TheDinarian
News • Business • Investing & Finance
Could the M^0 protocol challenge Tether and USDC stablecoins?
July 19, 2024
post photo preview

Google wasn’t the first successful search engine. Nor was Facebook the first runaway social network. Tether and Circle’s USDC might be considered first generation stablecoins. Could a new wave of stablecoins usurp them? Tether reported a Q1 profit of $4.52 billion, a runaway success for a tiny team. The question is whether that is sustainable.

Luca Prosperi, CEO of M^0 Labs, believes he has the formula for the next generation of stablecoins. He makes grand claims such as the M^0 protocol becoming the central bank stablecoins. While big visions are not unusual in the cryptocurrency world, there are hints that this one might be more than hot air. For starters, the protocol infrastructure has only just launched and has no material traction, yet it managed to raise two funding rounds of $22.5 million and $35 million, with the latter led by Bain Crypto with participation from major market makers.

Two other aspects grabbed our attention. Firstly, the M^0 protocol is a decentralized one. The M stablecoin issuance is federated to multiple approved ‘minters’ who are expected to comply with their local regulations.

Stablecoin incentives

Secondly, today’s major stablecoin issuers, Circle and Tether, appear to retain the majority of the interest earned on their stablecoin reserves. That’s while others do the work.

Consider crypto exchange Binance. At the start of June 2024, Binance held $25 billion in Tether, much of it on behalf of clients. Tether earns 5% + on the $25 billion. What if another stablecoin came along and shared most of that with Binance, say 4%? That’s worth $1 billion a year to Binance.

The M^0 protocol shares most of the interest revenues with the approved distributors referred to as Earners.

This model applies equally to market makers. While Tether is currently the coin of choice for traders, if market makers are formally incentivized to hold a different stablecoin, that could change. It’s not a coincidence that several of the latest M^0 backers are market makers: Galaxy, Wintermute, GSR and Caladan.

However, that’s not to say that Tether and USDC don’t distribute rewards, they’re perhaps more ad hoc.

USDC and Tether rewards

With decentralization and incentives as distinctive M^0 features, we asked Mr Prosperi what he thinks sets M^0 apart from other new stablecoin projects. He responded it’s the all star team, the vision, and the depth and quality of its investors. Prosperi himself has a strong resumé with stints at Oliver Wyman and Morgan Stanley. He was also involved in the MakerDAO stablecoin protocol, alongside one of his co-founders who participated in the protocol from the early days. Last year M^0 recruited Circle’s VP of Product for Stablecoins, Joao Reginatto, who was with the firm for 8 years.

But the vision is the interesting aspect.

The M^0 vision

On the face of it, the M^0 protocol looks like a potential competitor to Tether and USDC with added decentralization and incentives. While the M stablecoin’s reserves are in Treasuries, the model more closely resembles MakerDAO, the protocol that started out by over-collateralizing Ether deposits and minting US dollar stablecoins, DAI. Today the collateral of the third largest stablecoin (market cap $5.3bn) is far more diverse with various cryptocurrencies making up less than half.

The concept of distributing the minting harks from MakerDAO. Previously, others have referred to the Maker protocol as the central bank of DeFi because it aims to create a non volatile asset. Mr Prosperi described Maker as a centralized repo window. He used the same terminology to describe the M^0 protocol.

“We want to create an infrastructure where many can come, access this centralized repo window and just mint the same coin, in the same way many commercial banks access the central bank and mint the same dollar,” said Mr Prosperi.

He believes that a stablecoin like USDC is more of a payment product, which is just one function of money.

With USDC he said “the backend of money creation is untouched. We are reinventing the way you can actually create money in a way more transparent way, bypassing the legacy banking system.”

“We have the ambition to reinvent the whole stack,” he added. “The ambition is reinventing monetary systems rather than creating a payment product.”

Banking system exposure

In his view, Circle is very exposed to the banking system. Circle notoriously had a de-pegging event in March 2023 when Silicon Valley Bank collapsed. That involved $3.3 billion of its cash balance out of $43 billion in reserves.

Prosperi highlighted that a sizeable chunk of USDC’s reserves are not in Treasuries but in reverse repo (56% in April 24, sometimes over two thirds). In other words, Circle (or BlackRock on its behalf) lends the cash to banks which secure the loans with Treasuries. Hence, it has credit exposure to banks even if the risk is covered by Treasuries. While that seems fine, there are periods when the entire system is fragile. The Basel Committee recently considered whether to allow reverse repo of reserves of eligible stablecoins. Eventually it said it was ok provided they are over collateralized.

As Mr Prosperi put it, “Banks are thin margin, 20 x levered institutions. 99% of the time it works. Sometimes it doesn’t.” In his view, it’s hard to optimize for both liquidity and solvency, and M^0 is choosing solvency. It won’t use repo or reverse repo. Initially all reserves will be in Treasuries.

The desire to avoid banks partly comes from Mr Prosperi’s work experience investing in bank debt. He also doesn’t believe “they’re necessary any longer”. There’s another very crypto angle. “We are building for a future that exists mainly on chain,” he said.

No blacklists at the core design

Many mainstream stablecoins support freezing or blacklists, including Tether and USDC. “Having a blacklisting functionality at the core of a stablecoin contract is absolutely devastatingly terrible design,” said Mr Prosperi.

He said that’s why “most” on chain projects adopt the DAI, because they can’t afford to have an external switcher. And it’s why the initial DAI collateral was Ether despite its volatility.

If a particular jurisdiction requires a freeze functionality, it’s possible for a local M issuer to add another layer. Effectively they’d create a wrapped version of the M stablecoin within that jurisdiction that would avoid impacting everybody else.

Beyond the eurodollar

Many stablecoin issuers don’t like the ‘stablecoin’ term. A cryptodollar is a popular alternative. Prosperi was keen to emphasize that the M stablecoin targets the eurodollar market, the offshore dollar market.

A natural question is what about the future? Would there be an M Euro? That’s not Prosperi’s vision, but as the protocol’s governance decentralizes, his influence will reduce.

If you look at web3 so far, the dollar is dominant with blockchain transcending borders. Prosperi believes the dollar’s dominance will persist for some time. However, 20 years down the line he envisions a basket, a mix of international currencies and cryptocurrencies. Now one can see shades of Facebook’s Diem and MakerDAO combined.

He also sees it coexisting with CBDCs because they bypass the commercial bank model. One of Prosperi’s comments was “If we reach the ceiling of the supply of Treasuries for the dollars, it means we’ve done a pretty good job.”

It’s far too early to predict whether the M^0 protocol represents the second wave of stablecoins. One area that’s likely to become more prominent is the incentives offered to stablecoin distributors.

 

Link

community logo
Join the TheDinarian Community
To read more articles like this, sign up and join my community today
0
What else you may like…
Videos
Podcasts
Posts
Articles
Built On Stellar XLM 💎 😉

Blockchain adoption demands both privacy and transparency. Stellar is built for both.

@tomerweller, SDF's Chief Product Officer, shares the path to privacy on Stellar:

Dont underestimate Stellar..
This is financial advice. 💎

00:01:01
⚠️ The entire cross-chain bridge & CEX model is built on a flawed premise ⚠️

The entire cross-chain bridge & CEX model is built on a flawed premise: custodial trust. This is a bug, not a feature.
​What if you could execute a native BTC <> native SOL (or ETH, USDC, USDT, XRP, RWAs, tokenized assers, etc.) swap with zero counterparty risk? No bridge, no CEX, no wrapped assets, not even a DEX!

​This video breaks down the P2P atomic swap architecture that makes it possible. (Thread 👇)

https://x.com/ReggieMiddleton/status/1973467803656032281

00:02:12
In the first SEC-CFTC Joint Roundtable in 14 years, Pyth is mentioned.

✓ The US Dept of Commerce worked with Pyth to bring data onchain

✓ Institutions are using Pyth data in live trading models

Dave Olsen, from Jump Trading Group at the SEC-CFTC Joint Roundtable ⬇️

00:00:37
👉 Coinbase just launched an AI agent for Crypto Trading

Custom AI assistants that print money in your sleep? 🔜

The future of Crypto x AI is about to go crazy.

👉 Here’s what you need to know:

💠 'Based Agent' enables creation of custom AI agents
💠 Users set up personalized agents in < 3 minutes
💠 Equipped w/ crypto wallet and on-chain functions
💠 Capable of completing trades, swaps, and staking
💠 Integrates with Coinbase’s SDK, OpenAI, & Replit

👉 What this means for the future of Crypto:

1. Open Access: Democratized access to advanced trading
2. Automated Txns: Complex trades + streamlined on-chain activity
3. AI Dominance: Est ~80% of crypto 👉txns done by AI agents by 2025

🚨 I personally wouldn't bet against Brian Armstrong and Jesse Pollak.

👉 Coinbase just launched an AI agent for Crypto Trading

⚡️XRP TREASURY RAISE COMPLETED

Nasdaq-listed VivoPower secured $19M via a common stock. Funds to be used for focused on acquiring and long-term holding of $XRP.

https://x.com/coinbureau/status/1973639082275471457?s=19

🚨BREAKING: CRYPTOCOM GETS CFTC LICENSE

Crypto ․com is now the first major crypto platform to secure a U.S. CFTC derivatives license.

Ledger now supports @hedera tokens!

This means you can now manage your favorite HTS tokens, such as @SaucerSwapLabs, @gib_plz, @HashPackApp, @KabilaApp, @dovuofficial, and more, easily and securely through Ledger Live.

Head over to Ledger Live now to check it out!

https://x.com/Ledger/status/1973355804469371017

post photo preview
The Great Onboarding: US Government Anchors Global Economy into Web3 via Pyth Network

For years, the crypto world speculated that the next major cycle would be driven by institutional adoption, with Wall Street finally legitimizing Bitcoin through vehicles like ETFs. While that prediction has indeed materialized, a recent development signifies a far more profound integration of Web3 into the global economic fabric, moving beyond mere financial products to the very infrastructure of data itself. The U.S. government has taken a monumental step, cementing Web3's role as a foundational layer for modern data distribution. This door, once opened, is poised to remain so indefinitely.

The U.S. Department of Commerce has officially partnered with leading blockchain oracle providers, Pyth Network and Chainlink, to distribute critical official economic data directly on-chain. This initiative marks a historic shift, bringing immutable, transparent, and auditable data from the federal government itself onto decentralized networks. This is not just a technological upgrade; it's a strategic move to enhance data accuracy, transparency, and accessibility for a global audience.

Specifically, Pyth Network has been selected to publish Gross Domestic Product (GDP) data, starting with quarterly releases going back five years, with plans to expand to a broader range of economic datasets. Chainlink, the other key partner, will provide data feeds from the Bureau of Economic Analysis (BEA), including Real Gross Domestic Product (GDP) and the Personal Consumption Expenditures (PCE) Price Index. This crucial economic information will be made available across a multitude of blockchain networks, including major ecosystems like Ethereum, Avalanche, Base, Bitcoin, Solana, Tron, Stellar, Arbitrum One, Polygon PoS, and Optimism.

This development is closer to science fiction than traditional finance. The same oracle network, Pyth, that secures data for over 350 decentralized applications (dApps) across more than 50 blockchains, processing over $2.5 trillion in total trading volume through its oracles, is now the system of record for the United States' core economic indicators. Pyth's extensive infrastructure, spanning over 107 blockchains and supporting more than 600 applications, positions it as a trusted source for on-chain data. This is not about speculative assets; it's about leveraging proven, robust technology for critical public services.

The significance of this collaboration cannot be overstated. By bringing official statistics on-chain, the U.S. government is embracing cryptographic verifiability and immutable publication, setting a new precedent for how governments interact with decentralized technology. This initiative aligns with broader transparency goals and is supported by Secretary of Commerce Howard Lutnick, positioning the U.S. as a world leader in finance and blockchain innovation. The decision by a federal entity to trust decentralized oracles with sensitive economic data underscores the growing institutional confidence in these networks.

This is the cycle of the great onboarding. The distinction between "Web2" and "Web3" is rapidly becoming obsolete. When government data, institutional flows, and grassroots builders all operate on the same decentralized rails, we are simply talking about the internet—a new iteration, yes, but the internet nonetheless: an immutable internet where data is not only published but also verified and distributed in real-time.

Pyth Network stands as tangible proof that this technology serves a vital purpose. It demonstrates that the industry has moved beyond abstract "crypto tech" to offering solutions that address real-world needs and are now actively sought after and understood by traditional entities. Most importantly, it proves that Web3 is no longer seeking permission; it has received the highest validation a system can receive—the trust of governments and markets alike.

This is not merely a fleeting trend; it's a crowning moment in global adoption. The U.S. government has just validated what many in the Web3 space have been building towards for years: that Web3 is not a sideshow, but a foundational layer for the future. The current cycle will be remembered as the moment the world definitively crossed this threshold, marking the last great opportunity to truly say, "we were early."

🙏 Donations Accepted 🙏

If you find value in my content, consider showing your support via:

💳 PayPal: 
1) Simply scan the QR code below 📲
2) or visit https://www.paypal.me/thedinarian

🔗 Crypto Donations👇
XRP: r9pid4yrQgs6XSFWhMZ8NkxW3gkydWNyQX
XLM: GDMJF2OCHN3NNNX4T4F6POPBTXK23GTNSNQWUMIVKESTHMQM7XDYAIZT
XDC: xdcc2C02203C4f91375889d7AfADB09E207Edf809A6

Read full Article
post photo preview
US Dept of Commerce to publish GDP data on blockchain

On Tuesday during a televised White House cabinet meeting, Commerce Secretary Howard Lutnick announced the intention to publish GDP statistics on blockchains. Today Chainlink and Pyth said they were selected as the decentralized oracles to distribute the data.

Lutnick said, “The Department of Commerce is going to start issuing its statistics on the blockchain because you are the crypto President. And we are going to put out GDP on the blockchain, so people can use the blockchain for data distribution. And then we’re going to make that available to the entire government. So, all of you can do it. We’re just ironing out all the details.”

The data includes Real GDP and the PCE Price Index, which reflects changes in the prices of domestic consumer goods and services. The statistics are released monthly and quarterly. The biggest initial use will likely be by on-chain prediction markets. But as more data comes online, such as broader inflation data or interest rates from the Federal Reserve, it could be used to automate various financial instruments. Apart from using the data in smart contracts, sources of tamperproof data 👉will become increasingly important for generative AI.

While it would be possible to procure the data from third parties, it is always ideal to get it from the source to ensure its accuracy. Getting data directly from government sources makes it tamperproof, provided the original data feed has not been manipulated before it reaches the oracle.

Source

🙏 Donations Accepted 🙏

If you find value in my content, consider showing your support via:

💳 PayPal: 
1) Simply scan the QR code below 📲
2) or visit https://www.paypal.me/thedinarian

🔗 Crypto
XRP: r9pid4yrQgs6XSFWhMZ8NkxW3gkydWNyQX
XLM: GDMJF2OCHN3NNNX4T4F6POPBTXK23GTNSNQWUMIVKESTHMQM7XDYAIZT
XDC: xdcc2C02203C4f91375889d7AfADB09E207Edf809A6

Read full Article
post photo preview
List Of Cardano Wallets

Well-known and actively maintained wallets supporting the Cardano Blockchain are EternlTyphonVesprYoroiLaceADAliteNuFiDaedalusGeroLodeWalletCoin WalletADAWalletAtomicGem WalletTrust and Exodus.

Note that in case of issues, usually only queries relating to official wallets can be answered in Cardano groups across telegram/forum. You may need to consult with specific wallet support teams for third party wallets.

Tips

  • Its is important to ensure that you're in sole control of your wallet keys, and that the keys used can be restored via alternate wallet providers if a particular one is non-functional. Hence, put extra attention to Non-Custodial and Compatibility fields.
  • The score column below is strictly a count of checks against each feature listed, the impact of specific feature (and thus, score) is up to reader's descretion.
  • The table represents current state on mainnet network, any future roadmap activities are out-of-scope.
  • Info on individual fields can be found towards the end of the page.
  • Any field that shows partial support (eg: open-source field) does not score the point for that field.

Brief info on fields above

  • Non-Custodial: are wallets where payment as well as stake keys are not shared/reused by wallet provider, and funds can be transparently verified on explorer
  • Compatibility: If the wallet mnemonics/keys can easily (for non-technical user) be used outside of specific wallet provider in major other wallets
  • Stake Control: Freedom to elect stake pool for user to delegate to (in user-friendly way)
  • Transparent Support: Easy approachability of a public interactive - eg: discord/telegram - group (with non-anonymous users) who can help out with support. Twitter/Email supports do not count for a check
  • Voting: Ability to participate in Catalyst voting process
  • Hardware Wallet: Integration with atleast Ledger Nano device
  • Native Assets: Ability to view native assets that belong to wallet
  • dApp Integration: Ability to interact with dApps
  • Stability: represents whether there have been large number of users reporting missing tokens/balance due to wallet backend being out of sync
  • Testnets Support: Ability to easily (for end-user) open wallets in atleast one of the cardano testnet networks
  • Custom Backend Support: Ability to elect a custom backend URL for selecting alternate way to submit transactions transactions created on client machines
  • Single/Multi Address Mode: Ability to use/import Single as well as Multiple Address modes for a wallet
  • Mobile App: Availability on atleast one of the popular mobile platforms
  • Desktop (app,extension,web): Ways to open wallet app on desktop PCs
  • Open Source: Whether the complete wallet (all components) are open source and can be run independently.

Source

🙏 Donations Accepted 🙏

If you find value in my content, consider showing your support via:

💳 PayPal: 
1) Simply scan the QR code below 📲
2) or visit https://www.paypal.me/thedinarian

🔗 Crypto
XRP: r9pid4yrQgs6XSFWhMZ8NkxW3gkydWNyQX
XLM: GDMJF2OCHN3NNNX4T4F6POPBTXK23GTNSNQWUMIVKESTHMQM7XDYAIZT
XDC: xdcc2C02203C4f91375889d7AfADB09E207Edf809A6

 

Read full Article
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals