Please describe your proposed solution.
The Mehen team is actively building the USDM stablecoin, a Cardano-native token that will be backed 1:1 with $1 of high-quality, liquid assets.
Who is USDM for?
The USDM stablecoin will be minted and redeemed by ordinary people and institutions alike.
Individuals who would like to mint or redeem USDM will need to go through normal identity verification checks, and connect a Cardano wallet to the Mehen DApp. Once connected, they will be able to send USD, and Mehen will mint USDM into the connected wallet.
The same process works in reverse. Individuals will send USDM to their identity-verifed wallet. From there, they can initialize a burn transaction to receive USD in the connected bank account.
Licensing
Mehen is taking a well-travelled path, legally speaking. This is the path taken by premiere fiat-backed stablecoins on other blockchains, and it is the best way to ensure that the USDM token will always be redeemable 1:1 for fiat.
Licensing is an important part of safeguarding our tokenholders' off-chain rights. State licensing officials place a high priority on making sure we can fulfill our obligations to our tokenholders.
Mehen Finance will be open for minting and burning USDM tokens wherever it is licensed and is able to legally operate. Mehen is currently seeking Money Transmitter licenses in a variety of US states and territories, and we are working with partners in the UK and the EU to facilitate licensing in those jurisdictions.
TECHNICAL REQUIREMENTS / CODING DETAILS
Mehen Wallet
Mehen will have to navigate a plethora of laws and regulations, not only from each state in the US, but each country throughout the world. Because of this, Mehen will need to create a 3-signing-key multi-signature Cardano wallet for each user. Two signatures will be required. One signing key will be held by the user, one key by Mehen, and the final key held by a neutral arbitrator.
This wallet will be KYC-verified and used for minting and burning/redeeming the stablecoin.
Through the dApp, multi-signing occurs, and the user experience is familiar. Minting and burning happen transparently for a KYC-approved user.
But this multi-signature setup allows Mehen to comply with court orders, or to lock a mint/burn wallet if necessary to prevent fraud or abuse.
Admin Website and Mehen dApp Details
There will be 2 websites for the USDM stablecoin. The first website is the dApp that customers/users will access to mint and redeem the stablecoin. The second will be an administrative website for the Mehen team.
Admin Website
The admin website will have multiple capabilities to allow Mehen to more efficiently monitor and control the Mehen dApp. There will be various reporting tools available including AWS CloudWatch for anomaly detection. This service can alert Mehen to any irregularities within the system and hopefully allow Mehen to mitigate the issue before it becomes critical.
Other capabilities will allow Mehen to review KYC updates and notifications from the KYC provider, review wallet locks, and allow Mehen to comply with any legal issuance.
Mehen dApp
The Mehen dApp will consist of three separate components, the website, the Mehen back end, and the Drasil back end.
<u>dApp Website</u>
The user website will be fairly simple and straightforward. Its purpose is to allow users to deposit USD from their bank, mint USDM from their USD, transfer USDM to another Cardano Wallet, burn USDM for USD, and withdraw USD to their bank. The user’s transaction history will be viewable to the user, and they will see any KYC or other notifications received for their account. An FAQ section will be built to allow users to work through any common questions or issues from these services. If the user cannot resolve their issue, they will be able to open a ticket via a Contact Us section with Mehen to get the issue resolved.
<u>dApp Mehen Back End</u>
The Mehen back end will handle the KYC integration with the KYC provider and store the KYC data for regulatory purposes. It will also handle the Bank integration along with deposits and withdrawals from the user’s bank. The user's transaction history, notifications, tickets, and profile will also be handled by this component.
Drasil Back End
The Drasil back end will handle the Mehen wallet creation, the minting and burning of USDM, and all Cardano network transaction creation/execution/signing,
dApp and Admin Website Implementation
Tech Stack
List of technologies and libraries to be used for implementing the website:
- Multiple Cardano wallet browser extensions (as many as possible)
- Cardano Browser Library
- Angular
- Java
- SpringBoot
- AWS Cloud hosting and tools (chosen based on developer's experience)
- Gitlab (this project will be opensource allowing full transparency and community interaction)
- Gitbook
- Node.js
- Drasil
Revenue
Fees similar to existing exchanges like Coinbase and Binance will be applied for the USDM service. The Fee schedule will be reviewed and determined by Mehen Financial. Fees collected will pay for further development and maintenance of the Mehen dApp.
Future Features
Beyond the scope of this proposal, subsequent targets for development will include (but are not limited to) the following:
- Additional languages for the website
- Be able to use other currencies for deposit besides USD
- Re-using this technology to launch stablecoins in currencies besides USD
- Licensing KYC-verified wallets for use in broader regulated applications
Please describe how your proposed solution will address the Challenge that you have submitted it in.
This project addresses all three success categories listed in "F9: Dapps, Products & Integrations".
Increasing the number of dapps and products available for the community to use that help to enrich the ecosystem with new use cases.
There is no fiat backed stablecoin on Cardano. We have seen Terra die because their algorithmic stablecoin was flawed. Tether, which is supposed to be fiat backed but later was revealed to be partially backed by unsecured debt, depegged from the dollar in 2022 as well (<https://www.cnbc.com/2022/05/12/tether-usdt-stablecoin-drops-below-1-peg.html> ).
USDM will be a true fiat backed stablecoin for the Cardano community, thus completely avoiding all of the pitfalls we’ve seen so far in the crypto space.
Increase the number of integrations that bring existing solutions together for a more seamless and connected experience between different products.
USDM is a native token for Cardano. It will be freely transferrable on the Cardano network, allowing different entities to transact with a stable payment model.
Increased quality of existing products & integrations through suggested improvements that is supported by customer feedback or increased usage by the community.
Dexs and DeFi platforms can rely on USDM as a stable peg to the USD. This will help them secure their investments and bottom line without forcing them to hold actual USD.
What are the main risks that could prevent you from delivering the project successfully and please explain how you will mitigate each risk?
The main risk would be not receiving funding to create the project in the first place. This project is complex in that there are laws and other legal requirements that need to be followed or there could be legal ramifications for Mehen. Because of that complexity and the risk of legal issues, we need a strong and disciplined development team. Documenting the system requirements, following through with system test plans, secure and robust implementation of the service, and safeguarding our customers’ KYC information will be paramount to our success. Having the funding secured will allow us to retain and even possibly attract the types of engineers required to make this project a success.