Please describe your proposed solution.
The lack of stablecoin diversity hinders Cardano DeFi adoption.
Cardano urgently needs a fiat-backed, regulatory-compliant solution for those who prefer one or need a direct-to-fiat bridge. Fiat-backed stablecoins provide a stable store of value, increased liquidity, broader appeal, reduced risk, and improved scalability for the DeFi ecosystem.
To address this shortcoming, the Mehen team is actively building the USDM stablecoin, a Cardano native token backed 1:1 with high-quality, liquid, transparent, and audited USD assets.
Who is USDM for?
The USDM stablecoin will be minted and redeemed by ordinary people and institutions alike.
With USDM, the user will be able to:
- Instantly send US Dollars (as USDM) to anyone at any time leveraging the security and low transaction fees awarded to Cardano native tokens
- Hedge against crypto price volatility
- Be natively compatible with DeFi protocols to enable trading, lending, borrowing, fundraising, and more
- Know their tokens are on-chain verified to be backed one-to-one by US dollars with the use of decentralized Oracles and smart contract mint controls
- Have another onboarding ramp from fiat into the Cardano ecosystem via the Mehen dApp
Licensing
Mehen has made notable progress toward obtaining appropriate fiat and crypto licenses and will be open for minting and burning USDM tokens wherever it is licensed and is able to legally operate. These licenses include US FinCen registration, Money Transmitter licenses in a variety of US states and territories, as well as establishing licensed companies in other jurisdictions for non-US users.
Licensing is an important part of safeguarding our token holders' off-chain rights. State licensing officials place a high priority on making sure we can fulfill our obligations to our token holders.
USDM will fall under well-known financial regulations, providing a degree of legal and regulatory clarity. This clarity allows Mehen to deliver what no other stablecoin is currently offering:
- Direct conversion to/from USD bank reserves.
- Transparency and trust through verification
- Reinvestment back into the community
Mehen will deliver on these promises via three key objectives:
1) Issuance of USDM, a Cardano-native stablecoin that is pegged 1:1 with the US dollar, backed fully and transparently with the use of decentralized oracles verifying USDM’s supply matches the reserve of US Dollars
2) Reinvestment of proceeds generated by the stablecoin platform to extend grants and financing to organizations developing for Cardano
3) Decentralizing ownership and governance of both efforts via a Mehen user’s decentralized autonomous organization (DAO)
As proof of this commitment, the Mehen team has already achieved numerous milestones towards these promises:
- Obtained Federal FinCen Money Service Business registration, enabling operation in over a dozen states in the US.
- Money Transmitter Licenses (or equivalent) are pending in at least 6 jurisdictions, including one offshore jurisdiction that will make USDM available for non-US users.
- Token design has been completed, including:
- On-chain verification of reserves using Charil3 oracle provider
- Controlled minting and burning with in-house developed smart contracts
- On-chain workflows to ensure efficient token distribution
- Banking partners have been identified, approved, and USDM reserves accounts have been opened.
- Reserve management partners have been identified and approved.
- Internal policies and procedures, including KYC/AML policies, have been created and implemented.
- Identity verification partners have been engaged, and contracts are signed.
Revenue
Fees similar to existing exchanges like Binance and Coinbase will be applied for the USDM service. The Fee schedule will be reviewed and determined by Mehen Finance. Fees collected will pay for further development and maintenance of the Mehen dApp.
Interest revenue coming from the fiat reserves will be used by Mehen, and shared among community projects for their benefit, according to revenue share and marketing agreements. These community projects include DeFi partners, DEX partners, and NFT partners.
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
- Receiving other currencies for deposit besides USD
- Using this design to launch stablecoins in currencies besides USD
- Issuing KYC-verified credentials in Atala PRISM
Once the assets backing the Mehen stablecoin provide sufficient income, we will launch the Mehen Foundation. The Mehen Foundation will be a community-driven incubator to fund and assist projects building on Cardano.
USDM will be a valuable addition to the Cardano DeFi ecosystem and it will bring Cardano one step closer to unlocking the next phase of DeFi: RealFi.
TECHNICAL REQUIREMENTS / CODING DETAILS
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.
User administration tasks such as account updates and resolving issues from the banking and KYC partners, review account locks, and allow Mehen to comply with any legal matters.
Mehen dApp
The Mehen dApp will consist of three separate components, the website, the Mehen back end, and the on-chain processes.
dApp Website
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 balance, 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.
dApp Mehen Back End
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.
On-Chain elements
The USDM structure, including smart contracts to control USDM minting and burning based on independent oracle reserves validation have already been completed.
Additional on-chain elements will securely handle post-mint USDM flow. The tokens will be distributed to users through a series of wallets with structural native-script multi-signatory security, and tokens that are received for burning are received through a series of similarly secure wallets and burned.
Post-token-launch, we will build future on-chain elements, including custodial USDM accounts which can be used for debit card functionality, corporate cash management activities, billpay, and direct deposit.
Tech Stack
List of technologies and libraries to be used for implementing the website:
- Multiple Cardano wallet browser extensions
- Aiken
- Cardano Serialization Library
- Angular
- Java
- SpringBoot
- AWS Cloud hosting and tools (chosen based on developer's experience)
- Gitlab (this project will be open source allowing full transparency and community interaction)
- Gitbook
- Node.js
How does your proposed solution address the challenge and what benefits will this bring to the Cardano ecosystem?
The Products & Integrations Challenge focuses on two main points:
1) Creation or improvement of different products that provide value to the Cardano community and wider ecosystem:
Stablecoins offer a solution to the biggest problem facing cryptocurrencies: price fluctuations. Because USDM tokens can be swapped for $1, they are far less volatile than a blockchain’s native cryptocurrency, and offer similar benefits as cash. As such, stablecoins play an important role in adoption of blockchains as a system upon which additional financial utilities can be built.
Regular people, businesses, and enterprises will all be able to rely on USDM for:
- Price stability
- Liquidity
- Accessibility
- Consumer protection
- Transparency
2) Integrations with other existing services, products and protocols that improve the end user experience. This could mean giving the user more options or making something easier to use that benefits the wider ecosystem:
Expenses and investments are often denominated in fiat currencies. Mehen will enable projects to trade their token vs. USDM rather than only vs. ADA, thus improving the user experience for every DeFi exchange/protocol, business, and individual.
- USDM is leveraging Oracle providers from Cardano native projects like Charli3. DeFi DEXs and Protocols will directly benefit from USDM by boosting the number of users and increasing TVL across the DeFi ecosystem as a whole.
What impact will this project have for Cardano?
There is currently no fiat-backed stablecoin on Cardano. We have approached the capacity of Djed, and until ADA value recovers, there will be no ability to mint additional DJED stablecoin.
Ethereum-based stablecoins such as USDC and USDT do not operate on UTXO blockchains like Cardano. Even if USDC and USDT re-design their token to be available on Cardano, their corporate design is inadequate. Their reserves are opaque and unverified. They do not control minting and burning with a third-party reserves validator Oracle as USDM does.
USDM will be able to be held in wallets and transferred peer-to-peer without KYC/AML. However, if a user wants to send fiat and mint new USDM, or send USDM to burn and receive USD in a bank account, KYC/AML will be required.
Mehen will work with existing ecosystem partners to issue a Self Sovereign Identity (SSI) “Mehen KYC Approved” credential within IOG’s Atala PRISM standard. Having such a credential within your Atala PRISM wallet will allow improved functionality within Cardano’s DeFi and RealFi ecosystem, and will prevent costly re-verification by others in the ecosystem.
How do you intend to measure the success of your project?
The success of USDM will revolve around two primary accomplishments. Initial success will be realized when the USDM stablecoin is deployed on Cardano mainnet, with fully functional features including direct conversion to/from USD bank reserves via minting/burning USDM, transparency and trust through verification via oracle providers on chain, and stable on-chain value for users.
Further success of this project will be quantified based on adoption of USDM, including the number of jurisdictions in which the USDM is licensed to be minted/burned, the number of individual users who hold, mint, or burn USDM, the number of projects that partner with Mehen and whose participants use USDM as a composable primitive, and the total amount of USDM outstanding.
Overall, success for USDM in the Cardano ecosystem can be quantified by the marketing revenue share sent to partner projects in the ecosystem whose communities find value in using USDM, and the number of reinvestments have been made in the Cardano ecosystem. Overall growth of the Cardano deFi ecosystem can also be used as a success metric is also an indirect measure.
Please describe your plans to share the outputs and results of your project?
The community will stay up-to-date with our results, milestone progress, and other relevant news through our website, newsletter, and official social media pages. Below are links to all Mehen Finance social media platforms:
Twitter - @MehenOfficial
Facebook - https://www.facebook.com/MehenInnovations
Discord - https://discord.com/invite/guX6hGqk
Linktree - https://linktr.ee/mehenofficial
LinkedIn - www.linkedin.com/company/mehenofficial
Medium - medium.com/@MehenOfficial
Instagram - @mehen_official
Reddit - https://www.reddit.com/r/Mehen/