Overview of mStable

Written by Nikola J.
Updated 3 weeks ago

Protocols currently integrated into Smart Savings include mStable, Yearn and Convex. This article will provide an introduction to mStable.

mStable

One of the main products of mStable protocol is their mUSD stablecoin. mUSD is backed by a basket of other stablecoins (DAI, USDC, USDT, and sUSD).

There are 2 options for earning yield via mStable on DFS, and both of these include depositing DAI, USDC and/or USDT and receiving minted mUSD.

After getting mUSD, users can choose to deposit either to mStable’s Save contract to receive interest-bearing imUSD or to further stake imUSD into the Vault, which would allow them to earn additional MTA rewards. Here is the whole process:

  1. Deposit supported stablecoins: DAI, USDC, or USDT.
  2. mUSD is minted against the deposit. You'll receive more mUSD if you deposit an asset with a lower mUSD basket share than other assets, and vice versa.
  3. Deposit mUSD into the Save contract.
  4. imUSD is minted as the proof of deposit in the Save contract. imUSD is an interest-bearing token that earns interest from Compound/Aave and from swap fees generated on mStable, COMP/stkAAVE rewards are auto-compounded back in the Save contract.
  5. Stake imUSD into the Vault to receive MTA rewards (claimed manually on SS).

Withdrawals are available in all supported assets (you are not obligated to withdraw the assets you've initially deposited), those being DAI, USDC, USDT or mUSD. You will receive more if you withdraw/choose the asset with a higher mUSD basket share than the others (because of the pool rebalancing), and vice versa.

mStable has a 0.02% withdrawal fee applied only in case users are exiting mUSD (withdrawing a non-mUSD asset: DAI, USDC, or USDT). In case the withdraw asset is mUSD, there is no fee.

There is a vesting period for 4/5 of MTA rewards (26 weeks) while staking imUSD in the Vault. The other ⅕ is claimable immediately.

Deposit and withdraw restrictions: Each asset within the mUSD basket has a set of max and min weights. Currently, these are set to 5% and 50%. This means that no single asset could make up more than 50% of the basket nor less than 5%.

There is a very low risk of impermanent loss since all assets are used for lending on Compound/Aave. Furthermore, users are exposed to mUSD which represents an additional hedge from the de-pegging risk of underlying stablecoins, by being backed with a basket of different stable assets.

There is no performance fee.

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