🤝 Ethereum, meet MAI!

A brief introduction to the MAI stablecoin

So what type of stablecoin is MAI?

  1. Deposit Collateral
  2. Mint MAI at 0% interest
  3. Use your MAI and manage your debt position

Isolated risk — Separation of collaterals and users

Isolation of funds on QiDao brings new levels of safety for users. Most major lending markets suffer from a lack of sufficient isolation, pooling together all users deposited liquidity to be lent out. This commingling of funds presents a risk if one collateral type in a pool experiences extreme volatility, exposing users to others’ bad debt.

Collateral risk

Backed by over 70 collaterals and minted on 12 blockchains, MAI is one of the most decentralized and diversely backed stablecoins in all of DeFi. A diverse set of assets helps to ensure that MAI is never over-exposed to any one particular asset, and is therefore less likely to experience scenarios where MAI would find itself undercollateralized due to extreme changes in the value of any single asset. Users can use static tokens like ETH and CRV or exotic interest bearing assets collateral such as Beefy, Yearn, and AAVE receipt tokens.

  • Accurate pricing: Mai Finance only accepts assets as collaterals that have Chainlink Price Feeds. These price feeds are critical as they help secure underlying collateral calculations by providing high-quality, decentralized market data that’s resistant to API downtime, flash crash outliers, and data manipulation attacks that make reliable operations possible.
  • Asset Risk analysis: Following QIP111, in order to add new collateral types there must be a public risk assessment performed by the community, determining the risk profile of an asset and a minimum collateral to debt ratio.
  • Governance insight into new deployments: all new vault and oracle code are approved by the DAO before vaults are launched.
  • Vault size limits: caps the debt size that each individual vault can have to keep them under acceptable risk parameters.

Native and fungible

MAI can be bridged and traded on over 20 different chains, making it the most cross-chain decentralized token. It operates under a canonical bridging system, unifying MAI across all chains to use the same version. This eliminates the systemic risks of having bridges minting their own versions and facilitates interoperability to help users use the same MAI among different chains and dApps.

Peg Maintenance

Assumed debt value

When users mint MAI, their debt is denominated in MAI, not USD. This means that they can always pay off $1 of debt by repaying 1 MAI. MAI loans do not charge interest; instead, they have a single, .5% fee upon repayment of the debt. Users can keep MAI loans open for as long as they want. Because there is no time limit on the loan, users are encouraged to repay the loans when MAI trades below $1. This arbitrage opportunity lets users buy MAI for less than $1 and repay the loan valued at $1. The incentive to buy MAI for repayment when trading below the peg increases demand, which pushes MAI back to the peg. On the other side of the peg, if users see MAI trading above the peg, they are encouraged to mint MAI from their vaults and sell it for a premium.

Debt Ceilings

Debt ceilings are the maximum amount of MAI that can be minted for each collateral type. This helps QiDao not be beholden to any single collateral type. Constant on-chain liquidity monitoring is maintained for all collaterals and chains QiDao is on. This monitoring helps track the onchain liquidity of an asset to make sure that the MAI debt against that asset does not become too large to liquidate easily. This collateral monitoring and diversity reduces the overall systematic risk of the protocol greatly, and ensures that if a collateral token price drops greatly, the protocol and MAI can remain solvent. The debt ceilings also protect against large amounts of MAI being minted and entering the market (hyper borrowing), which could trigger a depegging event. If demand for MAI remains sustainably high, the protocol can gradually raise the debt ceilings for each collateral type.

Liquidations

As mentioned previously, liquidations are key for any overcollateralized stablecoins protocols to avoid bad debt and remain solvent. Liquidation is the process of selling collateral and repaying debt to make sure that there is always enough collateral backing MAI from a vault.

Interest bearing Stable Leverage

When the peg of MAI is above $1, the protocol will increase the debt ceilings for interest bearing stable vaults. This is because the low risk and high loan to value ratio of stable collaterals make them attractive for high leverage, where the new MAI is sold for more ib stables and vaults are quickly depleted. Since users can earn much higher APYs than the minting fee and liquidation risks are close to zero, the debt ceilings fill up, increasing supply of MAI and helping bring peg back down to $1.

Historical Analysis

Future Outlook

After months of building one of the largest and most cross chain stablecoin protocols in DeFi, QiDao is coming to Ethereum. With its decentralized nature, overcollateralized backing, and strong peg mechanics, MAI should be a staple in every defi users stable holdings.

New vaults will be released in the next few days!

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