Thala’s MOD: A Universal Strong Stablecoin In The Move Ecosystem
By developing the Move-native stablecoin and liquidity layer, Thala is creating a decentralized stablecoin that can fuel the further iteration of scalable blockchains.
Two multibillion-dollar Layer 1s, Aptos and Sui, entered the cryptocurrency market in 2022, generating interest in the scalable potential of blockchain technology. They employ Move, a fresh smart contract coding language. When Meta joined the peer-to-peer payments arena and planned to create a permissioned blockchain-based stablecoin payment system, they created a language they called Diem.
In comparison to other languages, it promises a number of advantages, including Solidity, superior security, and composability. The promise of the new Move language was taken with many of the original project members when they departed Meta.
Thala is creating the first Move-native stablecoin, called Move Dollar (MOD), as a result. This stablecoin is completely collateralized and yield-bearing, and it is backed by a variety of on-chain assets. Thala resolves the decentralized stablecoin trilemma of peg stability, security, and capital efficiency with its monetary policy, collateral mobilization, and accompanying automated market maker providing liquidity.
Why do we need stablecoins on Move?
One of our core investment principles is to support decentralization and censorship resistance, and a decentralized economy requires decentralized stablecoins. We also have confidence in Move-based blockchains such as Aptos and Sui, which we believe will form the basis of a strong and vibrant developer ecosystem building the next generation of Web3 applications and attracting a billion users. As such, we are very much aligned with Thala Labs’ vision to develop a stronger decentralized stablecoin while supporting the growth of the entire Move ecosystem.
After Terra’s thunderbolt last year, we delved into the stablecoin market and found that centralized fiat-based fully-collateralized tokens, such as USDT and USDC, or crypto-based over-collateralized tokens, such as DAI, have capital inefficiencies and trade-offs.
Problems with deficiencies such as lack of composability. Therefore, we believe that the decentralized stablecoins in the Move ecosystem can reduce liquidity risks while enhancing the independent development of its own ecology and optimizing the original mortgage position model (debt position model).
How do MOD and other Thala products work?
Move Dollar (MOD)
MOD is a hyper-collateralized stablecoin backed by a class of assets, including native and multi-chain assets, including liquid collateral derivatives, liquidity pool tokens, deposit receipt tokens, and more. In the future, RWAs will be added to the collateral list.
The basic design of the mod will be as follows:
- Users mint (or, in other words, borrow) less stablecoin value than the collateral value so that the collateral value in the system always exceeds the value of the stablecoin in circulation.
- Users with open vaults will have the option to exchange MOD for collateral of $1 (fewer exchange fees), making the effective price bottom $1.
- MOD holders can deposit MOD in the Stability Pool to get rewards, and the Stability Pool will be used to stabilize the value of MOD.
- A liquidation process will occur when the collateral value of a user’s vault falls below a level considered safe for MOD backing.
The liquidation process is as follows:
- First, the MOD in the Stability Pool will be used to buy back the collateral, and the collateral will be distributed to the MOD providers in the Stability Pool.
- If there is not enough MOD in the Stability Pool to buy back the collateral, the liquidated collateral will enter a Dutch auction.
When the collateral is liquidated, only part of the collateral will be liquidated, and it will be liquidated until the value of the user’s collateral returns to a safe level, instead of all the collateral being liquidated at once
For collateral pricing, Thala uses a hierarchical oracle design so that even if one of the oracles goes offline, there are still other active oracles that can provide quotes. The primary oracle’s price is always preferred unless price data reports outdated prices or unusual price fluctuations are detected. Now, Thala has two main oracle options; one is Pyth, and the other is Switchboard, which we invested in.
Thala Swap
The main role of Thala Swap is to help stabilize the value of MOD and improve access to MOD. When reviewing the reasons behind the failure of some stablecoin projects to gain traction, it is clear that one key factor is the availability of stablecoins. If there is no use case and composability for a particular stablecoin, users have no reason to hold it. Thala Swap allows combination with other cryptoassets and tokens in the Move ecosystem, helping to boost demand for MOD.
There are currently three capital pools in Thala Swap’s design:
- Weighted Pools are pools that exchange tokens by enforcing a constant weighted product. The weighted product of tokens will be set to a fixed number, which helps the pool determine the price of the token.
- Stable pools are a type of pool that allow assets whose value relative to each other converges to “1” to be exchanged with low price impact and low fees.
- ThalaLaunch launched a special pool called Liquidity Bootstrapping Pools (LBP) on ThalaSwap. LBP is a subset of weighted pools. The weight range of assets in the pool and the time required to move the weight can be set arbitrarily by the creator of the mining pool.
After the creator obtains permission, the fund pool will be established and automatically balanced by the LBP manager contract. It is expected that Thala will issue its own governance token, and when many projects on Aptos also start to issue tokens, ThalaLaunch can become the most stable cross-chain compatible platform from the first day, and return value to Thala.
At present, Thala expects MOD Liquidity Yield to be 5~10%, while for LBP (usually a new small-scale token), it can be 50% or even 100%.
DAO
Thala has a native token, THL, which is Thala’s governance token. Stakeholders can initiate proposals, vote on issues, and propose possible protocol parameter changes, playing a key role in shaping the direction of the protocol.
While the protocol will initially be governed by a core team, Thala will move to a DAO model once the necessary governance framework is established. THL will adopt veModel to make Protocol’s governance and value consistent. In order to better increase the liquidity and usage scenarios of THL, veTHL is actually an LP token with 80% THL and 20% MOD. Holders of LP tokens need to lock the tokens into the liquidity pool for at most one year in exchange for more benefits such as:
- Parameters for creating and voting key liquidity pools
- Enjoy discounts on project usage fees
- Access to the exclusive Discord channel
What makes Thala different?
Huge market size for the Move ecosystem
In addition to Aptos, there have been more recent blockchains built on Move, including Mysten Labs Sui and the Solana Move VM. Ease of deployment and development and its high performance make the Move blockchain incredibly scalable. Thala recognizes that the lack of a native Move stablecoin is a clear gap in the market and therefore seeks to capitalize on this by building a dominant robust stablecoin in this ecosystem, much like other stablecoins such as DAI have in the EVM ecosystem as done in.
Diversified collateral
The main advantage of MOD is its variety of collateral; they plan to accept RWAs as MOD collateral and are working on a combination of credit, US T-bills, real estate debt, and blue chip stocks as collateral. Compared with digital assets, physical assets are less volatile, more tangible, and will provide more residual value. This is critical as we believe DeFi needs to bridge the gap with the rest of the global economy, including real-world assets.
Focus on safety and risk management
To ensure the security and stability of the entire system and the stablecoin peg, Thala is conducting a comprehensive and transparent assessment of the proposed collateral types, covering smart contracts, counterparties, market volatility and liquidity risks. You can read more about its framework here.
Most notably, they implemented an Emergency Redemption Model (ERM), which inherently prioritizes holder safety as it allows MOD holders to redeem MOD directly in exchange for collateral after the emergency processing period.
The ERM is a last resort that can be used as a last resort to enforce target prices directly to MOD and Vault holders and to protect Thala from attacks on its infrastructure and periods of extreme and prolonged market instability and irrationality. It activates a systematic redemption mechanism that will settle all ongoing protocol procedures.
AMM in combination
As mentioned above about the relationship between Thala Swap and MOD, its AMM can continuously bring liquidity to MOD. At the same time, under the premise of sufficient liquidity, users can use important liquidity tokens, such as MOD-USDC, as collateral assets to further mint MOD tokens to complete leverage operations and increase returns.
This approach is similar to MakerDao’s G-UNI DAI/USDC pool, and the possibility of leverage for users can be seen in the market. If CDP is not attractive enough for users, users can still obtain income by staking into the main AMM pool.
Thala’s future roadmap
At the time of writing, MOD and ThalaSwap are gearing up to launch mainnet applications in Q1 2023. Subsequently, Thala will focus on its collateral diversity and cross-chain deployment.
This includes adding RWA to the MOD collateral list, as well as deployment on other Move-based chains such as Sui, Solana Move VM, and Sei. Thala will continue to expand its business, which may include more stablecoins such as the euro and Canadian dollar in the future. In the future, Thala will also achieve a greater degree of decentralization through community governance by launching native tokens THL and Thala DAO.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
Join us to keep track of news: https://linktr.ee/coincu
Harold
Coincu News
Author
Knowledge
Thala’s MOD: A Universal Strong Stablecoin In The Move Ecosystem
By developing the Move-native stablecoin and liquidity layer, Thala is creating a decentralized stablecoin that can fuel the further iteration of scalable blockchains.
Two multibillion-dollar Layer 1s, Aptos and Sui, entered the cryptocurrency market in 2022, generating interest in the scalable potential of blockchain technology. They employ Move, a fresh smart contract coding language. When Meta joined the peer-to-peer payments arena and planned to create a permissioned blockchain-based stablecoin payment system, they created a language they called Diem.
In comparison to other languages, it promises a number of advantages, including Solidity, superior security, and composability. The promise of the new Move language was taken with many of the original project members when they departed Meta.
Thala is creating the first Move-native stablecoin, called Move Dollar (MOD), as a result. This stablecoin is completely collateralized and yield-bearing, and it is backed by a variety of on-chain assets. Thala resolves the decentralized stablecoin trilemma of peg stability, security, and capital efficiency with its monetary policy, collateral mobilization, and accompanying automated market maker providing liquidity.
Why do we need stablecoins on Move?
One of our core investment principles is to support decentralization and censorship resistance, and a decentralized economy requires decentralized stablecoins. We also have confidence in Move-based blockchains such as Aptos and Sui, which we believe will form the basis of a strong and vibrant developer ecosystem building the next generation of Web3 applications and attracting a billion users. As such, we are very much aligned with Thala Labs’ vision to develop a stronger decentralized stablecoin while supporting the growth of the entire Move ecosystem.
After Terra’s thunderbolt last year, we delved into the stablecoin market and found that centralized fiat-based fully-collateralized tokens, such as USDT and USDC, or crypto-based over-collateralized tokens, such as DAI, have capital inefficiencies and trade-offs.
Problems with deficiencies such as lack of composability. Therefore, we believe that the decentralized stablecoins in the Move ecosystem can reduce liquidity risks while enhancing the independent development of its own ecology and optimizing the original mortgage position model (debt position model).
How do MOD and other Thala products work?
Move Dollar (MOD)
MOD is a hyper-collateralized stablecoin backed by a class of assets, including native and multi-chain assets, including liquid collateral derivatives, liquidity pool tokens, deposit receipt tokens, and more. In the future, RWAs will be added to the collateral list.
The basic design of the mod will be as follows:
- Users mint (or, in other words, borrow) less stablecoin value than the collateral value so that the collateral value in the system always exceeds the value of the stablecoin in circulation.
- Users with open vaults will have the option to exchange MOD for collateral of $1 (fewer exchange fees), making the effective price bottom $1.
- MOD holders can deposit MOD in the Stability Pool to get rewards, and the Stability Pool will be used to stabilize the value of MOD.
- A liquidation process will occur when the collateral value of a user’s vault falls below a level considered safe for MOD backing.
The liquidation process is as follows:
- First, the MOD in the Stability Pool will be used to buy back the collateral, and the collateral will be distributed to the MOD providers in the Stability Pool.
- If there is not enough MOD in the Stability Pool to buy back the collateral, the liquidated collateral will enter a Dutch auction.
When the collateral is liquidated, only part of the collateral will be liquidated, and it will be liquidated until the value of the user’s collateral returns to a safe level, instead of all the collateral being liquidated at once
For collateral pricing, Thala uses a hierarchical oracle design so that even if one of the oracles goes offline, there are still other active oracles that can provide quotes. The primary oracle’s price is always preferred unless price data reports outdated prices or unusual price fluctuations are detected. Now, Thala has two main oracle options; one is Pyth, and the other is Switchboard, which we invested in.
Thala Swap
The main role of Thala Swap is to help stabilize the value of MOD and improve access to MOD. When reviewing the reasons behind the failure of some stablecoin projects to gain traction, it is clear that one key factor is the availability of stablecoins. If there is no use case and composability for a particular stablecoin, users have no reason to hold it. Thala Swap allows combination with other cryptoassets and tokens in the Move ecosystem, helping to boost demand for MOD.
There are currently three capital pools in Thala Swap’s design:
- Weighted Pools are pools that exchange tokens by enforcing a constant weighted product. The weighted product of tokens will be set to a fixed number, which helps the pool determine the price of the token.
- Stable pools are a type of pool that allow assets whose value relative to each other converges to “1” to be exchanged with low price impact and low fees.
- ThalaLaunch launched a special pool called Liquidity Bootstrapping Pools (LBP) on ThalaSwap. LBP is a subset of weighted pools. The weight range of assets in the pool and the time required to move the weight can be set arbitrarily by the creator of the mining pool.
After the creator obtains permission, the fund pool will be established and automatically balanced by the LBP manager contract. It is expected that Thala will issue its own governance token, and when many projects on Aptos also start to issue tokens, ThalaLaunch can become the most stable cross-chain compatible platform from the first day, and return value to Thala.
At present, Thala expects MOD Liquidity Yield to be 5~10%, while for LBP (usually a new small-scale token), it can be 50% or even 100%.
DAO
Thala has a native token, THL, which is Thala’s governance token. Stakeholders can initiate proposals, vote on issues, and propose possible protocol parameter changes, playing a key role in shaping the direction of the protocol.
While the protocol will initially be governed by a core team, Thala will move to a DAO model once the necessary governance framework is established. THL will adopt veModel to make Protocol’s governance and value consistent. In order to better increase the liquidity and usage scenarios of THL, veTHL is actually an LP token with 80% THL and 20% MOD. Holders of LP tokens need to lock the tokens into the liquidity pool for at most one year in exchange for more benefits such as:
- Parameters for creating and voting key liquidity pools
- Enjoy discounts on project usage fees
- Access to the exclusive Discord channel
What makes Thala different?
Huge market size for the Move ecosystem
In addition to Aptos, there have been more recent blockchains built on Move, including Mysten Labs Sui and the Solana Move VM. Ease of deployment and development and its high performance make the Move blockchain incredibly scalable. Thala recognizes that the lack of a native Move stablecoin is a clear gap in the market and therefore seeks to capitalize on this by building a dominant robust stablecoin in this ecosystem, much like other stablecoins such as DAI have in the EVM ecosystem as done in.
Diversified collateral
The main advantage of MOD is its variety of collateral; they plan to accept RWAs as MOD collateral and are working on a combination of credit, US T-bills, real estate debt, and blue chip stocks as collateral. Compared with digital assets, physical assets are less volatile, more tangible, and will provide more residual value. This is critical as we believe DeFi needs to bridge the gap with the rest of the global economy, including real-world assets.
Focus on safety and risk management
To ensure the security and stability of the entire system and the stablecoin peg, Thala is conducting a comprehensive and transparent assessment of the proposed collateral types, covering smart contracts, counterparties, market volatility and liquidity risks. You can read more about its framework here.
Most notably, they implemented an Emergency Redemption Model (ERM), which inherently prioritizes holder safety as it allows MOD holders to redeem MOD directly in exchange for collateral after the emergency processing period.
The ERM is a last resort that can be used as a last resort to enforce target prices directly to MOD and Vault holders and to protect Thala from attacks on its infrastructure and periods of extreme and prolonged market instability and irrationality. It activates a systematic redemption mechanism that will settle all ongoing protocol procedures.
AMM in combination
As mentioned above about the relationship between Thala Swap and MOD, its AMM can continuously bring liquidity to MOD. At the same time, under the premise of sufficient liquidity, users can use important liquidity tokens, such as MOD-USDC, as collateral assets to further mint MOD tokens to complete leverage operations and increase returns.
This approach is similar to MakerDao’s G-UNI DAI/USDC pool, and the possibility of leverage for users can be seen in the market. If CDP is not attractive enough for users, users can still obtain income by staking into the main AMM pool.
Thala’s future roadmap
At the time of writing, MOD and ThalaSwap are gearing up to launch mainnet applications in Q1 2023. Subsequently, Thala will focus on its collateral diversity and cross-chain deployment.
This includes adding RWA to the MOD collateral list, as well as deployment on other Move-based chains such as Sui, Solana Move VM, and Sei. Thala will continue to expand its business, which may include more stablecoins such as the euro and Canadian dollar in the future. In the future, Thala will also achieve a greater degree of decentralization through community governance by launching native tokens THL and Thala DAO.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
Join us to keep track of news: https://linktr.ee/coincu
Harold
Coincu News
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