mento aims to serve all these markets with sustainable and local stable assets.
Why decentralized, mobile-first and multi-asset?
The demand for digital stable assets is constantly increasing. Fiat-backed stablecoins reached a market cap of more than $200bn despite ongoing concerns about their transparency, degree of decentralization, and quality of the collateral. While the majority of existing stable assets is Dollar-based, increasing adoption among the 6 billion mobile phone users around the world is best-served by a family of sustainable mobile-first stable assets. To enable local economies to grow in order to regenerate global ecologies, local sustainable stable assets are needed. And to increase trust and transparency we believe in decentralized algorithmic local sustainable stable assets.
What is new?
Together with the community, the team working on Mento aims to improve the existing Mento protocol so that it can achieve its mission. Mento’s home is Celo, - a mobile-first layer 1 with the mission to build a financial system that creates the conditions for prosperity for everyone. And in the same way that Celo can be the home to other stable assets, Mento assets could in future potentially also live on other blockchains. With the updates on Mento we would like to be able to issue new stable assets faster, increase the minting ability (reduce slippage), and build new participatory features that increase the liquidity and usability of the assets in future, and we will keep posting more details on these proposals here.
Mento as a platform lives on top of Celo and is currently governed by the same governance token. But Celo as a layer 1 is much more than just the base for stable assets. It enables mobile-first DeFi for everyone and makes financial tools accessible to anyone with a mobile phone. The Celo community and governance is focussed on layer 1 adoption for all of these use cases.
By distinguishing the stability platform Mento from the layer 1 Celo, we believe we are separating product, brand and mission in a clearer way. Mento supports Celo’s mission to create the conditions for prosperity for everyone with local, natural capital-backed stable assets that strengthen communities and preserve the environment. We can even imagine a future in which Celo and Mento governance are separated to enable an improved incentive-alignment for cross-chain Mento stable assets in governance decisions.
The Mento team together with the community focuses on stability platform development and adoption, as well as addressing and incentivizing several areas within a new version of Mento:
- Black-swan event robustness
- Additional participatory features
- Better minting ability, reduced slippage and increased liquidity
- A more decentralized and natural capital backed reserve
- Higher transparency and more community participation
For this we aim to make Mento the most sustainable stable assets with respect to three dimensions:
Mento stable assets are economically sustainable as they are stable, liquid and participatory.
The current version of Mento has a market-based buy-and-sell feature for stability. A key feature of Mento is the constant balancing of supply and demand for stable assets to keep the price stable. cUSD, cEUR and cREAL are already live on Mento and the team has been working hard to make it easier and faster to add more stable assets.
A new version of Mento will be more participatory, as it will not only allow users to buy-and-sell against the reserve but also enable users to borrow Mento stable assets against the reserve, earn by becoming part of the reserve, earn by participating in a novel decentralized arbitrage system and earn by contributing to improvements to stability protocol.
These features will allow easier and larger mints and improve long-term stability through a participatory reserve.
Technically sustainable as they are secure, scalable & decentralized.
The Mento stable assets are a unique combination of crypto-collateralized assets and a seigniorage-style market based mechanism. This mechanism is fully based on governable smart contracts and therefore decentralized and transparent.
The new Mento aims to increase decentralization by conducting reserve rebalancing on-chain, and by being able to also be used on other layer 1s via interoperability solutions. Still, Celo makes the most sense as a layer 1 for stable assets with its low gas fees, fast blocktime, mobile-first features, the phone number link and the feature that users can pay for gas in stable currencies, making it the ideal home for Mento. Interoperability of the stable assets is however key for global adoption.
Mento stable assets are environmentally sustainable as they are nature backed.
In this forum post (link) the community discusses regenerative finance and the idea for natural capital backed assets. This is a powerful idea. If, as a society, we were to denominate our economic activity in natural capital backed currencies, any economic growth – any increase in money in circulation, would lead to a growth in preserved natural resources.
The new Mento builds on this idea and provides for a decentralized way to link demand for Mento stable assets with the protection and preservation of natural resources. By introducing an impact-focused reserve mechanism, Mento allows the community to decide how to maximize environmental impact by making available funds for allocation towards verified and impactful natural capital backed assets to use as reserve assets. The Mento impact reserve will receive funding from the rebalancing of core reserve assets, Mento transaction fees and direct user deposits, and allows users to participate in the asset selection and fund release process.
The impact reserve will not only contribute towards the preservation and restoration of natural capital (further impact areas can be added in the future) but will also add valuable diversification benefits to the Mento reserve system, ultimately backing Mento stable assets. Natural Capital held by Mento’s impact reserve is subject to a tiered liquidation policy, holding natural capital backed assets as long as possible to maximize impact but divesting and rebalancing its assets to boost overall Mento stability if necessary. Developing market places for natural capital assets will play a crucial role in this process and will contribute towards the decentralized rebalancing of Mento reserve assets.
This process won’t happen overnight and it will take some time to go from experimentation to mature natural capital markets. With CGP 31, we entered the experimentation phase.We hope with the help of the Climate Collective we can reach the goal of backing Mento stable assets with tokenized natural capital and to build out a Regenerative Finance ecosystem.
What’s next?
We would like to use this forum post and the discussions at Celo Connect to engage the community on the future of Mento. All questions or discussion points that could not be answered at Celo Connect can be discussed here. The Mento team commits to working more in the open closely together with the community. So please let’s discuss Mento - Sustainable Stable Assets for the next billion users.
And if you are interested to work with us on the future of Mento, please get in touch, we would be excited!