Why I Advise MANTRA DAO, the Community Governed DeFi Platform on Polkadot

in LeoFinance2 months ago (edited)

I've been talking with my crypto frens for years, for as long as I can remember, in fact, about starting a managed fund focused on Proof of Stake coins. I'm a real believer in the potential of blockchain technology to transform certain portions of the economy that we have created for ourselves in our current post-modern capitalist society. I'd like to see less wealth inequality and more access to potentially life-changing investment opportunities for more people. The powerful cocktail of Proof of Stake (PoS) blockchains, decentralized autonomous organizations (DAO), and decentralized finance (DeFi) is the way I think we'll get there.

So when my long-time blockchain buddies John Patrick Mullin and Will Corkin told me about their vision for what they were building at MANTRA DAO, I had one thing to say:

"I'm in."

MANTRA DAO combines my long-held belief in the long-term investment thesis for holding a basket of PoS coins with my passion for DeFi and the power of decentralized governance via a DAO.

MANTRA DAO Meditation.png

Stake The Future

I love bitcoin (BTC) and think it'll be around for a long while providing the base layer of value and security for the interconnected blockchains ecosystem that we are on the cusp of constructing for ourselves as an industry. The ever-elusive ETH2, Cosmos, Polkadot, Elrond, Wanchain and others are all focused on interoperability, not only of public blockchains but also private blockchains and non-blockchained databases as well. In the future, all of these data structures ideally will be able to seamlessly interoperate in a secure and trustless manner. That's the world we're pointed towards.

Media are fond of citing statistics like every bitcoin transaction requires a minimum of 77 kWh of energy (or whatever the figure is these days) which is enough to power an energy-efficient home for a couple weeks. There's even crazier figures out there that say the Bitcoin blockchain uses as much energy as the whole of Switzerland, for example. In short, the consensus algorithm of the original Bitcoin blockchain is an extremely resource-intensive energy hog. As billions of transactions will be moving onto blockchains in the next decade, concurrent with the rise of artificial intelligence (AI) and the Internet of Things (IoT), it is unlikely that Bitcoin will continue to dominate the crypto markets as it has so far if we're taking a long-term (5-10 years) view.

As Bitcoin increases in price, more people mine it, which leads to a difficulty adjustment in the mining software, which leads to an arms race of GPUs, ASICs and other techno-acronyms that then require ever more energy. Thus, this destructive feedback loop embedded in bitcoin’s economic system very well could be an environmental disaster. However, this incredibly valid criticism of cryptocurrencies only applies to Proof of Work (PoW) coins like Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Monero (XMR), and Dash (DASH).

The alternative to PoW is Proof of Stake (PoS). PoW requires raw processing power to verify transactions and solve cryptographic puzzles, the processing of which is wasted on calculations that have no useful purpose but at least secures the blockchain upon which the calculations are being performed. An alternative means to secure a blockchain is to staking your PoS coins on the blockchain, thus proving that you have committed financial resources to the blockchain. The next generation of blockchains, the so-called third-generation blockchains, are almost all based on PoS.

To incentivize token holders to contribute their financial resources to secure a blockchain, PoS systems must offer a reward denominated in the native coins of that blockchain. The result is a bond-like yield that can be derived from staking coins. Combined with the potential price appreciation of those staking coins, investing in PoS systems has the potential to be very rewarding, especially when you factor in the power of compounding those staking rewards.

Managing Risk When Investing in Staking Coins

Of course, in crypto, a token holder faces unsystematic risk when holding just one coin. That coin could get hacked. Or the founders could exit scam. Or that technology could be rendered obsolete by some new blockchain breakthrough. With staking coins, there is an added layer of risks due to the technical requirements needed to manage the node hardware to maintain validators on multiple blockchain systems. Many of these chains even require minimum buy-ins before being eligible to operate a validator that are beyond the reach of a modest individual investor. Thus, one can argue (and many have) that these third- and fourth-generation PoS blockchain systems are just as oligarchic in nature as any system that we are currently railing against.

Enter MANTRA DAO.

MANTRA DAO offers a convenient vehicle to pool financial (and technical resources) in order to qualify for (and properly manage) some of these more rewarding opportunities in the PoS universe. Over time, by removing the unsystematic risk associated with a particular individual project via diversifying across many PoS blockchains, an accumulator of PoS coins earns direct risk-adjusted exposure to what I think is the most dominant thesis of the next decade - PoS, DeFi, DAO.

MANTRA DAO, and the OM token holders that will be an essential part of it, will mitigate the risk of some of these PoS chains not achieving meaningful growth in adoption by being a validator on many different blockchains at once. Thus, the DAO will constantly be earning staking rewards denominated in a variety of staking coins. By owning OM tokens, I own a piece of governance over the accumulated staking rewards of MANTRA DAO, which theoretically in the long run would become a diversified basket of high-quality PoS coins. In fact, owning OM tokens can be seen as equivalent to holding the tokens in the DAO because if the MANTRA DAO Foundation were to dissolve, all the assets held by the DAO would be pro-rata divided to the OM token holders. They are the beneficiaries of the foundation.

Leveraging the Accumulation of Value in the DAO via DeFi Services

To me, having a bit of claim over an increasing pile of staking coins that I don't have to manage personally was attractive enough in and of itself. However, in classic late night infomercial style...

The accumulation of value within the DAO and the (hopefully) increasing number of members joining it provides the perfect platform for offering decentralized financial services. Every user who stakes or lends their digital assets on the MANTRA DAO platform will receive, in addition to their staking interest less a small fee taken by the DAO, the OM token. MANTRA DAO uses highly secure, enterprise-grade node infrastructure that will allow our members to earn staking rewards while still retaining custody of their own crypto assets. They can generate up to 100% or double interest on their underlying principle this way.

Users can receive OM staking rewards by staking Polkadot (DOT) and other DPoS assets with MANTRA DAO. Currently, these digital assets include Kusama (KSM) and the OM token itself. We are also working to bring online a large collection of validators for an attractive portfolio of PoS coins soon after the conclusion of the Initial Membership Offering (IMO). So the potential to earn OM tokens via delegation of other PoS assets to our validators will be huge.

Immediately, those OM tokens can be used as collateral for loans. The MANTRA DAO team is also working on a method to facilitate liquidity of one's staked assets so that they might also be made available as collateral in our loan system. For instance, a user could create a tokenized representation of their staked-to-MANTRA DAO DOT and then stake this omDOT on our lending platform to simultaneously earn DOT staking rewards in addition to participating in other DeFi sources of return with the stablecoin generated from a loan collateralized by omDOT.

Once instituted, this mechanism should facilitate a sustainably growing ecosystem grounded in sound tokenomic principles that reinforce what I call the "DeFi flywheel," where staking begets lending begets more capital to stake which then gets borrowed against to acquire more assets that can be staked... and so on.

Solving Undercollateralization Through the KARMA Protocol

One of the "holy grails" of DeFi that has yet to be adequately solved is a means to safely enable loans without having to overcollateralize them. This overcollateralization is how DAI or sUSD is generated, for example. But DeFi is moving toward methods to undercollateralize loans, as you can see in this new innovation by Aave, which would potentially unlock lots of unproductive digital capital and attract more into the system.

Basically, the KARMA Protocol is an on-chain reputation system. OM token holders can grow their reputation via the KARMA Protocol and be rewarded for their contributions to MANTRA DAO. The KARMA Protocol aims at rewarding users for their contributions to the ecosystem. It’s similar to a credit score in traditional finance.

Users gain KARMA by supporting the ecosystem through:

  • Staking OM tokens, taking out & paying back loans
  • Submitting & voting on proposals
  • Joining the MANTRA POOL savings game
  • Referring friends to grow the community
  • Receiving grants to build tools that benefit the MANTRA DAO community, and more...

Users with higher KARMA gain access to various benefits, such as:

  • Increased OM staking rewards
  • Decreased staking fees
  • Free access to MANTRA POOL, a no-loss on-chain lottery
  • Lower loan interest rates
  • Loyalty rewards

Through the OM governance module, token holders can help expand on these KARMA mechanisms to make an even more robust reputation mechanism that safeguards the MANTRA DAO.

Conclusion

So there you have it! I advise MANTRA DAO not only because it is a concept started by some of my best friends in the crypto business but also because I firmly believe in the three pillars upon which the project rests -

PoS, DeFi and DAO.

I believe that together, these concepts will change the world for the better.

After all, that's the only reason why I ever got involved in blockchain in the first place.

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It is interesting enough to dig further on this awesome opportunity. A lot of material covered on this article.

Thank you for your comment. If you have any questions about the project the MANTRA DAO Telegram is pretty active and has been growing pretty steadily over the past few days. And not due to stupid shady bots!

Good luck MANTRA DAO

Posted Using LeoFinance

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