The Dollar DAO and the Metrix Dollar
This article contains information on the Dollar DAO and Metrix Dollar. Anything mentioned in this article is not financial advice.
Metrix Coin is a community-driven blockchain environment that harnesses Bitcoin’s Unspent Transaction Output model and Etheruem’s Virtual Machine framework. Metrix Coin is a fork from the Qtum (Quantum) blockchain. Metrix Coin sets the bar high for a user-friendly chain to create token assets (i.e. MRC-20 and MRC-721; or fungible tokens and non-fungible tokens), and affordable transaction fees regardless of high transaction volume. The governor smart-contract ensures ongoing development, both on and off the chain. The team and Metroid community assisted in the development of wallet, both online and offline, solutions. Metrix Coin is on course to lay down the foundation for a decentralized model where community members from around the world support the native chain, web 3.0, NFT platform, decentralized finance (DeFi) smart-contracts, and more. Please read Metrix Coin Whitepaper for more information.
A developer from the Metroid community by the alias SeqSEE in Discord is leading the development behind the Dollar DAO and the Metrix Dollar. The Dollar DAO is a decentralized autonomous organization that exhibits a decentralized organizational hierarchy, therefore no central leadership or board of directors to make decisions. The Dollar DAO will be governed by any supporter that holds DDAO, the token for the Dollar DAO. Anyone with DDAO will have voting rights on potential projects proposed to the Dollar DAO. The Metrix Dollar will be the first project to pass through the Dollar DAO. The Metrix Dollar is a stable token soft-pegged to 1 USD backed by MRX, Metrix Coin’s cryptocurrency. Both, the Dollar DAO and Metrix Dollar, are being built on the Metrix Coin blockchain. As SeqSEE further comments, there are plans in the near future to also develop a decentralized exchange. Other Metroid community members with the Discord alias ElenaZe and Squidicuz are leading the website development. There are additional Metroid community members assisting in various tasks for these two projects.
This article, in a question answer format, further discusses the theory and benefits of the Dollar DAO and the Metrix Dollar.
What is the Metrix Dollar (MRXD)?
MRXD is a stable token that is overcollateralized with Metrix Coin (MRX). It can be used to have a stable value token within the native Metrix Coin chain.
So MRXD is like USDT, what makes it beneficial?
Similar to USDT, in that both are pegged to equal 1 USD. However, MRXD is a fully decentralized stable token. Whereas, USDT is centralized. The mechanism of minting MRXD is considered decentralized, and USDT is more centralized. Both are not volatile and are able to store value. SeqSEE shares with the Metroid community member (MCM) a planned applicable use, “for example, we will be paying some of our partners with MRXD. This will allow them to hold it without worrying that the price may go down. Really it will be useful for other traded MRC20 tokens also.”
At the current MRX sat level, does it make sense to put it in MRXD?
In order to mint MRXD, any MCM will lock MRX in a smart-contract. The amount needed to lock for 1 MRXD will depend on the market price of MRX. By minting MRXD, MCMs reduce the circulation supply of MRX. There are applicable uses for MRXD. As previously mentioned, it stores value, so it may be used to secure other trading assets against MRXD, and it may be used to pay for service. Other uses, MRXD may be used to create a liquidity pool with another MRC20 token. And it may be used in yield farming where liquidity providers earn DDAO (Dollar DAO token) by creating liquidity and locking the Liquidity Provider (LP) tokens. The approach is to create a new asset within the Metrix Coin blockchain that will further progress not only blockchain utility but also utility of MRX, MRXD and DDAO. In effect, under appropriate market conditions, the value of MRX may appreciate.
Let’s say I have 10 million MRX, and it is worth 10,000 USD. I can get 10,000 MRXD?
No, the minimum collateralization is at least 150%, but the Dollar DAO can vote to increase the required collateral. If you want 10,000 MRXD you need 15,000 USD worth of MRX as collateral at minimum.
Let’s expand, collateralization, as the word implies, is the process in which MRXD is backed by MRX. It is key to provide over-collateral, 1.50 USD worth in MRX for every 1 MRXD, at least. The more collateral provided, the lower the risk of liquidation. If the market price of MRX increases, the collateral provided is strengthened and the risk of liquidation is reduced. If the market price of MRX decreases, collateral provided is weakened and the risk of liquidation is increased. If the loan (in MRXD) is taken out near or at 150% of collateral provided, and the market price of MRX decreases, then there is a high risk of being liquidated. If liquidated, then the MCM will have to pay a penalty fee. As a rule of thumb, it’s best to provide more collateral, e.g. provide a collateral of 400+%, and/or take out a lower amount MRXD loan. Remember, taking a loan at or near 150% collateral increases the risk of liquidation, so anything way below reduces the risk of liquidation. For example, 10 MRXD are minted, and a collateral of 15 USD worth in MRX was provided. If the price of MRX were to decrease, then the collateral position is weakened to 14.99 USD worth in MRX. The MCM will be liquidated and will pay a fee (revisited again later in the article).
Where does the penalty fee go? To an MRX fund?
The penalty fee goes to the system. The system uses any fees to recapitalize. Any excess is action to the Dollar DAO.
Let’s say I have 20 million MRX and I get 1,000 MRXD (way below the collateral provided), then what?
You can repay your loan with it. You can trade it with other tokens. You can lock it in a savings account to earn MRXD. You can put it in liquidity with other tokens to earn fees, and if supported by the farms/pools, lock the LP tokens to earn DDAO.
Will this all be done on our system?
Yes, it is all part of the ecosystem.
Do you have to lock it for a certain period of time?
You may lock and unlock at time. Any amount of MRXD minted will be repaid when the MCM unlocks collateral, or closes the collateral vaults. If you unlock it early, you may miss MRXD savings rewards.
What is pMRX?
MCMs wanting to provide collateral will swap MRX in the following fashion, 1MRX (native chain on the UTXO side) = 1 wrapped MRX (native chain on the EVM side) = 1 pMRX (system internal token). Pooled Metrix (pMRX) is an internal token that is a calculated value used within the system for vault collateral. The MCM only needs to trigger the swap, once, and the system will internally swap the rest to pMRX. Upon closing the vault or liquidation, the system will convert any pMRX left in the vault to wMRX to MRX back to the user.
Keep in mind that there are 2 sides to the Metrix Coin blockchain, there is a UTXO side similar to Bitcoin’s unspent-transaction-output model, and EVM side similar to Ethereum’s virtual machine. The system will be built on the native chain on the EVM side.
MRXD Savings probably won’t be higher than staking right?
The savings rates and rewards are changeable by the DAO. It is currently being discussed that the savings rate per year will be 6%. Since staking rewards and governor rewards will be reduced to 5% later in the year, it will appeal to the Metroid community to lock up MRXD and stake or set up a governor.
The more MRXD you have, the more DAO power you have in voting?
DDAO is the governance token for the Dollar DAO. The more DDAO one has, one can expect more weight voting power within the Dollar DAO. Voting may also be delegated to others within the Dollar DAO. This is the mere essence of Dollar DAO, that it is a fully decentralized democracy. There is no hierarchy model implemented. No CEO appointment. No centralized influence. It is completely governed by the community that holds DDAO.
SeqSEE discusses how minting MRXD and liquidation works.
A MCM that provides collateral for MRXD, and takes out a loan (or mints) MRXD, will have an active vault within the system. Once the loan is repaid the active vault is closed, and there is no risk of liquidation (since the loan has been repaid).
If the MCM has an active vault and took out a loan at or near 150% of collateral provided, eg. 10,000 MRXD and provided 15,000 USD worth in MRX, and the MRX price decreases, then the MCM will be liquidated and incur a penalty fee of 13%.
The loan may be completely paid to close the vault. If you have a loan and your collateral drops beneath the required collateral (150% at the minimum), then the MCC will be liquidated and incur the penalty fee of 13%. The MCM will keep the MRXD minted, and will get MRX returned less than payment for the loan and the 13% of collateral in the vault. The liquidation penalty fee will be set by the Dollar DAO and can be changed via a vote.
If the MCM minted 10,000 MRXD and provided a collateral of 15,000 USD worth in MRX, then after liquidation, the MCM will have 10,000 MRXD and 3,050 USD worth in MRX. At liquidation events, vaults are closed in which loans are repaid and any collateral left over is subjected to the 13% penalty fee. Any amount of MRX left over is returned to the MCM. The reason why over-collateral is provided, is to ensure loan repayment within the system in addition to fees incurred.
The rates, fees and penalties are all adjustable by the Dollar DAO, so it can manage its risks accordingly to make the system work. Dollar DAO may also make bad choices. In the case of vaults and/or system insolvency, DDAO tokens are minted and dumped in the the market to recapitalize and hold the Dollar DAO accountable for their decisions.
So, to get MRXD it has to be a loan?
At first, yes! But if an MCM creates a pool on a DEX, then it will be available to buy in the market.
Another MCM discusses with SeqSEE on the mechanics of a DEX built on the Metrix Coin blockchain.
The Decentralized Exchange (DEX) built on the Merix Coin blockchain is all smart-contracts. MCMs will need to use MetriMask, a web 3.0 wallet, to use the DEX and swap MRX with any other MRC20 token. Any other web 3.0 wallet that supports the Metrix Coin blockchain will work with the DEX. MCMs may use Altitude or the QT wallet to use the DEX. However, it is not user-friendly at the moment. SeqSEE encourages other developers to create a bridge between other assets to the Metrix Coin blockchain to introduce other assets into the DEX that may be tradable. This will further support the DEX as more assets are introduced to the Metrix Coin niche opening the opportunities for liquidity pools and yield farming.
In summary, the Metrix Dollar (MRX) is a stable token soft-pegged to 1 USD. MCMs that mint MRXD must provide collateral, at least at 150%, e.g. provide 1.50 USD worth in MRX for 1 MRXD. This over-collateralization will cover loan repayment, minus any liquidation penalty fees (13%) that may incur. It is important to keep in mind associated risk of liquidation. Any amount of MRX used within the system to mint MRXD will mean that MRX circulating supply is decreased, and not much of the MRX is making it into exchanges. The more assets used to provide over-collateral for MRXD the more stable MRXD. It is encouraged that other developers introduce other assets bridged from other blockchains to the Metrix Coin blockchain. Not only is MRXD more stable, but it also strengthens the Dollar DAO. This will further create the possibility to hold stable assets native to Metrix Coin, add to the ecosystem by creating a place to trade, and earn for individuals. The Metrix Coin team does not directly benefit from the system. The Metrix Coin team does not own the Dollar DAO. Only those that benefit are the ones that participate in the Dollar DAO or system will take any risks, and get any rewards.
A note on utility and fees:
The more utility within the Metrix Coin blockchain translates to higher volume of transactions in which gas fees will need to be paid in MRX. As far as any fees related to MRXD (i.e. set-up fee and liquidation fee) are returned to the system. Any trading fees will go to the Dollar DAO and Liquidity Providers.