1. Who is the interested party for this collateral application?
2. Provide a brief high-level overview of the project, with a focus on the applying collateral token
The DeFi Money Market (DMM) Ecosystem is a protocol built on Ethereum that brings interest-generating real world assets on-chain into Ethereum in a transparent and trust-minimized manner enabling DeFi users to earn a stable uncorrelated yield (currently 6.25% APY). Users gain exposure to these assets by depositing their Ethereum digital assets (e.g. DAI USDC) into the DMM Ecosystem and receive back a corresponding mToken (e.g. mDAI mUSDC) representing a claim on their deposit (like Compound cTokens). A portion of these deposited funds are then used to purchase interest generating real-world assets and the rest is left in the contract for withdrawal liquidity.
Users can hold, transfer, and trade mTokens in any Ethereum wallet as tokens are fully ERC20 compliant. There is a blacklist, but there is no whitelist for mTokens. Users can redeem their mTokens to withdraw their share of the underlying digital asset that was originally deposited plus interest generated. mTokens are overcollateralized in terms of both the valuation of real-world assets (collateral worth ≥100% of mToken value) and in the interest streams those assets generate (generates more than 6.25% APY).
As such, mTokens are stable and predictable in value compared to cryptocurrencies such as ETH, making it an excellent addition to the MakerDAO credit system as an uncorrelated collateral option for users and the DMMF to mint DAI against real world assets. mTokens are currently overcollateralized with $8.5M in automobiles within the United States. More information can be found on-chain or on our Explorer page.
3. Provide a brief history of the project
The DeFi Money Market (DMM) was launched in March 2020 in partnership with Chainlink to bring real world assets into Ethereum’s DeFi ecosystem. DMM has also been backed by Billionaire Tim Draper’s Venture Studio who purchased a stake of the DMM DAO. Since release, over $245k worth of mTokens have been purchased on the Swap app with mTokens now supported on the Trust Wallet and Coinbase Wallet.
The DeFi Money Market is built to enable anyone to earn a stable yield on their digital assets in a permissionless and borderless manner, requiring nothing more than an internet connection and an Ethereum address. The DeFi Money Market Foundation (DMMF) is currently overseeing the DMM protocol, but ownership of the protocol, real world assets, and off-chain fiat holdings will be transferred to the DMM DAO which will be run and managed by a distributed group of DMG governance token holders. Decentralization of DMM is a continual work in progress, but we are working to ensure DMM is as transparent and trust-minimized as possible.
4. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.
DMM Controller Contract:
Off-chain Assets Valuator:
Underlying Token Valuator:
5. Link any available audits of the project. Both procedural and smart contract focused audits.
DMM is currently undergoing a Smart Contract security audit which is being performed by the security firm SECBIT who previously audited Loopring, DDEX, and more. The audit process thus far has been positive with no critical issues found and the final report will be published publicly once complete.
6. Link to any active communities relating to your project.
7. How is the applying collateral type currently used?
mTokens (mDAI mUSDC) are currently being used by Ethereum users to earn 6.25% on their digital assets by gaining exposure to interest-generating real world assets. As mTokens are ERC20 compliant, they can be transferred using any regular Ethereum wallet. We are working with various DeFi protocols, aggregators, and portals so mTokens can be utilized by the most users. We believe adding mTokens as collateral in the MakerDAO credit system (Vaults) can boost the overall liquidity of DAI and help act as a peg stabilizer as these assets are uncorrelated to cryptocurrencies such as ETH and have minimal opportunity cost as mTokens are interest generating enabling users to get the most utility out of their deposited funds, namely stablecoins.
8. Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?
Currently the DeFi Money Market Foundation (DMMF) holds and owns the contractual rights to the underlying collateral (real world assets) through a first lien, senior-secured position meaning it is above all other rights and has first priority in the event of lack of payment. The DMMF was established and has an office in the United Arab Emirates in cooperation with the UAE government’s Dubai International Financial Centre (DIFC). The DIFC is home to an internationally recognized, independent regulator and a proven judicial system with an English common law framework being the leading financial hub for the Middle East, Africa, and South Asia regions.
However, ownership of the protocol, its real world assets, and fiat currency reserves will be transferred from the DMMF to the DMM DAO which will substantially reduce any single points of failure.
The beginning process to the decentralization of governance, starts with a transitional DAO acting as custodian, essentially the role the DMMF’s core team fulfilled in the ecosystem at implementation. This initial transition will remove central points of control and help ensure that the protocol is unable to be captured or censored, while also moving control of the treasury from the core team members to a DAO. Functionally, this will look like multiple independent teams financed by revenue from the DAO to maintain critical functions for the ecosystem’s protocol. The DMM DAO will be established after the transitional DAO, and while the structure is to be determined, the core team’s initial view is to develop a representative democracy. The ultimate goal is to decentralize control of the DMM Ecosystem and its collateral as much as possible.
9. Where does exchange for the asset occur?
Wrapping and unwrapping of mTokens occurs on the DMM Swap app, but we are working with 1inch.exchange to get listed and enable any token <-> mToken swapping capability. The underlying digital assets that can be wrapped in mTokens or redeemed from mTokens like DAI and USDC are already highly liquid in DeFi applications and exchanges. The redeeming process is subject to the digital asset liquidity available in the mTokens contract (portion not sold for real world assets), but secondary markets can be created on various decentralized exchanges to fuel extra liquidity as needed. An easy way to bootstrap this is with uniswap v2 pools, e.g. DAI/mDAI and USDC/mUSDC pairings.
10. (Determined by Legal Domain Team) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.
We do not have a legal opinion or memoranda at this time.
11. (Determined by Legal Domain Team) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.
We do not have any regulatory registrations for mTokens at this time.
12. (Optional) List any possible oracle data sources for the proposed Collateral type.
A simple oracle to use would be the exchange rate built into each mToken that relays how much underlying digital assets each mToken can be redeemed for. For example mDAI can be redeemed for DAI, mUSDC to USDC, and then the stablecoins can either be assumed to be $1 in value or can be priced by using a price feed such as Chainlink’s DAI/USD reference network. In summary, valuation can be calculated by multiplying the built-in exchange rate in the mToken contract by how many mTokens are used as collateral and then multiplied by either a static value 1 or by the Chainlink/Maker price feeds for DAI/USD and USDC/USD.
13. (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type.
This is a function that the DMM Foundation could help perform and bootstrap, but a distributed set of liquidators would be the ideal solution.
Liquidations of mTokens have the interesting property that the liquidator can redeem their received mTokens for the underlying digital asset (DAI for mDAI, USDC for mUSDC) given that there is enough reserve liquidity of digital assets that haven’t been withdrawn.
Initially the reserve ratio for withdraw liquidity is currently set at 50%, but is currently residing at 100% as to grow liquidity. If there is too little liquidity in the mToken’s digital asset reserve (due to user withdraws), liquidators can then either trade their mTokens on secondary markets or redeem their mTokens at a later date when the liquidity has returned due to either user deposits or the Foundation (eventually DMM DAO) liquidating a portion of the real world assets to purchase back the underlying digital asset and deposit it into the mToken contract.
We’re excited to work with the Maker community as we believe adding DMM’s mTokens would be a mutually beneficial relationship for both projects. If you have any questions, feel free to comment below or contact us directly. Thank you!