Add wUSDM Market to Moonwell on Optimism

Summary

This proposal suggests adding a Mountain Protocol wrapped USDM (wUSDM) market to Moonwell on Optimism. This recommendation comes as an opportunity to add a USD-denominated yield-bearing asset fully backed by US Treasuries, hence creating a more capital-efficient lending market that will ultimately bring great benefits to both Moonwell and its users.

This initial post aims to gather feedback based on community input, updating any needed information. Once the Snapshot vote is conducted and if successful, we will engage with Gauntlet to perform the risk assessment and obtain the initial risk parameters.

Motivation

USDM, the first product offered by Mountain Protocol, is a regulated, permissionless, and yield-bearing stablecoin, fully backed by US Treasuries. It is designed to maintain a consistent value pegged to the US dollar, making it a reliable digital asset for transactions and savings. Peg is kept by having primary customers buy/sell USDM at $1 and by the US Treasuries held as collateral for USDM on a bankruptcy remote SPV: USDM Reserves Ltd.

USDM follows a proven model used by all the well-known stablecoins, rewarding holders daily through a rebasing mechanism, currently at a 5% APY. The wrapped USDM (wUSDM), on the other hand, is built as a value-appreciating token that ensures its price increases reflect all the rewards that USDM has generated over time. This token was created to address integration challenges with protocols that were not built for rebasing assets.

Mountain Protocol is a regulated entity by the Bermuda Monetary Authority (Class F license #202302512). This regulatory oversight ensures a high-standard of compliance and safety for USDM holders. Mountain Protocol has received funding from prominent investors in the crypto space, such as Coinbase Ventures, Multicoin Capital, Castle Island Ventures, among others.

Benefits to the Moonwell Community

• Borrowing at a discounted rate: Using wUSDM as collateral would allow users to reduce their net borrow rate thanks to its native yield (currently 5% APY).
• Leveraged exposure to wUSDM yield: Users would be able to loop and leverage their lending of wUSDM by borrowing other non-yield-bearing tokens which would be automated with other integrations such as Contango, increasing Moonwell TVL and revenue.
• Market Diversification: wUSDM would be both the first RWA and yield-bearing stablecoin to be onboarded into Moonwell, expanding Moonwell’s offerings to users while also attracting USDM holders seeking for an added yield. This would additionally help Moonwell align with Optimism's intention to expand activity around yield-bearing assets.

Following on from the last item, it is worth noting that USDM has been whitelisted at inception for the ‘Optimism Dominance in Yield-Bearing Assets’ campaign, which includes a Mission dedicated specifically to protocols including YBAs as collateral. This means that a wUSDM market could have OP incentives subsidizing both lending and borrowing of wUSDM, which would also give more room for looping and leveraging to users.

Resources and Socials

Mountains Protocol Website Docs Twitter LinkedIn One pager Deck Github Terms and conditions

Proposal Author Information

Martin Carrica - CEO and Co-founder of Mountain Protocol

Telegram: @mcarrica

Twitter: @mcarrica

Linkedin: Martin Carrica - Mountain Protocol | LinkedIn

Julian Marcos - Head of DeFi Partnerships

Telegram: @julimarcoz Twitter: @julimarcoz

Market Risk Assessment

Market Cap: US$ 55.2M total (US$ 5M on Optimism)

Maximum: US$ 156.1M (April 2nd, 2024)

Minimum: US$ 43.2M (August 7th, 2024)

Volatility: N/A. USDM price has been $1 with the expected volatility around $1 before arbitrage opportunities offset gas costs.

Total DEX Liquidity Across all Chains: 40.6M

Main Pools by Liquidity on All Chains: DeGate on Ethereum USDM, total liquidity of US$ 10M

Curve sDAI/USDM pool on Ethereum, total liquidity of US$ 14.5M

Curve USDM/USDC pool on Arbitrum, total liquidity of US$ 8.1M

Curve USDM/USDC pool on Optimism, total liquidity of US$ 5M

Curve USDM/USDC pool on Polygon PoS, total liquidity of US$ 1.2M

Curve USDM/3crv pool on Ethereum, total liquidity of US$ 820k

Curve USDM/USDC pool on Base, total liquidity of US$ 510k

Velodrome wUSDM/wstETH on Optimism, total liquidity of US$ 450k

Uniswap v3 wUSDM/wstETH pool on Arbitrum, total liquidity of US$ 82k

Security and Decentralization

Token Addresses (same on all chains): USDM / wUSDM (ERC-4626)

Age of token: 387 days (279 on Optimism)

Amount of holders: 3289 (113 on Optimism)

Number of transactions to date:

USDM: Ethereum: 7,628 / Optimism: 2,506

wUSDM: Ethereum: 4,306 / Optimism: 1,842

Privileged Roles in the Token Contract: Docs

Admin: Mountain Protocol uses the Admin role to grant and revoke roles (DEFAULT_ADMIN_ROLE, MINTER_ROLE, BURNER_ROLE, BLOCKLIST_ROLE, ORACLE_ROLE, UPGRADE_ROLE, PAUSE_ROLE) using OpenZeppelin Defender + safe multisig approval (4/7): 0x313d5B7EfDcd84e8a52D425282B03860e9354d74. Details regarding the signers are not shared due to OpSec reasons.

Owner: The address assigned as the owner during the contract initialization. This address is given the DEFAULT_ADMIN_ROLE and can manage other roles.

Minter: The MINTER_ROLE can mint new tokens. Addres assigned this role (Fireblocks MPC vault) can create new tokens by calling the mint function.

Burner: The BURNER_ROLE can burn tokens from specific addresses. Address assigned this role (Fireblocks MPC vault) are allowed to manage the destruction of tokens to reduce the total supply.

Pausable: The PAUSE_ROLE allows accounts to pause and unpause all token transfers. This functionality is inherited from PausableUpgradeable.

Blacklist: The BLOCKLIST_ROLE has the ability to block and unblock addresses. Blocked addresses cannot send tokens, and only those with this role can modify the blocklist.

Fallback function: No fallback function is defined in this contract.

Fixed supply: No, the supply is not fixed. The contract allows minting and burning, so the total supply can increase or decrease.

Upgradability: Yes, this contract uses the UUPSUpgradeable proxy pattern. Only addresses with the UPGRADE_ROLE can upgrade the contract. Role has not been assigned to any address. If it were, it would be exclusively for the Mountain Protocol team. Access is granted by Admin (4/7 multisig): 0x313d5B7EfDcd84e8a52D425282B03860e9354d74. Full contract is upgradable with no timelock, similar to other centralized stablecoins and all upgrades are first tested on testnet before formal upgrades. We do not expect upgrades to the SC given its simplicity.

Rebasing: This contract implements a dynamic supply mechanism where balances are represented in shares. The token uses a rewardMultiplier to convert between shares and tokens, which could be seen as a rebasing-like mechanism. wUSDM is a value-appreciating token that has a deterministic price path based on the USDM rewards rate, utilizing a tokenized vault standard ERC-4626.

Wrapped: Yes, wUSDM is the wrapped version of USDM.

Test Suite with Code Coverage: 1 / 2 / 3

Chronicle Oracle Price Feed - We will also be providing a Chainlink Price Feed as soon as it goes live in the upcoming days (currently under review).

Audit Reports

Bug Bounty Program

Monthly Attestations

Risk Assessment (BlueChip)

Risk Assessment (Steakhouse)