🌈MPOOL

A stableswap pool with liquidity controlled and owned predominantly by the protocol

The AMO puts MUSD and USDC collateral to work providing liquidity for the protocol and tightening the peg. MMFM has deployed its own MUSD3MM metapool. This means that the MMFM deployer address owns admin privileges to its own pool. This allows the AMO controller to set and collect admin fees for BURROW holders and various future functions. The protocol can move idle USDC collateral or new MUSD to its own pool to create even more liquidity and tighten the peg while earning trading revenue.

MPOOL's Stableswap invariant allows for dampened price volatility between stablecoin swaps when reserves are not extremely imbalanced, approximating a linear swap curve when doing so.

The AMO

The protocol calculates the amount of underlying collateral the AMO has access to by finding the balance of USDC it can withdraw if the price of MUSD were to drop to the CR. Since MUSD is always backed by collateral at the value of the CR, it should never go below the value of the collateral itself. For example, MUSD should never go below $.85 at an 85% CR. This calculation is the safest and most conservative way to calculate the amount of collateral the AMO has access to. This allows the AMO to mint MUSD to place inside the pool in addition to USDC collateral to tighten the peg while knowing exactly how much collateral it has access to if MUSD were to break its peg.

Additionally, the AMO’s overall strategy allows for optimizing the minimum MUSD supply Y such that selling all of Y at once into a pool with Z TVL and A amplification factor will impact the price of MUSD by less than X%, where X is the CR’s band sensitivity. Said in another way, the AMO can put MUSD+USDC into its own pool and control TVL. Since the CR recollateralizes when MUSDprice drops by more than 1 cent under $1, that means that there is some value of MUSD that can be sold directly into the pool before the MUSD price slips by 1%. The protocol can have at least that amount of algorithmic MUSD circulating on the open market since a sale of that entire amount at once into the pool’s TVL would not impact the price enough to cause the CR to move. These amounts are quite large and impressive when considering our stablecoin optimized curve. For example, a 330m TVL MUSD3Pool (assuming balanced underlying 3Pool) can support at minimum a $39.2m MUSD sell order without moving the price by more than 1 cent. If the CR band is 1% then the protocol should have at least 39.2m algorithmic MUSD in the open market at minimum.

The above strategy is an extremely powerful market operation which would mathematically create a floor of algorithmic MUSD that can circulate without any danger of breaking the peg.