Mori Finance: A competitor on the LSDFi track with both stable assets and leveraged assets

As the ETH pledge rate rises to close to 20%, ETH's various liquid staking derivatives (LSD) have become an important asset on the chain, and LSDFi has also become an important part of the Ethereum ecosystem. Pendle, Instadapp, etc. The project also ushered in its second spring.

Stablecoins are an important track in DeFi and LSDFi. Lybra Finance, Prisma Finance, Raft, etc. all plan or have issued their own stablecoins. Recently, Mori Finance, a native stable asset DeFi protocol on Ethereum, has also launched a test network, which PANews will introduce below.

A native stable asset protocol built on ETH and LSD

Stablecoins have rich application scenarios both on-chain and off-chain in the encryption market. Under the pressure of security issues and supervision, the native and completely decentralized stablecoins on the chain are a direction that everyone is striving to pursue. In a situation where DAI's collateral in MakerDAO includes more and more RWA (real world assets), Liquity's LUSD is an option. In addition, stablecoins such as RAI that are not fully anchored to the US dollar are also favored by Vitalik and others.

Mori is a native stable asset protocol based on ETH and LSD, which can divide collateral into low-volatility stable asset ETHS (ETH Stable) and high-volatility derivative asset ETHC (ETH Coin). Similar to RAI, ETHS is also a stable asset issued based on ETH and not fully anchored to the US dollar.

Users can decide on their own whether to split the collateral into ETHS and ETHC, or redeem ETHS and ETHC as collateral. Initially, the protocol will only support stETH as collateral, and will expand to other derivatives later.

Collateral is graded into ETHS and ETHC

Mori can divide the collateral into low-volatility ETHS and leveraged ETHC. Users with different risk preferences can choose to hold different proportions of ETHS and ETHC, so as to achieve investment with different risks and returns through a single collateral Strategies to meet the needs of users with different risk preferences.

In any case, the sum of the value of ETHS and ETHC held by the user is equal to the value of ETH in the collateral. In the beginning, the price of both ETHS and ETHC was set at $1. Among them, the fluctuation of ETHS is set to be 10% of the fluctuation of ETH price. If the price of ETH increases by 10%, then the price of ETHS increases by 1%, and the remaining increase is absorbed by ETHC. The price of ETHC can be obtained by subtracting the value of ETHS issued from the value of ETH in the collateral, and then dividing by the number of ETHC.

ETHS is similar to a low-volatility stable asset. It can be regarded as a stablecoin-like asset backed by ETH, with minimized volatility, and can obtain income through subsequent ETHS/USDC LP mining.

ETHC is a perpetual token that is bullish on ETH. This is a long position in ETH. There is no mandatory liquidation process, but under special circumstances, the leverage will be reduced through the emergency control mode.

Risk Management

Since Mori generally does not limit the ratio of users to mint ETHS and ETHC, the agreement must ensure that the price fluctuation of ETHS is 10% of ETH. In the upward trend, there is no problem with this mechanism, and the additional increase will be absorbed by ETHC; but in the downward trend, if the proportion of ETHS is too high, the leverage of ETHC is too high, and the volatility is too high, ETHC may not be able to fully absorb the additional decline in ETH Case. Therefore, it is necessary to limit the ratio of ETHS and control the leverage ratio of ETHC within the range of 1 to 4 times.

When the mortgage rate (ETH value in collateral/issued ETHS value) is <130%, the minting of ETHS will be prohibited, and the redemption of ETHS, the minting of ETHC and the reduction of redemption of ETHC will be incentivized through fees.

When the mortgage rate is <120%, the insurance fund will also be used to purchase ETHS in the secondary market and redeem it for ETH.

Has launched the testnet and obtained OG status through early participation

According to the white paper on the official website, the native token of Mori Finance is $MORI, and the total amount of tokens is 1 million. The protocol can charge from the minting and redemption of ETHS and ETHC, and can also obtain a part of the fee from the pledge income of ETH.

Mori Finance is currently on the testnet, and users who participate in the testnet (submit feedback through the form) and content creation can obtain OG status.

According to the roadmap in the white paper, the project plans to launch on the Ethereum mainnet after completing the audit in the third quarter of this year, and then participate in Curve War and support more LSD assets; it is expected to launch Layer 2 and complete cross-chain in the fourth quarter of this year Deploy and issue derivatives based on ETHS and ETHC.

Members of the Mori team remain anonymous at present, but claim to have been in charge of the wallet business of licensed and compliant exchanges from 2018 to 2019, and have been engaged in DeFi research and product development since 2020. Inspired by the thinking of Curve's liquidity ecological construction and the f(x) Protocol incubated by AladdinDAO, the team built Mori Finance. Mori referred to f(x) as a co-founder, and also shared the relationship between the two in a tweet.

Summary

Mori divides the volatility of ETH into low-volatility assets ETHS and high-volatility derivatives ETHC to meet the needs of users with different risk preferences. The fluctuation of ETHS is set to 10% of ETH, and other fluctuations are absorbed by ETHC.

At present, the project has been launched on the test network, and the OG status can be obtained by participating in the test. The project plans to launch the Ethereum main network in the third quarter of this year and participate in Curve War.