[MIP-10] The Evolution: Migration to Unified Liquidity Lending

Author[s]: Mendi Core Team

Title: The Evolution: Migration to Unified Liquidity Lending

Type: Mendi Improvement Proposal

IMPORTANT NOTE: Due to character limits, we couldn't include the full proposal here.

Visit forum post for complete version: https://gov.mendi.finance/t/mip-10-the-evolution-migration-to-unified-liquidity-lending/242

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We are embarking on the next chapter of our protocol’s journey, transitioning from a single-chain solution to a Unified Liquidity Lending protocol across Ethereum mainnet and Layer 2s. With this evolution we are aiming to fill in a significant role in DeFi, that expands beyond the Mendi we know today.

Our current single-chain lending protocol has served us well as a foundation, reaching peak TVL of $110+ million and more than half a million users. However, the next phase of growth requires a more ambitious, ground-up re-imagination of a multi-chain solution. To meet the needs of a decentralized world where liquidity and innovation span across Ethereum mainnet and Layer 2s, we will migrate to the unified liquidity protocol that leverages the strengths of our current model while introducing the next generation of lending. The single-chain solution we have today will become the building block of a unified lending protocol that enables us to operate on a much larger scale.

This evolution requires us to grow on multiple fronts to allow the protocol to rise to the challenge and succeed in its next chapter:

• Team: To deliver on the cutting edge tech required for a unified liquidity lending protocol that leverages ZK technology for security, we have been expanding our team and will continue to do so. A larger team, with more diverse skills, particularly expertise in ZK, is enabling us to deliver the complexities of a multi-layered protocol while maintaining high security standards and a seamless user experience.
• Strategic Investment: The vision of a unified future is a novel one that must be pioneered, and investments are a key fuel to make it happen. This capital will enable team expansion and support day-to-day operations, allowing us to further attract top-tier talent and execute a go-to-market strategy that drives significant user adoption. Additionally, it will help fund security measures, such as extensive audits and bug bounty programs. To honor the spirit of fair launch, we aim to first extend an exclusive opportunity to Mendi’s most loyal supporters to take part in this pivotal funding event, through a Governance Round. While future strategic investment opportunities are explored.
• Tokenomics: The transition to the unified liquidity lending protocol calls for an enhancement of our tokenomics to effectively attract liquidity, so users benefit from deep pools and efficient markets. As we evolve from a single-chain to a multi-chain environment, it is essential that our token model is designed to maintain competitiveness across all networks. Additionally, the updated tokenomics framework will pave the way for strategic investment, a critical element for paving initial growth, development and audits.
• Brand: Alongside these technical and operational upgrades, we’re launching a new brand that better captures our grander vision and more ambitious goals. This fresh identity marks our growth from a single-chain protocol to a leading force in DeFi, committed to pioneering a unified future. With zkProofs at our core, we’re set to bring secure, scalable, and easy to use solutions to users - all embodied in this new identity.

Creating a Unified Future, powered by zkProofs

(Note: Section shortened due to character limit. Visit the forum for details).

Our Unified Liquidity Lending protocol (detailed in this litepaper) is going to redefine capital efficiency and user experience in DeFi:

• Unified Liquidity across Ethereum and L2s
• Enhanced Capital Efficiency
• Secure Protocol Interoperability with zkProofs
• Simplified Interactions Across Chains

We envision a DeFi ecosystem where liquidity is truly global, accessible, and unfragmented. With zkProofs as the backbone, our protocol isn't just aiming to unify liquidity across Ethereum and Layer 2s but also to pioneer a new standard for secure, scalable, and composable financial services. Our ultimate goal is to become a cornerstone of the DeFi ecosystem, fostering liquidity, efficiency and accessibility.

Roadmap

(Note: Section shortened due to character limit. Visit the forum for details).

Our roadmap outlines a path to bring the protocol’s vision to reality, with milestones aimed at ensuring steady, scalable growth:

• The Governance Round (Q4)
• Testnet (Q4/Q1)
• Mainnet Launch (Q1)
• Expansion to More Layer 2s
• Dynamic Enshrined Risk Management System
• Leverage DeFi Trading

New Era, New Tokenomics: Powering Growth

To fully realize the potential of our transition to a unified lending protocol, we must introduce new tokenomics that enable us to secure deep liquidity, drive growth, and remain competitive across all chains.

Liquidity Migration

As part of the protocol upgrade, we are committed to migrating existing Mendi liquidity to the unified liquidity protocol, which will include supplies and borrow positions. To ensure a smooth transition and incentivize participation, we are implementing a double reward system that will bootstrap the protocol’s liquidity from day one.

Users who migrate their positions will receive double incentives:

1. $MENDI Rewards
2. Points from the Unified Liquidity Lending protocol

These incentives will ensure that we retain a robust liquidity base and pave the growth from the get-go.

Token Migration

The migration focuses on long-term value creation, ensuring $MENDI holders not only retain significant influence in the protocol but also directly benefit from its success as it scales.

Why We Need a New Token?

Mendi's tokenomics was designed for a native lending protocol within the Linea ecosystem. The Unified Liquidity Lending protocol requires a new token for the following reasons:

• Incentivizing markets on several L2s and Ethereum
• Allocating funds for audits and security toolings
• Expanding the core team, including zk developers and account abstraction specialists
• Onboarding strategic investors, either in private fundraising or by following the large scale public sale
• Paying for ongoing infrastructure costs for off-chain components
• Expanding the community, new investors will be naturally more attracted to a new token

Allocation

The $New_Protocol_Token will have a total supply of 700 million, out of this 105 million is reserved for migrators.

The 105 million is going to be distributed to the Mendi community, excluding any core team wallets (addresses can be found through docs, at core team vesting claim contract; estimated ~10-11 million).

All of the non-circulating supply held in protocol contracts, protocol multisig, and Timelock contract will be removed from circulation by sending it to the 0x000 address (burn address).

This means that only the circulating supply will be used for migration.

The remaining part of the tokens will be dedicated to:

• Community Emissions
• Initial DEX and CEX liquidity
• Treasury
• Core team allocation - Subject to 6months cliff and 2 year vest from TGE
• Strategic Investment Allocation - Subject to 6months cliff and 2 year vest from TGE
  • Potentially slightly adjusted terms for Gov Round participants

Circulating Supply of New Token

At launch, the circulating supply of the New Token will include MENDI migrators and Season 1 airdrop holders. This means that current Mendi holders will have the most voice within the DAO that underpins future security of the Unified Liquidity Lending protocol.

In terms of % dilution the correct calculation is around 1:3.5, given that the estimated amount of $MENDI that is migrated is around 50 million.

Timing

The token migration will take place around the time on $New_Protocol_Token TGE, which will happen after the initial growth phase of the unified liquidity lending protocol has been concluded (we cannot determine the exact date, but estimated to happen somehwere 2025 Q2).

Until then $MENDI will remain tradable on the market. $MENDI holders will have the opportunity to upgrade their tokens for the new $New_Protocol_Token, at a fixed ratio.

Management of POL

Once the migration is complete, $MENDI will remain tradable, but as the protocol gradually withdraws protocol-owned liquidity (POL), the liquidity of MENDI on secondary markets will become less robust.

The USDC part of the POL will be moved to the treasury while the $MENDIs will be used as rewards for migrators who lock their tokens.

The Governance Round

To fuel our expansion, we are opening a Governance Round. Unlike typical closed rounds that cater only to VCs, we are making this opportunity available to the Mendi community.

The Governance Round is designed to empower our loyal MENDI stakers, giving them the opportunity to actively participate in this crucial funding event. This round allows stakers to invest in the protocol, gaining enhanced governance rights and helping shape the future of the protocol. While we remain open to exploring potential strategic investment opportunities in the future, our primary focus for this round is on strengthening and empowering our dedicated community members. To reward and reinforce the commitment of our community, the vesting period for participants in this round will be determined based on the amount of MENDIs staked.

With community involvement, our goal is to keep the governance truly decentralized, while ensuring that the protocol has sufficient capital to grow in a sustainable and secure manner.

FAQ

(Note: Visit forum for FAQ).