Fantom has recently been the hub of Growth DeFi’s innovation with the launch of cLQDR and the soon to be released Beethoven MOR AMOs, there are several reasons for this but in a nutshell has all the tools and projects needed for this type of new financial derivatives to flourish.
In the short term future veGRO will be released on Fantom with the ability to regularly claim cLQDR rewards, this is unique to other chains where veGRO is deployed where currently MOR (surplus) distributions are the main source of rewards (excluding GRO rewards).
This opens up the possibility to create new products that leverage this free surplus on Fantom, the topic of discussion of this post are Volatile PSMs. You are probably already familiar with the existing MOR PSMs (Peg-Stability Modules), they allow users to mint and redeem MOR with stablecoins at fixed prices, providing a further stability and liquidity wall. Volatile PSMs would work in a similar fashion but using Volatile collaterals instead of stablecoins, the main examples being a BTC PSM and a ETH PSM.
How would it work precisely?
1-The Volatile PSM would have a debt ceiling, so no more than the amount decided by the DAO can be minted to acquire this volatile collateral.
2-Chainlink oracles would be used, combined with a spread to ensure real time quoting.
3-This enables direct minting and redemption of MOR for this assets, the surplus would profit from the spreads and any upside moves, on the other hand the surplus could go down if the collateral value in USD goes down.
BTC PSM Example:
Chainlink price: 47,000$
Mint Fee (tin): 0.3%
Redeem Fee (tout): 0.3%
Mint Price: 46,859 MOR/BTC
Redeem Price: 47,141 MOR/BTC
Consequences of introducing this type of PSM:
-MOR’s Surplus (on Fantom) would also be correlated with the performance on the holdings of this PSMs. This could lead on extreme scenarios to very big surplus profits or surplus losses.
-Diversifies the collateral backing MOR and ensures more liquidity routes beyond just stables (if we support a BTC PSM then you’d be able to swap from MOR to BTC back and forth without slippage and instantly).
-More revenue generation from the mint/Redeem fees of this PSMs
If implemented we would work on launching Volatile PSMs on Fantom.
This type of implementation would affect directly GRO holders which is why I’m opening the discussion with this post, don’t hesitate to share your thoughts in the forum or in Telegram.