Meet the Stablecoins, Episode 1: MAI, the coin with locked collateral.
The Hummus Exchange is an Automated Market-Maker (AMM) built exclusively for swapping stablecoins on the Metis Andromeda network with extremely low slippage and minimal fees. The protocol’s design allows for the pools to not only interact with each other but also to be flexible and grow relative to the natural supply and demand characteristics of the market. The backbone of the Hummus protocol is the staking mechanism. Hummus allows you to deposit and then stake certain stablecoins “single-sided” in its liquidity pools. This design allows new stablecoins to be added seamlessly, without the complications evident in legacy AMM designs.
Episode 4 of this educational series, Meet the Stablecoins, introduced users to one of the newest of the so-called “algorithmic” stablecoins: QiDao’s $MAI.
$MAI, unlike most other stablecoins, is not hard pegged to the U.S. dollar, but rather uses a soft peg and is backed by a basket of locked coins for collateral. MAI borrowing is decentralized and non-custodial, meaning that only users have control over their funds. This varies from most stable coins which have either a constant peg or a custodial at the heart of the project.
$MAI can only be made through locking collateral to back its value — either through approved collateral in vaults or through Anchor. Collateral can be static tokens like LINK, CRV, and others. It can also be exotic assets like Beefy and Yearn strategies. Interest-bearing collateral like Beefy, Yearn, and Aave receipt tokens allow users to accumulate yield from their collateral while it’s deposited in $MAI vaults.
The $MAI token does not rely on a DAO or a centralized entity, but instead was designed to be fully decentralized and allow the users to keep the peg constant to the collateral backing it. Users are able to do this by engaging with the Anchor of the protocol. $MAI is not a hard-pegged currency, so it does not perfectly track the value of the collateral backing it. Anchor allows users to mint $MAI with stablecoins and redeem stablecoins from $MAI. The 1% minting fee to create $MAI sets a price ceiling of $1.01 and the 1% fee to redeem stablecoins from $MAI sets a price floor of $0.99. The price of $MAI should trend close to $1, given that $MAI can only repay $1 worth of debt. The ceiling and floor on its price keeps it from diverging from its peg too much.
$MAI is not bound by a single blockchain but instead resides on multiple Etherium layer 2’s and multiple competing layer 1 blockchains. Right now the list of chains includes Optimism, Arbitrum, Metis, Gnosis, BSC, Harmony, Polygon, Fantom, Avalanche, Cronos and Moonriver. By being on multiple chains, it easily allows users to supply a variety of tokens for collateral.
Want to learn more about $MAI? Check out https://app.mai.finance/ for more information.
Want to stake your $MAI on Hummus to earn $HUM? Check out our alternate pool- https://app.hummus.exchange/pool