Whitelisting of USDM algorithmic stablecoin within Seamless Protocol

[OnlyMeridian]

Title: Whitelisting of USDM algorithmic stablecoin within Seamless Lending Protocol on the Base chain.
Author(s): TJ & Yair from Meridian Finance
Submission Date: 19/10/2023

Summary
Integration of USDM stablecoin for collateral and borrowing on Seamless Lending Protocol. This addition will provide a native over-collateralized stablecoin option for lenders and borrowers within the Base ecosystem.

Overview:

Meridian Mint is a decentralized, non-custodial, governance-free borrowing protocol that enables users to obtain interest-free loans against ETH collateral. Loans are paid in USDM, which is a USD-pegged stablecoin. Meridian adopts an over-collateralized lending architecture that maintains a minimum collateral ratio of 110% which is algorithmically validated and assured by a Stability Pool to maintain the pegged value of USDM. As a direct fork of the highly successful Liquity protocol, Meridian shares the exact same smart contract code base. All contracts are fully verified and can be reviewed on sourcify.

USDM offers lucrative features & advantages, that make it a highly appealing choice for both users and protocols looking to integrate:

• Zero interest rate — Borrowers can hold USDM for as long as they wish. As there is no interest to pay there is no need to worry about constantly accruing debt
• Efficient use of capital — By using a blue-chip asset such as ETH users only need to maintain a minimum collateral ratio of 110% providing more efficient usage of deposited ETH.
• Governance-free — all operations are algorithmic and fully automated, and protocol parameters are set at the time of contract deployment
• Directly redeemable — USDM can be redeemed at face value for the underlying collateral at any time
• Fully decentralized — The Meridian base contracts can be accessed by multiple third parties. This allows for different frontend operators and ensures that the protocol remains resistant to censorship

Full USDM Technical documentation and risk assessment can be found here: https://docs.meridianfinance.net/resources/technical-and-security/usdm-technical-overview

Motivation
The team behind Meridian, previously ran OmniDex, the largest exchange and lending service on Telos EVM. OmniDex was directly impacted by the failure of the Multichain Bridge collapse, which made the team acutely aware of the hazards of supporting only bridged assets. Our experience at OmniDex motivated us to create USDM—a genuinely decentralized stablecoin that addresses the pitfalls and vulnerabilities of wrapped bridged stablecoins.

We now want to proliferate the adoption of USDM within the Base ecosystem to ensure the network does not become overly reliant on either bridged or centralized stablecoins. We believe as developers in this space we have the ability to guide the industry toward a decentralized future, as it was originally intended. Small decisions made today have the potential to have great effects into the future. Meridian’s robust infrastructure has been rigorously tested and with the support and adoption from other leading Base projects, we believe it can significantly aid the shift towards genuine decentralization on Base.

~ Growth

USDM saw impressive growth in the last two months. DeFiLlama tracks the amount of ETH deposited to Meridian in order to mint USDM. Each USDM token is currently 170% collateralized by ETH.

Implementation
Add USDM stablecoin as a supported asset (whitelisting) for both lending and borrowing within the Seamless protocol.
USDM Contract Address: 0x5e06eA564efcB3158a85dBF0B9E017cb003ff56f

Meridian Finance is committed to ensuring the USDM token is always overcollateralized. Thus ensuring its hard price floor of $1 at all times. (This commitment is guaranteed algorithmically via the design of the protocol)

Meridian Finance is dedicated to promoting awareness and adoption of Seamless within our community, ensuring that the newly introduced pool on Seamless is actively used.

Meridian supports adopting the Seamless future token as a treasury asset. 5% of USDM platform fees will be used to purchase the token.

USDM belongs to Seamless as well.

[Pepperatzi224]

I really believe in integrating as much ‘Base’ native assets as we can. Enough with bridged assets!
USDM fits right in and is a robust option.

[Blockchainlover]

I’m a fan of the concept of the USDM on the seamless protocol. Unlike most bridged tokens, USDM stands out as a native token with the added benefit of being overcollateralized.

This would make a valuable addition for both lenders and borrowers.

Also I checked it out and found that it is forked from liquity. The pegging mechanism adopted by this stablecoin has demonstrated its sustainability and reliability, even in the face of extreme market conditions.

[IDCORP]

Been a user and following Meridian for quite some time. Their product is unique on Base and its lending platform is always over collaterized with ETH, making the value of USDM very stable and not affected even by extreme market conditions.

[Willypete]

Adding $USDM to the Seamless protocol is a great move. As a Meridian user, I really like how convenient and decentralized it is. Dealing with those bridge hiccups on other chains that affect USDC can be a pain, so having a stablecoin like USDM that’s all about decentralization and overcollateralization is pretty reassuring. The team is good and always seem to be working on something to make meridian better which I like, not to mention that overcollateralization makes me think it is sustainable, which I also like.

[OnlyMeridian]

I agree. We experienced enough pain with bridges getting hacked or shutting down.

On that note, we really appreciate the support & encouragement everyone here shared!
@IDCORP @Blockchainlover

[seamlessian]

The idea of adding USDM as a support asset for the Seamless lending platform truly resonates with me. As a fully decentralized stablecoin, USDM embodies the very essence of what Bitcoin and Ethereum set out to achieve - a financial system free from the risks and constraints of centralized entities. This is a fundamental requirement for any lending platform and the broader crypto space. What’s more, USDM is native to the Base chain. This means it doesn’t carry the inherent risks that come with bridged or wrapped assets. Recent incidents involving significant losses in cryptocurrency due to issues with bridges, such as the Multichain Bridge where approximately $130 million worth of cryptocurrencies vanished, highlight the importance of this feature. This is the main reason Meridian Finance was built on Base to enhance the security and reliability of transactions involving USDM. Another aspect that bolsters my support for USDM is its robust pegging mechanism. USDM is a forked from Liquity, and the mechanism has proven to be secure and has remarkable sustainability even under extreme market conditions. This kind of resilience adds a layer of credibility that’s hard to ignore. But what truly sets this protocol apart is its unique combination of two highly successful applications on Ethereum - Liquity (CDP) and GMX (Derivatives). The developer behind Merdian Finance (and USDM) @TJ_meridian on Telegram has an impressive track record, and created the number 1 DEX on Telos, however leaned the dangers of relying on bridged assets. TJ and his team are constantly improving Meridian Finance and USDM and always open to suggestions from the community, for example, they’re currently working on optimizing the GMX model to achieve greater capital efficiency. This will ultimately lead to lower trading fees, a benefit that all users will appreciate. Sorry for this long reply but I am really excited about having stable dollars on Base mainnet. Yes, there are other high volume stable coins but it is good to have multiple options when it comes to stables. This is only my opinion and not financial advice.

TLDR: I believe that the addition of USDM to the Seamless lending platform could usher in a new era of decentralization, security, reliability, and efficiency. It’s an exciting prospect and I’m eagerly looking forward to seeing it come to fruition.

[Ras]

First of all, thanks for the proposal.
Sorry for being rather sceptical, but if I found the right project on Defillama, it says that it has 147K TVL. At the same time,
Semless has over 2 mln of TVL. In this respect I wonder whether USDC supply would be sufficient to meet the demand of users. And what is more important will it be resistant enough agains various price manipulations? Oracle problem also exists.
Additionally it was launched 2 months ago, that is rather short period for a stablecoin.
Again, sorry for my scepticism, probably Im just missing something

[lewis]

Thank you for the proposal. Similar to above there are concerns on liquidity given smaller TVL. Can you please help explain utility of USDM and what is driving user demand for this vs other stablecoins on Base?

[OnlyMeridian]

Ras, I understand your concern. I’ll just say that Meridian’s mechanism is a direct fork of Liquity, which by itself has been battle-tested for years now. It survived the UST collapse, FTX, SVB shutdown, and so on.
The similarity to Liquity is perfect, as it also shares the same collateral asset, which is ETH.

In short, the pegging mechanism consists of multiple lines of defense.
The Stability Pool is the first line of defense in maintaining system solvency. It achieves this by acting as the source of liquidity to repay debt from liquidated Troves—ensuring that the total USDM supply always remains backed by collateral.

Another line of defense is the Recovery Mode, which kicks in when the Total Collateral Ratio (TCR) of the system falls below 150%. During Recovery Mode, Troves with a collateral ratio below 150% can be liquidated.

Moreover, the system blocks borrower transactions that would further decrease the TCR.

These are the main lines of defense. But more in-depth info can be read on our documentation hub: https://docs.meridianfinance.net/

Price/oracle manipulation isn’t an issue in my eyes, as you can hard peg it to 1$, as it is always redeemable for 1$ worth of ETH in the Meridian protocol app.

[OnlyMeridian]

I also understand where you are coming from as the project is still in its early days. Our team was motivated to build the stablecoin after experiencing first hand the fallout of Multichain which caused our own lending platform (OmniLend) to have to close shop. The goal for Meridian’s USDM stablecoin is to help other lending platforms reduce their exposure to centralized or bridged assets that carry their own risk.

USDM is a fully decentralized stablecoin that is backed by only ETH and has unique characteristics that aren’t available on other logarithmic stablecoins.
On a personal note, we believe as developers in this space we have the ability to guide the industry toward a decentralized future, as it was originally intended. Small decisions made today have the potential to have great effects in the future.

For reference, I’ll quote a text piece from our documentation hub, which will do a better job than me.

USDM offers lucrative features & advantages, that make it a highly appealing choice for both users and protocols looking to integrate:

• Zero interest rate — Borrowers can hold USDM for as long as they wish. As there is no interest to pay there is no need to worry about constantly accruing debt
• Efficient use of capital — By using a blue-chip asset such as ETH users only need to maintain a minimum collateral ratio of 110% providing more efficient usage of deposited ETH.
• Governance-free — all operations are algorithmic and fully automated, and protocol parameters are set at the time of contract deployment
• Directly redeemable — USDM can be redeemed at face value for the underlying collateral at any time
• Fully decentralized — The Meridian base contracts can be accessed by multiple third parties. This allows for different frontend operators and ensures that the protocol remains resistant to censorship

We like Seamless protocol which is why we approached, hopefully in the future we can work on this integration as we believe it will be a positive step toward providing greater optionality for lenders and borrowers on Base that do not want to hold centralized or bridged stablecoins.

[Smailov]

Exciting news from Seamless
USDM algorithmic stablecoin is now part of the Seamless Lending Protocol on Base chain.

This addition brings over-collateralized stability to borrowers and lenders in the Base ecosystem.

[Navyblue]

Adding USDM to the Seamless protocol is an excellent idea. As a meridian user, I appreciate its convenience and decentralized nature. I’ve experienced issues with bridges on other chains affecting USDC, so having a decentralized stablecoin like usdm is reassuring, especially since it is overcollateralized. As for the team they are responsive and polite and they answer every question head-on with out much hesitation. Looks like this is a “seamless” fit if you ask me

[Rocky]

I would love to be whitelisted for this project, although am a bit unclear on how to add USDM for lending and borrowing…
I will figure this out now, but perhaps more direct instructions would benefit all…

@OnlyMeridian

Implementation