QIP218: Onboard USDM PSM on Ethereum Layer 2s

Summary

The goal of this proposal is to approve USDM as collateral to mint MAI via a PSM vault on all Ethereum Layer 2s where available. USDM is a yield-bearing stablecoin issued by Mountain Protocol.

Abstract

This proposal builds on the PSM idea from QIP215 on Base, where MAI tokens can be minted 1:1 against approved collateral & yield from those assets is earned by the protocol as revenue. wUSDM on Layer 2s is a wrapped rebasing asset (4626 vault token), similar to wstETH, that receives rewards from Mountain Protocol, paid in USDM, currently at 5% APY. USDM is a payment token, with Reserves composed solely by short-term US treasuries held by Mountain Protocol. The token is bridged to Layer 2s using official L2 bridges.

With $140M+ USDM in issuance, USDM is the largest permissionless RWA product https://dune.com/steakhouse/tokenized-securities

Here are third party reviews of USDM: LlamaRisk https://cryptorisks.substack.com/p/asset-risk-assessment-mountain-protocol BlueChip https://bluechip.org/coins/usdm

Motivation

• wUSDM has risen in popularity, namely on Manta, where there is over $70M wUSDM bridged.
• With Zero DEX launching on zkEVM, QiDao has an opportunity to initiate demand for MAI on zkEVM. MAI needs a way to be minted that strictly enforces its peg while initially liquidity levels are low. This minting method should cover the cost of incentivizing liquidity.

Specification

Rationale

ROI on minted MAI

Onboarding USDM as collateral in a PSM will earn QiDao around 5% APR on every MAI minted via this method. The unit cost of MAI on Layer 2s should be very low cost of capital for incentivizing liquidity on available ve3,3 DEXs. This dynamic lends for a profitable opportunity for the DAO to mint have MAI be minted with USDM.

Low barrier to mint

A PSM creates a very low barrier for users to mint MAI, as users don’t need to enter into a collateralized debt position against volatile assets. This should allow for MAI to bootstrap deep liquidity pools for MAI lending to occur.

Peg

Being fully redeemable, MAI minted via the PSM will see much less fluctuations than MAI that is not redeemable. This will help build confidence for holding MAI while in its initial growth period on zkEVM.

Technical Specification

PSM specifications

• The ability for users to deposit whitelisted tokens and receive MAI in return.
• A fee setter for deposit fees and withdraw fees
• Limit the deposit of collateral to whitelisted strategies, which require Guardian signatures for implementation and QIP votes for approval
• The ability to retain accrued interest earned by the protocol
• Withdraw functions for retained interest to be collected by treasury
• Epoch-styled withdrawals
• wUSDM to be priced on its redemption rate