Towards Mento 2.0

Fellow Celo-Enthusiasts, we would like to give a quick update on the progress made towards a new version of Mento - the stability protocol behind our beloved cStables. This post aims to give an overview of the community feedback and insights the Mento team has gathered, the conclusions that the team has drawn and the workstreams towards Mento 2.0 that now exist. More detail than could fit in this forum post is provided in the related presentation at Celo Connect and the accompanying Mento 2.0 Simulation Github Repo which we open-sourced today!

But first: Why do we even need an improved Mento? Since launch in June 2020, Mento is working as intended - we are seeing short-term price fluctuations but no prolonged/significant depegs have occurred. The stakes for Mento keep on rising though with every person entering the ecosystem. Anticipating potential future difficulties with the goal of improving long-term stability and black-swan robustness is a necessity given the intent of solving real-world problems of real-world people.

Increasing stability further should however not be the sole focus. The total supply of cStables is still tiny compared to stable assets like USDC, USDT or UST which suggests that changes need to be made to better support sustainable growth of cStables such that mission aligned projects and use cases can scale. Also, with Celo going all-in on ReFi (see this post by Packy McCormick for a beautiful overview), the question arises: What can be changed about Mento such that it better materializes the principles of ReFi?

After gathering feedback from a wide range of community members on all of the above, the following core goals in the quest for a new Mento 2.0 design crystallized:

  1. Improve long-term stability & black-swan robustness
  2. Make Mento more participatory and improve democratization of profits
  3. Allow large, cost-efficient mints and better support sustainable growth
  4. Leverage interoperability solutions and further decentralize the reserve
  5. Better support natural capital reserve assets

The Mento team brainstormed and analyzed a range of potential designs and came up with a set of proposed innovative feature additions that seem like a good starting point for addressing most of the identified goals in a holistic manner. The proposed additions are:

  • guaranteed collateral via collateral providers
  • guaranteed interactions via interaction providers
  • borrow-and-repay minting (similar to DAI) but with liquidations resulting in Mento reserve inflows instead of auction-based fire sales

The first two proposed additions extend the well-known concepts of liquidity pools and protocol owned liquidity to other sources of potential stability related problems, that is (missing) collateral and (missing) interactions. The third, borrow-and-repay minting, aims to provide the upsides of a DAI-type minting mechanism while avoiding the major downsides around liquidity and participation risk.

With the broader workstreams of reserve decentralization and natural capital backed reserve assets, six overall workstreams (with dedicated points-of-contact) emerge. Four of them that can be considered somewhat separate building blocks of Mento 2.0

  1. Buy-and-sell improvements (Mento1.0) - POC: Nadiem Sissouno ([email protected])
  2. Borrow-and-repay minting - POC: Bogdan Dimitru ([email protected])
  3. Collateral providing - POC: Roman Croessmann ([email protected])
  4. Interaction providing - POC: Pedro Grojsgold ([email protected])

whereas the remaining two are horizontal efforts that relate to all of the above building blocks

  1. Reserve decentralization - POC: Tobias Kuhlmann ([email protected])
  2. Natural capital backed reserve assets - POC: Slobodan Sudaric ([email protected])

If you are interested to learn more about the mechanics of these building blocks and/or would like to contribute to any of the above workstreams, please join our new dedicated Mento discord server, take a look at our Github repository and/or join our biweekly Mento community calls starting next week Wednesday, 4pm CET (link will be posted below)!

Thanks and see you around!
Roman

15 Likes

Hey all, the first bi-weekly Mento Community Call will take place tomorrow from 4:00-4:45 pm CET. Please use the following link to join: meet.google.com/zwi-tveo-iwx
Looking forward to seeing many of you there! Loads to talk about, especially given the current Terra situation.

Roman

8 Likes

Lucky for us we have a great live example of what doesn’t scale (UST), and an example of what does scale (DAI).

Somebody else paid the $B price tag to teach us what not to do :yum: