💸Lending

Earns APY from lending out MUSD to DeFi platforms

This controller mints MUSD into money markets to allow anyone to borrow MUSD by paying interest instead of the base minting mechanism. MUSD minted into money markets don’t enter circulation unless they are overcollateralized by a borrower through the money market so this AMO does not lower the direct collateral ratio (CR). This controller allows the protocol to directly lend MUSD and earn interest from borrowers through existing money markets. Effectively, this AMO is MakerDAO’s entire protocol in a single market operations contract. The cash flow from lending can be used to buy back and burn BURROW (similar to how MakerDAO burns MKR from stability fees). Essentially the Lending AMO creates a new avenue to get MUSD into circulation by paying an interest rate set by the money market.

Adjusting Interest Rates and Capital Efficiency

The AMO can increase or decrease the interest rate on borrowing MUSD by minting more MUSD (lower rates) or removing MUSD and burning it (increase rates). This is a powerful economic lever since it changes the cost of borrowing MUSD on all lenders. This permeates all markets since the AMO can mint and remove MUSD to target a specific rate. This also effectively makes the cost of shorting MUSD more or less expensive depending on which direction the protocol wishes to target.Additionally, the fractional-algorithmic design of the protocol allows for unmatched borrowing rates compared to other stablecoins. Because the MMFM Protocol can mint MUSD stablecoins at will until the market responds with pricing MUSD at $.99 and recollateralizing the protocol, this means that money creation costs are minimal compared to other protocols. This creates unmatched, best-in-class rates for lending if the protocol decides to outcompete all other stablecoin rates. Thus, the AMO strategy can optimize for conditions for when to lower the rates (and also bring them under other stablecoin rates) and also increase rates in opposing conditions. Ironically, the lending rate on their own token is something other stablecoin projects have difficulty controlling. MMFM has total control over this property through this AMO.