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MAI Finance QI: A Dapp for Borrowing a Decentralized Stablecoin without Interest rate

By 2sats | 2sats | 11 Apr 2022


*obligatory not financial advice*

 

What is Mai Finance?

Mai Finance is a dApp on multiple blockchains that allows its users to mint a stablecoin without having to pay any interest back.

The protocol works much like Maker DAO or Abracadabra Money do. You must supply cryptocurrencies as collateral and can then mint the MAI stablecoin (also known as MIMATIC) as a loan. Your collateral is used to back the MAI, which is why you have to supply more than what you can borrow. You can pay your loan back to receive your digital assets back anytime. Should the value of the collateral drop and be at risk of no longer covering your loan, then other users will be allowed to pay some of your loan back for you and receive a share of your collateral that is 10% bigger than the value of the MAI they paid back for an instant profit. So obviously you should supply assets that you believe will grow in value, but you only lose your collateral partly each time it dips too low, not everything like with many other such dApps.

The main advantage of Mai Finance over similar projects is that you don't have to pay any interest for the MAI you borrow. This means that if you need money right now but don't want to sell your crypto because you are bullish on it, then you can use it to get a loan without worrying about any interest. This makes Mai Finance an especially useful platform for borrowing money over longer terms. However, there is a repayment fee of 0.5% of your debt that you have to pay with your collateral. For example, if you supply 100 dollars’ worth of MATIC and borrow 10 MAI, then once you repay your debt you have to pay a fee in MATIC that is equal to 0.5% of the MAI you pay back, in this example that’s 0.05 USD worth of MATIC.

Depending on which blockchain you use, you can supply MATIC, ETH, FTM, MOVR, ONE, LINK, WBTC, AAVE, CRV, SUSHI and many more cryptocurrencies as collateral. You can also use some am-tokens and yv-tokens, that you get for supplying liquidity to Aave or Yearn.Finance. This makes it possible to keep earning a yield on Aave or Yearn while also using your funds to mint MAI.

The MAI stablecoin keeps its peg to the US dollar because the protocol always assumes its value to be $1 and thanks to arbitrage trading. Should its value fall below $1 on any exchange, then users could take advantage of that and buy it for cheap to repay their debts. Should it rise above $1 than people could mint MAI to sell it for an instant profit. On Polygon there is also an "Anchor" feature that allows people the sell stablecoins like USDC, USDT and DAI for newly minted MAI and they can burn MAI to redeem the stablecoins. This Anchor works with fixed prices for MAI and the stablecoins, which further helps to fix the value should the market fluctuate.

The dApp runs on Polygon, Fantom, Avalanche, Moonriver, Cronos, Solana, Arbitrum, Harmony and Gnosis Chain. Not every chain has every feature available but all of them have an official MAI token that can be minted there, and you can also bridge between the official MAI token on each chain with AnySwap. The platform and its stablecoin seem to be still relatively unknown, but it offers great utility and is interoperable.

 

 

The QI Token

The protocol behind Mai Finance is called Qi DAO and QI is its governance token. Holding the token gives you the right to vote on things like which types of collateral should be added, how the fees should be adjusted and how the revenue and treasury should be distributed or spent.

There is a 0.5% repayment fee and a 1% fee for swaps with the Anchor. Of these fees, 30% are distributed to QI stakers and the rest is added to the treasury. This means that the QI token will become more valuable if more MAI is being minted because the holders can earn more and because the underlying treasury is growing. Holders can lock their tokens for up to 4 years and if you lock your tokens for a long time, then your vote will have more weight in the DAO and you will earn a bigger share of the fees.

There is a max supply of 200 million tokens. 5% of that supply is used for strategic partnerships, 10% are used as incentive for further development and 85% are going to the actual users. The 10% for further development are being vested for 3 years but could be stopped by the DAO if the holders choose that. The tokens for the users can be earned by minting MAI and via farming by supplying MAI to certain liquidity pools of supported DEXes. The users receive 50% of their share in the first year, then 30% in the second and then 20% in the third. Most of the supply is going to the users like it should.

If more MAI is being minted and more funds are locked in the smart contracts of the protocol, then the demand for QI will increase. That is partly because there will be more demand for the governance rights and partly because there would be more fees. The dApp and its MAI stablecoin exist on many well-established smart contract blockchains and it is very easy to bridge between them. Being able to mint MAI without worrying about interest makes it easy and more affordable to get liquidity while still holding the digital assets you are bullish on. Unfortunately, the crypto market has been bearish so far this year, which means that many people wouldn't feel comfortable to risk their cryptocurrencies to mint stablecoins, but once the market recovers there will be more demand for applications like Mai Finance.

The QI token is not listed on most centralized exchanges yet, but many DEXs like SushiSwap and Balancer offer trading pairs for it. You can use a normal MetaMask Wallet to interact with the Mai Finance platform and store the QI token.

 

 

 

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