Following the legacy of Terra, can Mint Cash surpass the glory of UST in its heyday?

Can Mint Cash Surpass UST's Former Glory by Following Terra's Legacy?

Anchor again, but this time with airdrop expectations.

Author: How about husband

Recently, the rise of USTC has attracted widespread attention. At the same time, the prices of LUNC and LUNA have also experienced a certain increase due to its influence. The reason for the rise is not the resurrection of Terra, but the airdrop expectations of a stablecoin project called Mint Cash, which is based on Terra’s wish.

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Mint Cash aims to recreate the vision of TerraUSD: “A stablecoin system that does not depend on traditional financial systems and central control.” Currently, mainstream stablecoins in the cryptocurrency market, such as USDT and USDC, are issued with the US dollar as collateral. There is still a lack of widely adopted stablecoins in the cryptocurrency market that are collateralized with native assets. TerraUSD used to stand out in this regard, but algorithmic stablecoins tend to create a “death spiral,” and Terra’s fate has already verified this point.

Although Mint Cash is derived from the stablecoin mechanism of Terra Classic (formerly Terra), it optimizes the existing mechanism to avoid exacerbating the decoupling.

Odaily Star Daily interprets Mint Cash’s white paper and explains Mint Cash’s future prospects starting from its mechanism.

Robust mechanism design of Mint Cash

Mint Cash is created based on the Terra Core stablecoin system, and its characteristic is that Mint tokens are backed by Bitcoin. Mint Cash introduces automated liquidity management and Virtual Automated Market Maker (VAMMS) mechanisms to mimic the policies of central banks participating in foreign exchange trading and providing liquidity. Any user can deposit Bitcoin to obtain Mint tokens, or destroy Mint tokens and exchange them back for underlying Bitcoin.

The following diagram shows the stablecoin mechanism of Mint Cash:

The key to stablecoins lies in the size of their mechanism’s risk resistance. Mint Cash, as a stablecoin project built on Terra Core, takes its first step in improving the original mechanism’s risk by examining the role of Mint tokens, the innovation of the Anchor savings protocol, Mint Cash’s tax policies, and the foreign exchange lending market of Mint Cash.

The role of Mint tokens

Mint tokens are an essential part of the Mint Cash stablecoin system. They serve as evidence of Bitcoin collateral and also as collateral for exchanging Cash stablecoins. However, the true core role of Mint tokens lies in acting as a risk buffer medium.

Let’s take AAVE as an example. Normal users participating in lending and borrowing need to collateralize ETH to borrow stablecoins. However, if the collateral’s price drops, there is a risk of liquidation.

Similarly, Mint Cash, as a stablecoin project, uses Bitcoin as collateral, which has higher price fluctuations compared to fiat currencies. If the price of Bitcoin fluctuates too much, it can cause the stablecoin system to lose its pegged value. This is why most stablecoin projects use fiat-backed or government-backed stablecoins as collateral.

Therefore, Mint Cash system attempts to bridge the liquidity gap between BaseSatoshis (the amount of Bitcoin in the system) and BaseCollateralInput (the amount of collateral input) during each CollateralPoolRecoveryPeriod. When BaseSatoshis are extremely low or high relative to BaseCollateralInput, the system adjusts the virtual slippage to control the outflow and inflow of capital within the system to maintain stability. This allows Mint to serve as an asset buffer to temporarily cover sudden systemic shocks caused by collateral deposits and withdrawals.

In addition, the exchange between Mint tokens and Cash stablecoins depends on the Mint fair market value determined by validators. Factors in the calculation include the total value of locked Bitcoin collateral, Mint staking rewards, the total value of all minted Cash stablecoins, the anchoring borrowing interest rates and utilization of all Cash stablecoins denominated in SDR, etc.

Mint tokens can be exchanged with various Cash stablecoins, each pegged to a different fiat currency. For example, the flagship Cash stablecoin is CashSDR, which reflects the value of the International Monetary Fund’s SDR. There are also various variants of Cash stablecoins, such as CashUSD, CashEUR, CashGBP, etc.

Innovation of Anchor savings protocol

Mint Cash provides a high-yield savings account as an adjustment token demand solution through a savings protocol called Anchor Sail (formerly Terra’s savings protocol Anchor). The goal of this protocol is to ensure stable tokens within the system while providing a liquidity management mechanism to maintain market liquidity.

Anchor has two main functions in Mint Cash:

• Anchor acts as a multi-token basket product and can serve as a hedging tool for multiple tokens: Anchor includes multiple tokens, making it suitable for hedging token value and interest rate risks. For example, if the value or interest rate of one token decreases, it may be offset by the appreciation in value or increase in interest rates of other tokens in the basket. Hence, Anchor provides a certain degree of stability in both value and interest rates.

• Anchor solves the initial adoption problem by providing efficient lending services: Traditional interest rate models assume there is a certain operational cost and expenses between deposit and loan rates, which smart contract-based token markets do not have. Therefore, Anchor can offer higher deposit interest rates at similar interest rate levels, attracting more capital to enter and utilize the new token.

Overall, in Mint Cash, the main role of Anchor is to hedge risks, provide stability, and solve initial adoption issues, thereby promoting the overall stability and development of the system.

Mint Cash Tax Policy

In the Mint Cash system, the tax policy is a key part of its stability mechanism. Mint Cash, following Terra’s transaction tax mechanism, adds a property tax mechanism to levy property taxes on accounts that have not traded or have traded below a certain value within a period of time. The goal of this tax policy is not to increase government revenue, but to maintain token stability.

Mint Cash’s tax policy has two main components:

• Tax on transactions: Every transaction requires payment of a certain percentage of tax. The purpose of this tax policy is to curb excessive market liquidity and prevent market bubbles by increasing transaction costs.

• Tax on property: Property taxes are levied on accounts that have not traded or have traded below a certain value within a certain period of time (e.g. one tax cycle). The purpose of this tax policy is to encourage market liquidity and prevent funds from being idle in the market for a long time.

In addition, Mint Cash’s governance mechanism includes a fiscal committee, which is empowered to decide certain important token policy parameters such as interest rates, tax rates, and borrowing rates. This governance mechanism enables Mint Cash to make rapid decisions when necessary to maintain token stability.

Mint Cash’s Forex Loan Market

Mint Cash’s Forex Loan Market is a market that allows users to borrow one stablecoin using another stablecoin as collateral. It is a synthetic market, which means it does not require the provision of upfront liquidity, payment of actual interest, or collateral liquidation.

The market sets parameters for minimum liquidity and maximum borrowing limits for all stablecoins. The market should hold a certain amount of specific stablecoins to address risk and liquidity management; for a particular stablecoin, the borrowing limit cannot exceed the set maximum borrowing limit.

The three main functions of the market are borrowing, repayment, and liquidation.

• Borrowing: When a user wants to borrow, the market executes an internal transaction to convert the funds into the user’s set loan-to-value ratio (LTV). The LTV should be lower than the set maximum LTV while maintaining sufficient liquidity.

• Repayment: When a user wants to repay, the opposite operation of borrowing is executed.

• Liquidation: When the LTV of a loan exceeds the set maximum LTV, the loan may be liquidated. Anyone can query the loan list and perform liquidation operations on loans that need to be liquidated.

In addition, both the fiscal committee and protocol governance have the authority to determine these parameters, including the borrowing interest rates for each pair of stablecoins. This is crucial because the borrowing interest rates between different stablecoins determine their effective interest rates.

Mint Cash’s Unique Airdrop Mechanism

According to Mint Cash’s team leader, on May 10, 2022, before the collapse, holding UST or LUNA; lock and destroy a specified amount of USTC through Mint Cash’s airdrop mechanism. Both methods mentioned above are acceptable, and in the second method, USTC can be set at $1 to exchange for an equivalent amount of Mint.

After the airdrop information was released, the price of USTC skyrocketed, reaching a peak of over 0.07 USDT. If the project team’s claims are true, there may still be room for further growth, but it is highly unlikely to return to the anchor level. This is just a short-term speculative behavior.

This move by the project team has brought a lot of attention to Mint Cash. As early as October this year, Mint Cash had already published its whitepaper, but it didn’t gain much traction. This sudden increase in popularity has changed the game.

In fact, we still have some doubts about the airdrop. According to the project’s whitepaper, it uses Bitcoin as collateral to generate Mint tokens, which can then be exchanged for Cash stablecoins. But in the airdrop, USTC is exchanged at an equivalent value of $1 for Mint tokens. So, does the project team have to provide the Bitcoin collateral themselves?

However, we will have to wait for the specific details to be announced. It is expected that the project team will attract people to deposit Bitcoin by offering high interest rates when they launch, in order to increase the usage frequency of Mint to Cash stablecoin conversions.

In summary, the rise in USTC’s price may be short-lived. But could Mint Cash’s actions be the future play for Terra’s ecosystem projects? This move could also potentially bring TerraUSD back on track.

Regarding Mint Cash itself, its mechanism design is relatively well-thought-out and has a relatively high risk resilience. Although the project’s popularity has increased through this move, long-term stability requires support from the underlying ecosystem. The project has not been officially launched yet, so everything is subject to change.

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