Mint Cash behind the skyrocketing USTC A new exploration of stablecoins backed by Bitcoin collateral

Exploring Mint Cash The New Frontier of Stablecoins Backed by Bitcoin Collateral Driving the Growth of USTC

On November 26th, at 23:00, the original Terra ecosystem stablecoin USTC suddenly surged. Within 1 hour, it reached a peak of 0.05 USDT from 0.02 USDT, a 250% increase. As of the time of writing, it is still maintaining around 0.065 USDT, reaching a new high in a year. Influenced by the anticipation of the Mint Cash stablecoin project airdrop in the Terra ecosystem, the popularity of USTC has returned overnight. Market speculation suggests a connection to the airdrop empowerment of Mint Cash developed by former members of Terra and the proposal to restore USTC’s USD anchor.

What is Mint Cash

Mint Cash is a stablecoin system based on BTC collateral, intending to combine the advantages of the Terra ecosystem with Bitcoin’s anti-censorship and anti-inflation properties, providing stable and efficient payment and savings solutions. The project achieves both purchasing power stability and profit for cash holders through innovative synthetic exchange mechanisms, while also promoting the development of DeFi.

According to the official whitepaper, the main features and design goals of Mint Cash include:

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1. Dependency on decentralized institutions, fully supported by Bitcoin collateral for stablecoin exchange and payment;

2. Use of synthetic asset exchange mechanisms, eliminating the need for excessive collateralization as in traditional systems, thereby achieving high capital efficiency;

3. Flexibility in monetary policy through adjusting interest rates, taxation, pledge mechanisms, etc., to withstand price shocks;

4. Provision of stable and high-yield savings accounts through the Anchor protocol;

5. Support for multiple currencies, including stablecoins of major fiat currencies other than the US dollar;

6. Borrow from traditional currency policy economic models and adjust them to the characteristics of blockchain to achieve smooth operation between Mint Cash tokens and various stablecoins;

7. Maintain system stability through moderate capital control measures to avoid a large outflow of funds;

8. Provide a synthetic forex lending market to increase system liquidity and enable exchanges between multiple currencies.

Participation Methods:

Mint Cash allows users to participate in two ways using USTC. First, users can hold UST or LUNA before Terra’s collapse on May 10, 2022. Second, users can participate by locking and destroying a specified amount of USTC through the Mint Cash airdrop.

Team Members

The core developers of Mint Cash come from the former Anchor team and Aleph Research. The core developers will be responsible for developing the stablecoin protocol. Additionally, Aleph Research is also involved in the development of the new version of the Anchor Protocol called Anchor Sail, which will play a key role in the growth and anchoring of stablecoins within the Mint Cash ecosystem. Furthermore, the team is planning to collaborate with smart contract platform CosmWasm and EVM L1 blockchain Berachain to build Polaris EVM support based on Cosmos SDK.

The reason behind USTC’s skyrocketing

The reason behind USTC’s skyrocketing is explained by Mint Cash’s core developer, Shin Hyojin, who tweeted about the airdrop rules: “We will airdrop an equal amount of tokens with an estimated value of 1 USTC = 1 USD (actual conditions may vary), which is a discount of up to 99%”. In the eyes of most users, USTC was only worth $0.015 before this surge, and currently, the highest it has risen to is only $0.067, which is an amplifier of valuation exceeding 20 times.

Although Shin Hyojin clarified on the 27th that “this is an initial valuation quote, meaning that the received tokens will not always be exchanged at a rate of 1 USTC = 1 USD”, the market sentiment has already been ignited. Currently, the total issuance of USTC exceeds 9 billion, and it can be speculated that the nominal initial valuation of this project will be extremely high, possibly even reaching several billion dollars.

The design model of Mint Cash

Instead of using algorithmic stable coins, Mint Cash generates stable coins by collateralizing BTC, a concept similar to Maker DAO’s over-collateralization model. So, what are the differences between Mint Cash’s design and Maker DAO’s DAI, and does it have any unique characteristics?

According to the whitepaper published by Mint Cash, let’s take a look at the virtual liquidity model between MintCash coin and Bitcoin:

The virtual liquidity model between MintCash coin and Bitcoin is defined in the documentation by four lemmas:

Lemma III.2.1: Defines the quantity of MintCash issued when collateralizing n satoshis.

Lemma III.2.2: Defines the quantity of MintCash destroyed when redeeming n satoshis of collateral.

Lemma III.2.3: Defines the amount of Bitcoin collateral required to issue n RoundUnits of MintCash.

Lemma III.2.4: Defines the amount of Bitcoin collateral returned when redeeming n RoundUnits of MintCash.

These formulas establish the correspondence between input and output between MintCash and Bitcoin. When the amount of Bitcoin collateral flowing into the system varies, these formulas can determine the corresponding issuance or destruction of MintCash.

To control capital flows, the whitepaper also mentions the introduction of the BaseCollateralLiquidity parameter, combined with the constant product formula used in Uniswap, forming a virtual liquidity model with an upper limit on liquidity. This restricts the total amount of capital that can flow into or out of the system within a unit of time. The aforementioned virtual liquidity model controls the capital exchange process between MintCash and Bitcoin, enabling control over the inflow and outflow of funds in the system. This is the basis for Mint Cash to implement elastic monetary policy and capital control.

Overall, Mint Cash and MakerDAO have demonstrated two different methods and concepts for generating stablecoins. MakerDAO’s DAI focuses on providing stability through over-collateralization and partial reliance on centralized stablecoins, while Mint Cash emphasizes the use of Bitcoin’s decentralized properties to achieve stability through a synthetic swapping mechanism.

Conclusion

In general, Mint Cash’s goal is not to peg USTC to 1 USD; its essence is to launch a new project that allows USTC to participate in IDOs. Additionally, to some extent, Mint Cash’s airdrop can be seen as a positive attempt to expand the use cases of USTC and move towards deflation through destruction. By motivating users to lock USTC for airdrops and subsequently destroying the corresponding USTC.

Based on the information revealed so far, there is little association between USTC, Mint Cash, and the upcoming scenarios involving the new Anchor. Users should exercise caution when participating. It is also important to note that Mint Cash currently only has a whitepaper and has not officially launched a product yet.

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