When it comes to trading and investing in the cryptocurrencies world, one of its major advantages is tied to its inherent and literal “flip side of the coin”: that is, volatility.
While legal tenders maintain daily volatility percentages that float around the 0.5% mark, it is instead not usual for cryptocurrencies prices to undergo 5%, 10% downside/upside changes (or even more) in a short span of time. By simple syllogism, such an event can imply huge losses (or gains) for investors; instead, a fiat currency, regulated by a government, has a fixed value; take for example the British pound or the U.S. dollar – and, yeah, I can already hear a lot of you screaming…for matters of simplicity and logical, yet theoretical reasoning, I’m deliberately keeping inflation out of the equation, so please stick with me 🙂
So, while volatility can be a positive, driving factor if a trader knows exactly when to buy or sell, we cannot avoid taking into account the fact that the majority of cryptocurrency investments are extremely risky investments, being fully aware that the financial concept of risk-reward is a dual, holistic one.
Despite this acknowledgment, the cryptocurrency world is already armed to offer a different category of products to those that show higher risk aversion in their financial decision-making behavior. Anyone that wants to have access to the decentralized benefits brought by the industry – not having to worry, at the same time, about the ups and downs of crypto prices – can invest in a different crypto asset: stablecoins.
While this is not an in-depth guide on “how do stablecoins work?”, “what are stablecoins?” or “what is volatility?” (I can assure you, you can easily and quickly find the answers following up with a simple google search), we will still briefly touch upon these topics here and there, as they play a pivotal role in the brilliant design and architecture of today’s featured project – the MARS Ecosystem.
In the next paragraph we will work our way towards building our understanding via a brief introductory compendium meant to scratch *very superficially* the surface that makes up the bulk of the questions above … and then, armed with that simple knowledge, we will delve deeper into the value-packed proposition and amazing goodies that the MARS Ecosystem team is developing!
- A Quick Understanding of The Central Role Played by Stablecoins
If we put on the analyst hat and examine how the market cap of decentralized stablecoins has been faring during the last year (taking into account, for example, “stables” like DAI, sUSD, etc.), it gets very easy to reckon that a real boom has been taking place: the growth of the stablecoins market has been unprecedented with a whopping ~22x growth. While this may only seem a huge number, it also bears all the signs of what could be seen as the jump-start of a new era – one where decentralized stablecoins could take the lead and even overthrow, in a not-so-unlikely future, the multitude of centralized, regulated stablecoins represented by behemoths of the likes of USDC or even BUSD.
Keeping our analyst hat still on our heads, we can see that the current, aggregated market cap of centralized stablecoins has reached over the years the order of magnitude of hundreds of billions of dollars (market cap variations have also been frequent and quite dramatic with volatile swings, just as witnessed in recent periods). While this is huge and impressive, decentralized stablecoins are also taking hold in terms of adoption (with the current market cap around one-tenth of the figures outlined above), with many technical projections and indicators foreshadowing a potential “flippening” scenario occurring in less than 3-5 years from now.
But why is this important? Let me correct myself: it’s not important – it’s critical… and that is because, by definition, stablecoins represent DeFi’s life essence. Decentralized stablecoins are at the very heart of the DeFi stack – that is, the modular, holistic design that makes Decentralized Finance the unique one-stop-shop for all of the services & products that we’re able to currently enjoy. If the DeFi stack is the engine, stablecoins are its fuel.
And this fuel is far from being the perfect mix though: the way actual stablecoins were to fit the stack’s architecture has, over time, bred three main issues: there is no stablecoin design that simultaneously meets the needs of price stability, decentralization & scalability. And that’s when, where, and why the Mars Ecosystem team steps in.
- What is the Mars Ecosystem
The above graphic does a great job of addressing some of the pros and cons of some of the most famous stablecoins of the cryptoverse. So, you might now be asking: what’s the Mars Ecosystem bringing onto the table? What is the value proposition brought forth … and, above all, what is Mars Ecosystem?
The Mars Ecosystem is a Decentralized Stablecoin and DeFi platform, whose design is tripartite; it is composed of
- the Mars Stablecoin (of course!)
- the Mars Treasury
- and the Mars Ecosystem DeFi Protocols
These 3 components were designed to integrate seamlessly, constituting a positive feedback cycle meant to generate a perpetuating “flywheel” effect within the ecosystem and giving life to a never-seen-before stablecoin paradigm that bears the characteristics of price-stability, capital-efficiency, scalability, and, above all, decentralization.
Let us now have a sneak-peek at the 3 components in more detail.
The 1rst Component – The Mint/Redeem Mechanism of the Mars Ecosystem
The Mars Ecosystem employs a dual-token model (more in detail in the Tokenomics paragraph):
- One is represented by the Mars Stablecoin (USDm)
- The other one is Mars Ecosystem’s flagship, non-pegged token (XMS).
A Mint/Redeem mechanism has been carefully thought out and put in place by the team: the USDm stablecoin can always be minted and redeemed from the ecosystem for $1 worth of XMS. When minting USDm, the XMS utilized to mint it is burned. When redeeming USDm, new XMS tokens are minted.
This whole process is accompanied by several features (that are specific to the Mars ecosystem), which are then indicated with the appropriate “jargon”, and also which address a specific, required aspect to make everything tick & work as smoothly and precisely as a Swiss watch. Again we will not get into the details of all the technicalities here, but there’s one specific feature that’s so unparalleled and ingenious that we believe deserves to be highlighted: that’s called “Asymmetric Minting” – and in order to grasp the smart mechanism underlying it, we need to introduce some terminology.
So what is Asymmetric Minting and how does redeeming work under it?
Let’s say you’re a user that wants to mint USDm tokens. In order to do that you have to add one of the Mars Treasury whitelisted assets to the Mars Treasury. For example, you can mint 5 USDm with $5 worth of ETH. However, when you decide to redeem 5 USDm, what you are given is the XMS token, in place of ETH. And that’s how Asymmetric Minting is provided.
On top of that, assets that are available in the Mars Treasury will sustain the value of USDm and XMS and, thanks to the Support Ratio (see the caption above), USDm’s market cap will be limited by XMS market cap, positively impacting XMS price and preventing the infamous “death spiral” events that are typical of sell-offs that occur under extreme market conditions.
The 2nd Component – The Mars Stablecoin DEX
The Mars Ecosystem team has implemented a Stablecoin AMM DEX, simply known as “Mars Stablecoin DEX”. The DEX aim is to incentivize liquidity provision and trading, particularly favoring the native USDm stablecoin.
On the DEX, users can also stake XMS to earn a share of the transaction fees generated via the DEX usage from other users.
This implementation allows for the capturing of value inside the Mars Ecosystem, solving the inherently rooted design problem that’s all too common within the majority of stablecoin protocols: the economic benefits generated by a stablecoin’s creation/minting aren’t captured by the protocol itself, but instead are dispersed via other use cases that are specific to the protocol, with a consequent “value leakage” that’s inefficient for both the ecosystem and the users. Instead, thanks to the Mars Ecosystem DEX architecture, the value is relayed to those users that utilize and support the protocol, at the same time generating highly-desired price support for the XMS token.
The 3rd Component – The Mars Ecosystem’s “Flywheel Effect”
The “Flywheel Effect” is a positive feedback loop that’s been designed to build “momentum”, increasing the payoff of incremental efforts. Borrowing some words from the project’s Official Medium, this Flywheel Effect appears to be kind of like karma: “[…]good things you do lead to more good things “just happening”[…].
It may sound sybilline, but it’s not. In fact, the Mars Ecosystem team intentionally designed the whole system in such a way that its 3 major components (the USDm stablecoin, the native XMS token, and the stablecoin DEX) would work together to generate a positive feedback cycle, one that would naturally bring about the “flywheel effect” and accelerate the Protocol’s expansion & growth.
This is beautifully recapped by the infographic below:
- Addressing The Fundamental Stablecoin Protocols Issues
We’ve outlined Mars Ecosystem’s structure, detailing its 3 major infrastructural components. This structure is in place to address two fundamental problems typical of stablecoins protocols: one is the positive externality problem, and the other is the integration problem.
The positive externality problem of stablecoin protocols is related to the costs of producing (minting) and maintaining stablecoins. These costs are incurred by the protocol and its users/stakeholders (minters, shareholders, bondholders).
The majority of the value derived from the stablecoin protocols lies within the transaction fees gathered on other DeFi protocols. This capital is thus captured by these DeFi protocols, giving no financial aid/support to the stablecoin protocol itself. What this too often implies, in the end, is that supply shortages of said stablecoin are a usual (yet unwished-for!) occurrence, leading to the potential inability to satisfy market demand on DeFi platforms.
The integration problem of stablecoin protocols is instead related to the demand for stablecoins created by any stablecoin protocol. This demand is highly dependent on the degree of integration of said stablecoin within other DeFi protocols, besides the native stablecoin protocol. If the integration of stablecoins with other DeFi protocols is ignored, then supply growth and stability of stablecoins are affected.
The Mars Ecosystem team has managed to work its way through these thorny problems, putting the puzzle pieces together, by crafting and designing a stablecoin protocol that would solve these two problems in one go, bridging the gap that’s been in place for so much time, thanks to the features that the Mars Ecosystem protocol can finally boast with its services:
Price stability: the Mint/Redeem mechanisms ensure the price of USDm is pegged to $1. The market cap of USDm is backed by the market cap of XMS by several multiples.
Capital efficiency: to mint one USDm a user will always need $1 worth of XMS
Scalability: The supply of USDm scales with the market cap of XMS.
No Reliance On Centralized Collateral: The price stability of USDm is built upon XMS and the Mars Ecosystem.
High Value Captured from Stablecoin Adoption: A substantial part of the transaction fees generated through the utilization of the Mars Stablecoin DEX are captured via the XMS token.
Extensive Integration: USDm will be integrated into other DeFi protocols as well as crypto payments.
The “Flywheel Effect: The relationship between the USDm, XMS, and the Mars Stablecoin DEX constitutes a positive feedback loop, generating the Flywheel Effect mentioned previously in this article.
And – cherry on the cake – this is all accompanied by a stern security layer: Mars Ecosystem’s smart contracts are in fact audited by some of the most renowned security auditors in the space – Certik, BlockSec, and SlowMist.
- Tokens (USDm & XMS) and Tokenomics
As explained in an earlier section, the Mars Ecosystem employs a two-token system:
USD-Mars (or, as we know by know, USDm) represents the stablecoin of the Mars Ecosystem. XMS, instead is the Mars Ecosystem Token, functioning also as the protocol’s governance token. The USDm stablecoin has been designed to serve as the reserve currency of the DeFi world, while the XMS governance token’s aim is geared towards capturing the value generated from the creation and circulation of USDm, and, for that reason, has also been equipped with huge potential and appreciation capabilities.
We could synthesize the value capturing model of the XMS Mars Ecosystem Token by highlighting 3 special characteristics:
- The Mintage Control Mechanism (MCM). The Mintage Control Mechanism ensures that the market value of XMS is at least 2.5 times the circulating supply of USDm. If, for example, at any given point, the market demand for USDm is parked at 100 million, then the market value of XMS should be at least 250 million USD. If this is not the case then the circulating supply of USDm cannot reach 100 million (at that given moment).
- Mars Treasury Control Rights Value. XMS holders can influence and determine protocol upgrades within the Mars Treasury through protocol governance votes. To prevent the occurrence of any 51% attacks on the protocol the market capitalization of XMS will always remain at least 2x the value of the assets held within the Mars Vault. If, for example, the circulating supply of USDm in the market is 100 million USD, and correspondingly Mars Treasury has 100 million USD assets, then the market value of XMS will be at least 200 million USD – otherwise, the Mars Treasury would be at risk of being attacked.
- The Transaction Fees Generated Via The Mars DeFi Protocols. When users trade on Mars DeFi protocols such as Mars Swap and Mars StableSwap, they will be charged transaction fees. These will be partly assigned to liquidity providers and partly assigned to the protocol itself. The protocol also defines the fees to distribute to XMS stakers through the buy-back and redistribution of XMS.
Also, numbers are important whenever we’re writing about token economics. The total supply of XMS amounts to 1,000,000,000. The token distribution is as follows:
- 70% has been allocated as Community Incentive – for Liquidity Mining, Trade Mining, and Airdrops purposes
- 10% has been allocated to the DAO Treasury – these represent Market Making, Operations, Marketing, and Partnerships reserves.
- 10% is held by Investors. The institutional investors’ tokens will follow a linear vesting schedule for 18 months, starting from Genesis Launch, while IMO participants’ tokens were released linearly for 6 months, starting on June 15th – this design was meant to incentivize the distribution of XMS tokens to true long-term supporters of the Mars Ecosystem in a sustainable way.
- Finally, 10% is held by the Mars Ecosystem Team. These tokens are locked following a monthly linear vesting schedule that started at the Genesis Launch, for 36 months.
Currently, the $XMS token is listed on PancakeSwap and Centralized Exchanges BKEX and Hoo.com. And by the way – a fully-fledged, detailed Tokenomics paper can be found here.
- Roadmap
The Mars Ecosystem just recently rolled 3 extremely successful “Genesis Events”. These events saw overwhelming participation, with over 24,000,000 BUSD and about 38,000,000 XMS tokens cumulatively staked over the course of just 9 days (from November 21rst until November 29th)! The “Genesis Events” goal is to incentivize the minting of USDm and distribute XMS, BTC, ETH, BNB, and CAKE as rewards to the early supporters of USDm for free. Genesis Event 4 is about to be announced soon with amazing rewards for all the participants – so, if you’re curious, I highly suggest having a look here!
Coming next, the team plans on releasing more DeFi protocols via investments, incubations, and joint development to empower the Mars Ecosystem. The end of Q4 2021 is bound to be the time for the yield aggregator module’s release, together with the development of the Mars Launchpad platform.
In Q1 2022 stable coins mintage will be implemented on other public chains, expanding the Mars Ecosystem further. 2022 and beyond will thus witness the implementation of the Cross-Chain Stablecoin DEX with an expansion into Ethereum, Heco, Polkadot, and many other renowned ecosystems. Also, the team will seek partners within the crypto payment service providers sector to foster USDm adoption.- Conclusion
With over $258 million locked in TVL – which the project has managed to attract, since its launch, in a very short span of time – the Mars Ecosystem team should be extremely proud of the steady growth of the platform. Bitcoin’s recent tumble hasn’t proven to be much of a hindrance for this ecosystem whose goal is to become the leading algorithmic stablecoin protocol of the DeFi world. The team’s mission is well on its way and this is also proven by the list of reputable, strong backers that have pledged their support to the protocol since its very inception (Parallel Ventures, YBB, Kernel Ventures, 7Star Capital, Continue Capital). We cannot also fail to mention the most recent cooperations and notable partnerships with Monsta Infinite and Celestial.
Mars Ecosystem has been warmly welcomed by most of its stakeholders, thanks to its innovative proposition in the niche of crypto stablecoins. Its future success will definitely depend on the team’s ability to cement its presence inside the wider marketplace of digital assets, and also the capability to fulfill the roadmap promises made to both investors and users for the coming quarters. Yet we can, without much doubt, consider Mars Ecosystem’s experience a positive and impactful one so far: we personally love what the team has been masterfully capable to build, with a dApp that offers a variety of tools and products that are undeniably value-packed, streamlined and rich in all of its aspects.
- Community and Social Channels (as of December 8th, 2021)
MARS Ecosystem’s Website
For everything you need to know about MARS Ecosystem, visit the official MARS Ecosystem Website.
MARS Ecosystem’s Telegram
Join the conversation on Telegram to stay in the know about MARS Ecosystem.
MARS Ecosystem’s Medium
To keep up with the latest updates from MARS Ecosystem, follow them on their official Medium page.
MARS Ecosystem’s Twitter
Get in touch and social with other members of MARS Ecosystem’s community. Join the community on Twitter.
Legal Disclaimer
Both Satoshi Club and the article’s authors are not providing readers any individually tailored investment advice. The article does not constitute financial advice. The material is for educational purposes only and Satoshi Club nor any of its authors are responsible for any gains or losses that result from your cryptocurrency investments. Investing in cryptocurrency involves a high degree of risk and should be considered only by persons who can afford to sustain a loss of their entire investment. Investors should consult their financial adviser before investing in cryptocurrency.