Minterest: Buying it Back for the Community
DeFi (Decentralized Finance) will no longer be ignored with its globally phenomenal growth since 2019. The TVL (Total Value Locked) has now exceeded $105 billion across various DeFi protocols as of mid-December 2021, of which the TVL of the lending sector has taken almost half. Considering that lending protocols are such a critical percentage of DeFi, the value capture mechanisms in these protocols, in contrast, benefit selected participants and result in a misalignment of user incentives, which results in the disproportion of distribution and discouragement of optimum value creation for the community.
Given that the true beneficiaries being the users who share in all revenues generated by these lending protocols is always in the pursuit, a fairer financial system for all users has always been one of the missions as well as sore points within the industry.
As the value of any digital platform is almost solely determined by its ability to generate network effects, where each user-added, to the platform, generates increased value for all other users. If value capture distribution amongst various user profiles becomes disproportionate, it surely results in the delivery of sub-optimal network effects. To optimize the delivery of value captured to all users, a protocol must generate network effects more powerful than its competitors within the same sector to survive. In order to achieve that vision, Minterest Protocol is born with an additional network effect to concurrently existing marketplace network effects, which is not exhibited with other lending protocols.
Minterest Protocol is a ground-breaking decentralized lending protocol to challenge existing DeFi Incumbents by offering a unique economic model built on Moonbeam. Minterest offers users a decentralized money market, combined with a fair incentive structure that will facilitate and promote the widespread adoption of DeFi. By its own uniquely designed buyback mechanism, the protocol itself captures 100% of the value it creates from the interest income, flash loan fees, and auto-liquidation fees which it passes on to its users in return for their active participation in governance.
The value capture of Minterest occurs when the protocol’s on-chain treasury captures interest rate fees, flash loan fees, as well as liquidation fees via the protocol’s internal auto-liquidation process, which guarantees that this portion of value will not be lost to external parties. Among the above, the capturing of liquidation fees is significantly innovative since no other lending protocol has done it so far.
With the first-of-its-kind buyback mechanism, the Treasury of Minterest automatically exchanges the captured value for its native token, MNT, via the open market of existing, deep liquidity decentralized exchanges. The accumulated MNT will then be distributed to all users who participate in the protocol’s governance process, which has taken the existing DeFi model and recalibrated it to fulfill its original mission of making the ecosystem fairer and more inclusive for its users, allowing everyone to get their fair shares of the profit the protocol generates.
Like alternative lending protocols, one of the most critical factors affecting the scale of value captured by Minterest Protocol is the value of supplied liquidity. The buyback mechanism of Minterest theoretically makes the protocol itself a buyer for its native token MNT in the market. As a result, a significant correlation between the value of liquidity supplied to Minterest and the value of MNT exists for the protocol.
An increase in liquidity supply will correspondingly lead to an increase in the volume of buyback, which results in the growing support for the value of MNT tokens. Moreover, the buyback for MNT will have certain directive positive impacts on APY. For instance, the process will increase the value of liquidity mining simultaneously, thus making the Minterest Protocol more appealing to liquidity providers.
Additionally, when users stake their MNT, loyalty bonuses will be passed onto those who provide liquidity in the long term and extra MNT tokens will be rewarded to loyal users for their commitment to the protocol’s governance processes over time. Such network effect has not been found in any other lending protocol until the creation of Minterest. This featured design will encourage users to continuously inject liquidity into Minterest in the long term and maintain the benefit of all Minterest users.
Minterest Protocol has found a way to pave the way to the highest long-term yield in DeFi by passing on all surplus generated directly to its users and ensuring their best interest. The sophisticated innovation of a truly sustainable long-term yielding system has surely taken the revenue model for all kinds of users to the next level since the inception of DeFi.
