Mori Finance: LSDFi Competitor Balancing Stable and Leveraged Assets
Mori Finance competes with LSDFi by balancing stable and leveraged assets.
As the ETH staking rate approaches 20%, various liquidity staking derivatives (LSD) of ETH have become an important asset on the chain, and LSDFi has also become an important part of the Ethereum ecosystem, with projects such as Pendle and Instadapp ushering in a second spring.
Stablecoins are an important track in DeFi and LSDFi. Lybra Finance, Prisma Finance, Raft, etc. plan or have already issued their own stablecoins. Recently, Mori Finance, a native stable asset protocol on Ethereum, has launched its testnet. BlockingNews will introduce it in the following.
Native stable asset protocol built on ETH and LSD
Stablecoins have rich application scenarios in the cryptocurrency market both on-chain and off-chain. Under the pressure of security issues and regulatory pressure, a native, completely decentralized stablecoin on the chain is a direction that everyone strives for. In MakerDAO, as the amount of RWA (real-world assets) in DAI collateral increases, Liquity’s LUSD is an option. In addition, stablecoins like RAI, which are not completely anchored to the US dollar, are also favored by Vitalik and others.
Mori is a native stable asset protocol built on ETH and LSD, which can divide collateral into low-volatility stable assets ETHS (ETH Stable) and high-volatility derivative assets ETHC (ETH Coin). Like RAI, ETHS is also issued based on ETH and is an unstable asset that is not completely anchored to the US dollar.
Users can decide on their own to divide collateral into ETHS and ETHC ratios, or redeem ETHS and ETHC for collateral. Initially, the protocol will only support stETH as collateral, and will later expand to other derivatives.
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Collateral is divided into ETHS and ETHC
Mori can divide collateral into low-volatility ETHS and leveraged ETHC. Users with different risk preferences can choose to hold different ratios of ETHS and ETHC to achieve investment strategies that provide different risks and returns through a single collateral, meeting the needs of users with different risk preferences.
Under any circumstances, the sum of the values of ETHS and ETHC held by users equals the value of ETH in the collateral. Initially, the prices of ETHS and ETHC were set at $1. The volatility of ETHS is set to 10% of the ETH price fluctuations. If the ETH price rises by 10%, the price of ETHS rises by 1%, and the remaining increase is absorbed by ETHC. Subtract the value of ETHS issued from the value of ETH in the collateral, and divide by the number of ETHC to get the price of ETHC.
ETHS is similar to a low-volatility stable asset that can be seen as an ETH-backed stablecoin with minimal volatility and can generate returns through subsequent ETHS/USDC LP mining.
ETHC is a perpetual token that is bullish on ETH. It is a long position on ETH and has no mandatory liquidation process, but in special circumstances, it may reduce leverage through emergency control mode.
Risk Management
As Mori generally does not restrict the ratio of ETHS and ETHC that users can mint, the protocol must ensure that the price fluctuation of ETHS is minimized to 10% of ETH. This mechanism is not a problem in the upward trend, and the additional increase will be absorbed by ETHC. However, 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, it may happen that ETHC cannot fully absorb the additional ETH decline. Therefore, it is necessary to limit the proportion of ETHS and control the leverage ratio of ETHC within the range of 1 to 4 times.
When the collateral ratio (the value of ETH in collateralized assets / the value of issued ETHS) <130%, the minting of ETHS will be prohibited, and ETHS redemption will be incentivized through fees, while ETHC minting and redemption will be reduced.
When the collateral ratio <120%, the insurance fund will also be used to purchase ETHS in the secondary market and redeem it for ETH.
Early participation in the online test network to obtain OG identity
According to the official website white paper, the native token of Mori Finance is $MORI, and the total token amount is 1 million. The protocol can charge fees from the minting and redemption of ETHS and ETHC, as well as obtain a portion of the fee from the pledge income of ETH.
Mori Finance has now launched the test network, and users who participate in the test network (submit feedback through the form) and content creation can obtain OG identity.
According to the roadmap in the white paper, the project plans to complete the audit and go live on the Ethereum mainnet in the third quarter of this year, and then participate in the Curve War and support more LSD assets; it is expected to go live on Layer 2 in the fourth quarter of this year, complete cross-chain deployment, and issue derivatives based on ETHS and ETHC.
Mori team members are currently anonymous, but claim to have been responsible for licensed compliance exchange wallet business from 2018 to 2019, and have been engaged in DeFi research and product development since 2020. Inspired by the thinking of Curve liquidity ecological construction and AladdinDAO incubated f(x) Protocol, the team constructed Mori Finance. Mori referred to f(x) as co-builder and 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. ETHS’s volatility is set to 10% of ETH’s, with the remaining volatility absorbed by ETHC.
The project is currently online on the testnet and participating in the test can obtain OG identity. The project is planned to go live on the Ethereum mainnet in the third quarter of this year and participate in the Curve War.
