Machinist - launchpad backed by decentralized reserve currency

Summary

Machinist will be developed with a single goal in mind - to fund the development of new and exciting community-centric blockchain projects on the FUSE Network.

This is a rare opportunity to not only help shape the direction of the powerful FUSE network, but also to contribute to building the ecosystem at the foundation.

We will democratize access to some of the first projects to emerge in the FUSE Network landscape, giving our users a second chance to be among the early adopters and investors in a space that is likely to expand soon.

Machinist is a launchpad similar to ETHPad, backed by a decentralized reserve currency like the well-known blockchain project OlympusDAO.

The goal is not only to attract the best projects, but also to bring a new wave of innovation to the FUSE ecosystem.

It will be the first launchpad backed by a decentralized reserve currency ever build on a blockchain. Initiated by the Fuse Assembly and operated by FuseDAO.

About

The Fuse Assembly is a small group of community leaders who drive the FUSE ecosystem from the community side. The FuseDAO will be the formal structure for the Assembly to implement revenue-generating projects like Machinist.

Motivation

Currently, FuseDAO relies on donations to fund projects in the community. This is expected to change through the implementation of own projects managed by FuseDAO, such as Machinist, which should generate additional revenue to support more projects in the future. The FUSE community should be able to decide for themselves which projects they would like to invest in. New projects will be introduced regularly. Depending on the number of MAC tokens stacked in the Machinist protocol, investments can then be made in these projects.

Rationale

Machinist will be the first FuseDAO project which creates organic growth for the FuseDAO Treasury by Bond sales and LP Fees within the FUSE community. This newly generated liquidity will help the FuseDAO Treasury to control the MAC (Machinist ERC20) token supply. The inflow is used to increase Treasury Balance and back outstanding MAC tokens as well as regulate staking APY. Compounds yields automatically through a treasury backed currency with intrinsic value which we see in high staking rewards. The initial profit distribution will be: 90% to stakers and 10% to the FuseDAO Treasury.

The project is divided into two distinct phases. Phase one is the growth phase, which means that high stakes (APY) are needed to attract new people (possibly from other chains) and use this new liquidity to grow and stabilize FuseDAO Treasury. The APY is high at the beginning, but is steadily lowered in the second phase. The goal is to create a decentralized reserve currency in the long run that is not tied to a single asset like the USD. This is achieved by having enough liquidity from various assets to control its own market supply and demand, thereby creating a decentrali reserve currency that will eventually stabilize in terms of token price.

To put it in simple words:

People can buy MAC tokens (or provide liquidity) and invest these tokens in Machinist. By doing so, they help Machinist generate revenue, which in return allows Machinist to pay back high interest rates and fund new community-driven projects, creating a decentralized reserve currency in the long run.

Process in more detail:

Each MAC token is backed by 1 fUSD in the FuseDAO treasury. However, the tokens cannot be minted or burned by anyone except the protocol. The protocol does this only in response to the price. When MAC trades below 1 fUSD, the protocol buys back MAC and burns it; when MAC trades above 1 fUSD, the protocol mints new MAC and sells it. Since the Treasury must hold 1 fUSD and only 1 fUSD for each MAC, it makes a profit each time it buys or sells. Either it receives more than 1 fUSD for the sale or it spends less than 1 fUSD for the purchase.

There are basically 2 different mechanisms for people to acquire MAC tokens.

Method 1: Buy on open market

Purchase of MAC tokens on the open market via an Automated Market Maker at the current price.

Method 2: Bond in Machinist

Bond assets like FUSE, VOLT, fUSD token or liquidity token for fUSD/MAC, FUSE/MAC, VOLT/MAC and thereby purchase MAC tokens from Machinist at a reduced price (e.g. -10%) over a period of several days (e.g. 7 day vesting).

Staking

Regardless of how the user acquired his MAC token, he usually wants to hold it for a certain period of time. Machinist rebases every 8 hours, thus paying interest back to staking users in the form of newly generated MAC tokens. OHM has coined the phrase 3,3 which basically means that if everyone stakes, everyone, including each individual, as well as the protocol will win in the long run.

Meanwhile, Machinist receives fees from liquidity provided via bonds and uses this newly generated revenue to pay interest to Stakers and ensure a healthy treasury in the event of a market downturn. Additional revenue not distributed to Stakers goes directly into a Gnosis Safe (FuseDAO Treasury) and is used to grow the Fuse ecosystem from a community-centric standpoint.

Example

  • Currently, 100 MAC staked, 100 sMAC outstanding
  • Protocol earned $10, which will be converted to 10 MAC
  • 10 MAC will be sent to the contract, which results in 110 MAC staked, 100 sMAC outstanding
  • 100 sMAC will be rebased to 110 (10%), which means your sMAC will be increased by 10% too

Bonds

MAC tokens can be purchased directly from Machinist at a reduced price (e.g. -10%) over a period of several days (e.g. 7 days vesting).

The protocol will start with these 4 bonds with different ROIs to incentivise people to lend money to the protocol:

Single assets

  • fUSD
  • FUSE

Liquidity Token on fusefi

  • fUSD/MAC LP
  • FUSE/MAC LP

The protocol will provide those 2 bonds shortly after launch of the VoltDAO:

Single assets

  • VOLT

Liquidity Token on fusefi

  • VOLT/MAC LP

Objectives

Machinist should:

  • Grow the FUSE community by getting people who don’t normally participate in launchpads or decentralized reserve currency projects excited about by integrating WalletConnect and making it mobile useable via fuse.cash
  • Build a strong and growing FUSE ecosystem by funding and providing liquidity to new community-driven projects
  • Allow the community to invest in early-stage blockchain projects with great potential
  • Create a decentralized reserve currency (MAC) in the long term that is not tied to a single asset such as the USD by having enough liquidity of different assets to control its own market
  • Incentivize new customers (potentially from other chains) to buy/bond MAC and participate through high APY to grow FuseDAO treasury

Machinist is:

  • Trusted due to the fact that it is led by community leaders from FuseDAO
  • Transparent, as the FuseDAO publicly votes on which projects are supported and with how much funding
  • Secure, since it is a multisig system and no single person can move funds without the majority of the FuseDAO (via Gnosis Safe)
  • Innovative, because it financially supports new projects on the FUSE Network to try out cutting-edge ideas

Deliverables

  • Deployed smart contracts of the protocol on the Fuse Sparknet Test Network
  • Deployed smart contracts of the protocol on the Fuse Main Network
  • Design and launch a user-friendly fuse.cash compatible (via WalletConnect) frontend dApp that’s simple and intuitive to use (supports for Metamask as well)
  • V1 (01/2022)
    • Stake MAC token to accumulate gMAC (which will be used in V2 and V3)
    • Bond assets to purchase MAC at a reduced price (including auto staking those bonds to accumulate gMAC automatically)
  • V2 (02/2022)
    • Governance to democratically decide which projects to list
  • V3 (03/2022)
    • Tier IDO system to invest into new projects based on staked MAC

Budget

A total budget of 200k FUSE is requested for the project. The budget is divided into liquidity pools and project setup.

1. Liquidity Pool Budget

  • 90% of total budget
  • 180.000 FUSE

The project needs initial liquidity to provide fUSD and FUSE pools for the MAC token on fusefi to start with an intended price per token of 1 fUSD.

  • 75% of LP budget: fUSD/MAC
    • To onboard new users from other chains via USDC/fUSD pair
  • 25% of LP budget: FUSE/MAC
    • To onboard existing users who are already holding fuse in their pockets
    • To incentivise the community to lock up their fuse in the FuseDAO treasury

2. Project Setup Budget

  • 10% of total budget
  • 20.000 FUSE

The project needs to be implemented, deployed and operated on the Fuse Network by two developers and one external designer / animator (who did the Cozy Cosmonauts Artwork and Animations). The project setup budget will be split between those 3 people.

Contributors

Bertrand Juglas (+20 years of software development experience) and Jan Owiesniak (+10 years of software development experience) are both active contributors in the Fuse community and 2 of 5 founding members of the Fuse Assembly.

7 Likes

A great initiative that is exactly what the Fuse ecosystem needs for the growth it deserves!

Some questions that popped up in my mind, please correct me if I misunderstood something:

  1. If I understand correctly, MAC token is designed as a stable token is that the case? I checked the mentioned OHM token and it is not designed as a stable token and I think it might make more sense for it to have a free-floating value.
  2. If 1 is true (i.e. MAC is a stable token), then in many cases it might be a disadvantage for the bond investors, since the bonded tokens’ value (e.g. Fuse or Volt) may appreciate much more than the 10% profit that the investor can make. Please correct me if I’m missing something.
  3. Under the Staking section, it is said that “Machinist receives fees from liquidity provided via bonds and uses this newly generated revenue to pay interest to Stakers”. Can you elaborate what are those fees? Are they related to the yield generated by staking the treasury tokens in other protocols (e.g. Fuse staking), or something else?

Thanks!

1 Like

Machinist is backed not pegged

Machinist is not a stablecoin. Rather, it is a decentralized reserve currency.

A stablecoin is usually pegged to fiat currencies such as the U.S. dollar (e.g. $USDC) and is always valued at $1.

A reserve currency, on the other hand, is not pegged to anything. Each MAC token is backed by a basket of assets such as fUSD and FUSE (later VOLT), as well as liquidity pool tokens such as fUSD/MAC and FUSE/MAC (later VOLT/MAC).

Each MAC in the Treasury must be backed by at least 1 fUSD (or the same amount of FUSE or VOLT with a current market value of 1 USD), which means that the minimum price (“floor”) of MAC is 1 USD. The price of MAC is cannot fall below this value and is likely to be much higher.

Revenue by bonds

When you enter into a bond, you trigger the creation of MAC by “buying” MAC directly from the treasury, but at a discount. In exchange for MACs at a discount, you provide assets such as fUSD, FUSE, VOLT, or LP tokens from liquidity pools such as MAC-FUSE and MAC-fUSD (later MAC-VOLT).

Let’s say the current price of 1 MAC on fuse.fi for the fUSD/MAC pair is $12. Machinist now offers a discount to purchase 1 MAC directly via the protocol for $11 instead. This means there is a $10 profit for the protocol because it’s only pegged to $1. The protocol will mint new MAC token for every dollar made in profit. 10 new MAC will be minted.

  • 10% goes to the treasury
  • 90% becomes staking rewards to be paid to others who have staked MAC. This is called a rebase

Revenue by liquidity providing

Users who contribute liquidity to liquidity pools on fuse.fi receive LP tokens that can be used to earn rewards on every trade.

The rewards are proportional to your contribution/ownership of the pool. Many traders are looking for quick profit opportunities by joining liquidity pools on their launch day, accumulating trading fees and reward tokens, and then exiting the liquidity pool and selling their reward tokens for profit. This can affect the liquidity of the tokens and the protocol behind them.

For this reason, Machinist takes the approach of “owning” its liquidity rather than being exposed to hoarding and dumping by liquidity miners.

It is also possible to deposit liquidity provider tokens from fuse.fi pools containing MAC instead of single assets.

Once you provide liquidity to these pools e.g. fUSD/MAC or FUSE/MAC (later VOLT/MAC), you get LP tokens in return. You can then take these LP tokens and deposit them Machinist in exchange for MAC at a discount.

Since holders of liquidity pool tokens earn trading fees with every transaction, by owning LP tokens Machinist can also earn trading fees. Those generated revenue will be shared in the same way with the treasury (10%) and the stakers (90%) as mentioned before on every rebase.

Bonding is a win-win situation because the user receives MAC at a discount, and the treasury is receiving more assets such as fUSD and FUSE to back the MAC token.

Jan, thanks for answering.

The “Revenue by liquidity providing” part makes a lot of sense, I like the approach :slight_smile:

However, I’m still confused a bit by the following statement in the proposal which made me think that MAC is a stable token pegged to 1 USD:

“When MAC trades below 1 fUSD, the protocol buys back MAC and burns it; when MAC trades above 1 fUSD, the protocol mints new MAC and sells it. Since the Treasury must hold 1 fUSD and only 1 fUSD for each MAC, it makes a profit each time it buys or sells. Either it receives more than 1 fUSD for the sale or it spends less than 1 fUSD for the purchase.”

Also in your answer you wrote “This means there is a $10 profit for the protocol because it’s only pegged to $1”. Here do you mean MAC is pegged to $1?

Each MAC is backed by assets that have a value of at least $1, but it is not pegged to the dollar. Thus, the token always has a value of at least 1 USD, but can (most likely) have significantly more depending on the assets in the treasury.