Overview of M^0
M^0 is a decentralized, on-chain protocol accompanied by a set of off-chain standards and APIs, designed to enable institutional actors to issue a stable, fungible digital currency known as M. This digital currency, or cryptodollar, is backed by high-quality collateral, primarily short-term US Treasury bills, ensuring its stability and reliability. The protocol integrates innovative governance mechanisms, primarily through its Two Token Governor (TTG) system, which uses two distinct types of tokens, POWER and ZERO, to manage and safeguard its operations effectively.
Protocol Description
M^0 operates through a combination of on-chain smart contracts and off-chain components, providing a robust framework for the creation and management of the digital currency M. This system is designed to ensure that all operations are transparent, secure, and comply with governance regulations.
Operations
Issuing M
Minters, who are approved institutional actors, initiate the issuance of M by locking eligible collateral in a secure off-chain facility. They then interact with Validators—entities responsible for ensuring the collateral’s presence and adequacy—to validate this collateral. Once approved, Minters can issue M tokens, which are then sold or used in financial transactions.
Example: A Minter might lock $10 million in US T-bills as collateral to issue an equivalent amount of M tokens, which can then be injected into the digital economy.
Redeeming M
Minters can also redeem M tokens by interacting with the protocol to burn the M and simultaneously request the return of their collateral. This process ensures that every M token in circulation is always backed by a tangible and stable asset, maintaining the integrity and trust in the M^0 system.
Example: If a Minter decides to exit the system or needs to access their collateral, they can burn their M tokens and retrieve their US T-bills from the custody solution.
Collateral Management
Eligible Collateral
The primary eligible collateral includes short-term US Treasury bills, which are stored in predefined Eligible Custody Solutions. These custody solutions are structured to meet high security and compliance standards to ensure the safety of the collateral.
Eligible Custody Solution
These are specially designed structures, often in the form of orphaned special purpose vehicles (SPVs), domiciled in jurisdictions approved by the governance framework of M^0. They ensure that the collateral is isolated from other financial risks and is exclusively used to back the issued M tokens.
Governance
M^0 utilizes a Two Token Governor (TTG) system, an innovative governance mechanism designed to ensure that the protocol operates efficiently, transparently, and equitably. This system involves two types of tokens: POWER and ZERO.
Two Token Governor (TTG)
POWER Tokens
POWER tokens are the primary means through which active governance participants (voters) interact with the system. Holders of POWER tokens can vote on various proposals that affect the protocol’s parameters and operations. In return for their active participation and decision-making, they earn ZERO tokens.
ZERO Tokens
ZERO tokens are held by governors who play a more passive role in the day-to-day governance but act as a check on the POWER holders. ZERO holders have the unique ability to reset the POWER token supply, a mechanism designed to prevent governance abuses and ensure the long-term neutrality and integrity of the system.
Governance Operations
Voting Mechanisms
The TTG system operates through structured voting periods, known as epochs, which last for 30 days. These epochs are divided into two phases: a 15-day Transfer Epoch, during which token transfers and delegations are permitted, and a 15-day Voting Epoch, where voting on proposals takes place and transfers are frozen.
Proposal Types
There are three main types of proposals within the TTG:
- Standard Proposals: Regular changes to the protocol or governance.
- POWER Threshold Proposals: Changes that affect the distribution or concentration of POWER tokens.
- ZERO Threshold Proposals: Proposals that can lead to a reset of the POWER tokens by ZERO holders.
The M^0 Economy
M^0 is designed not to replace existing financial systems but to enhance and streamline the interaction between financial service providers, such as cryptodollar issuers, auditors, and institutional investors. This section of the economy focuses on the roles and incentives for various actors within the M^0 protocol.
Minters
Minters are financial institutions or other entities that generate M by locking in eligible collateral. They are incentivized by the yield generated from the collateral and the operational efficiencies provided by the protocol.
Validators
Validators are independent entities that ensure the collateral backing M is present and adequate. They play a crucial role in maintaining the trust and security of the system. Validators are typically compensated through off-chain arrangements with Minters.
Earners
Earners are addresses approved by the TTG to earn a rate on held M tokens. They help provide liquidity and stability to the M token market by holding M and facilitating its circulation.
Off-Chain Ecosystem
The M^0 protocol relies on a robust off-chain infrastructure, which includes various actors and components essential for its operation. This includes Eligible Custody Solutions for collateral, banks for managing funds, and custodians for securing the physical assets.
Guidance and Compliance
M^0 benefits from guidance provided by Think Tanks and regulatory bodies, similar to international banking regulations. This guidance influences the protocol’s compliance and operational standards, ensuring it remains secure and effective.
