Introduction

Stablecoins have proven reliable for handling transactions in the crypto world. However, the most popular types defy what crypto stands for either by being centralized, over-collateralized, or using unreliable algorithms.

Mint Cash proposes a novel payment and savings system backed by Bitcoin (the most decentralized and inflation-resistant asset), based on the infamous Terra protocol that fell into a death spiral. It uses Terra’s codebase and design and eliminates its flaws to create a more stable system of currency management. This article delves into the Mint Cash project, how it works, and the technical and economic refinements that could make it stand out.

What is Mint Cash?

Mint Cash is a project that believes in the right to financial privacy and free movement of capital. Inspired by the successful run of Terra’s UST Stablecoin and Anchor Protocol before it ceased operation in 2022. It aims to create a currency not prone to centralization by redesigning Terra’s codebase from an algorithmic system to a collateralized digital currency system.

Mint Cash employs a unique approach of constructing two separate synthetic swap mechanisms that purely rely on Bitcoin to maintain buying power. Also, it uses monetary stability models proven by contemporary currency policies, as well as strives for capital efficiency, and adjusts interest rates to prevent interest arbitrage, thus preventing net value outflow. Furthermore, it uses liquid staking collateral to power interest, adjusted based on external interest rates and real money demand. This not only provides Mint Cash holders with a consistent yield source but also ensures high efficiency in the Mint Cash ecosystem.

Through synthetic swaps and borrows, Mint Cash allows the integration of non-US dollar currencies with DeFi protocols primarily denominated in the U.S. Dollar.

Brief History Of Mint Cash

Mint Cash was launched in October 2023, by two anonymous developers Shin Hyojin, and Minjae Yang. It gained notoriety after the news of its airdrop increased the price of the moribund $USTC by 300%, from $0.0133 to $0.072. Shin Hyojin claims to be the team lead and author of the project’s whitepaper.

Actively involved with the project are two anonymous members Daniel Hong (who claims to be a former team member of the defunct Anchor Protocol) and Junho Yeo, both founders of Aleph Research. The four members frequently release information about the project via X (formerly Twitter).

Current State of Mint Cash

As of the time of writing in December 2023, there are a lot of details yet to be released about Mint Cash, while it has a white paper and a functional website and social media pages, there’s no specified date for the release of its native token. Funding-wise, it’s still seeking funds from venture capitalists and frequently faces FUD (fear, uncertainty, and doubt) on X.

Its proposed ticker symbol ($MINT) is similar to another already existing project, Mint Club—a smart token-building platform that has no need to code and provides instant liquidity. Its utility token $MINT currently trades on exchanges.

However, Mint Cash appears to be a promising project with a novel use case but has a long way to go in terms of relaying plans to the public and convincing the crypto community that it’s a reliable project that would stand the test of time.

How Does Mint Cash Work?

Source: Mint Cash — This flowchart shows a simplified view synthetic swap mechanism; Bitcoin and Mint are swappable via the mint2 module, while Mint and Cash go via the market module.

Mint Cash operates as a heavily modified version of Terra Core, patching its mechanism-level flaws and unlocking even more use cases. The project aims to establish a system where all stablecoins are fully backed by Bitcoin and the ability for anyone to seamlessly “swap” Bitcoin to and from Mint (Luna equivalent) or Cash (UST equivalent stablecoin).

The project implements a unique trading curve designed to generate trading liquidity on demand. This serves as an initial market generation and bootstrapping mechanism, capable of creating markets for virtually any illiquid asset, given there is demand for them in exchange for liquid assets. A downside is that the curve creates exponential implied volatility, therefore they plan to gradually phase this out with a hybrid market that has both liquidity on demand and synthetic market curve.

Importantly, the redesign ensures that new Mint or Cash cannot be minted without explicit Bitcoin collateral, eliminating the possibility of free airdrops or private sales for these tokens.

The valuation of Mint within the Mint Cash system is tied to the direct collateralization by Bitcoin. The system acknowledges the potential vulnerability to oracle attacks, where malicious actors manipulate or provide false information to an oracle, compromising the integrity of smart contracts or decentralized applications (DApps). A mitigation strategy involves using the value of Bitcoin as a reference for the oracle, rather than solely relying on the direct market value of Mint. This approach, intended to address oracle issues, introduces a non-synthetic asset as collateral, establishing a linear price-to-oracle correlation rather than an exponential one, particularly during the initial period when Mint might have limited liquidity.

Monetary Stability Mechanisms

Mint Cash uses four critical mechanisms for ensuring monetary stability. They are:

• Staked Mint (bMINT) Module
• Liquidations Module
• Taxation Module
• Anchor Sail

Staked Mint Module

This was designed to solve the issue of supply-demand mismatch created by over-collateralization.

Mint Cash introduces a staking approach different from the standard proof-of-stake blockchains. Contributors to Mint’s ecosystem, whether through delegating Mint to validators or participating in the minting of bMINT (a liquid staking derivative), take on the initial risk of under-collateralization. In return, they are rewarded with transaction fees and taxes on Cash stablecoins or Anchor interest.

Source: Mint Cash — Mint Cash combines Bitcoin collateralization with proof of stake and liquid staking.

In case of a protocol-invoked liquidation event, Mint stakers bear the brunt, experiencing equal slashes across the entire validator set. Also, the protocol sets a globally applicable minimum staking rate, influencing the decision to trigger protocol-wide forced liquidations.

It’s essential to note that undelegations in Mint may be subject to a vesting period, introducing the concept of a gradual release of staked assets over time, other than the immediate release commonly observed in other staking mechanisms.

Liquidations Module

This is a mechanism designed to control a liquidation event, as adopted from other synthetic asset protocols.

In Mint Cash, a liquidation event happens if the staked Mint falls below the minimum staking rate. It uses a protocol-wide parameter, “LiquidationWeights”, which decides how much Mint stakers are affected compared to liquid Mint when dealing with a decrease in overall value.

During a liquidation auction, both Mint and Cash are accepted. However, bids in Cash take priority over bids in liquid Mint. Any assets received are immediately burned to maintain the mint staking rate above the minimum threshold.

Also, Mint Cash charges levy during liquidation events;

• Protocol liquidation fees are imposed by the protocol to manage capital exits.
• Liquidation premium is paid to liquidators as compensation for participating in protocol liquidations.

Taxation Module

Higher tax rates and interest rates contribute to monetary contraction, while lower rates do the opposite. Mint Cash uses tax and interest rates as levers for quick adjustments of money supply, as governance proposals might take more time.

Adopted Features From Terra Protocol

Mint Cash leverages the best features of Terra for both technical and economic purposes. Here’s a breakdown of the adopted features for a comprehensive understanding:

Economic Features

• No Centralized Collateral Risk: Mint Cash like Terra avoids backing against centralized assets, as done by USDC and USDT. It is not backed by assets controlled by governments or private entities. It remains censorship-resistant and beyond the reach of government sanctions, a fundamental principle of cryptocurrency.
• Support for Non-U.S. Dollar Stablecoins: Mint Cash also adopts Terra’s multi-fiat compatibility, provided the currencies meet specific criteria, including liquidity for trading against the native token, reliable price oracles, and accessible public information for setting economic parameters without disrupting stability mechanisms for other stablecoins.
• Cash Taxation and Incentives: Mint Cash adopts Terra’s taxation model in addition to standard transaction fees to provide incentives for risk-taking without resorting to inflation. Notably, unlike many proof-of-stake assets, the Mint Cash system eliminates inflation, ensuring that all minted assets are directly backed by Bitcoin. This is important as Mint stakers take on additional collateral risk compared to liquid Mint holders, necessitating extra incentives.

Technical Features

• Built on Cosmos SDK: Similar to Terra, Mint Cash is built on the Cosmos Software Development Kit (SDK), offering a robust foundation for its blockchain architecture.
• Secure Cross-Chain Asset Bridging via Inter-Blockchain Communication (IBC): Mint Cash relies on IBC for secure cross-chain asset bridging and messaging. This is essential for collateral types not native to any smart contract-supporting chain, ensuring reliable and decentralized asset transport.
• Vertical Integration: Mint Cash uses Cosmos SDK to integrate technical and economic systems like smart contract execution, transaction processing, and economic policies, avoiding potential security vulnerabilities associated with smart contract-level solutions.

Key Redesigns To Terra Protocol

Decentralized Collateralization: In contrast to Terra’s algorithmic stablecoin pegging, Mint Cash adopts a fully collateralized digital currency system. Every unit of minted currency within Mint Cash is secured by Bitcoin. Unlike other collateralized stablecoin systems, Mint Cash does not issue currency against loan positions, all units of currency are minted through synthetic swaps.

Liquidity Construction: Mint Cash strategically mirrors central bank policies by engaging in forex transactions and liquidity provision. This is achieved through the implementation of both automated liquidity management and virtual automated market makers (VAMMS). Any user can deposit Bitcoin in exchange for Mint, a token equivalent to Luna under the Terra system. Mint can also be burnt and redeemed back to underlying Bitcoins. Given the absence of initial market liquidity for Mint, the protocol assumes the responsibility of constructing a market with sufficient trading liquidity. It also determines the exchange ratio between Bitcoins and Mint, where Mint is issued and burned.

Swift Monetary Policy Implementation: Mint Cash uses tax rates to control the token supply dynamics within its ecosystem. Higher tax rates are designed to decrease the token supply, and conversely, lower tax rates can increase the token supply. In instances where there is a need for reduced liquidity, Mint Cash leverages taxation as a tool to promptly implement monetary policies. This eliminates the need to await potentially time-consuming governance proposals.

Currency Stability: While Terra initially propagated the idea that Luna’s buying power could contract Terra’s supply without external buybacks, Mint Cash seeks to redefine this by ensuring the collateral can sufficiently contract stablecoin supply without relying on a token that can be infinitely minted.

What is Anchor Sail?

Anchor Sail is a decentralized high-yield savings protocol on Mint Cash, named after Terra’s savings platform, Anchor Protocol. Anchor Sail will operate as Mint Cash’s savings platform that permits non-USD-denominated deposits.

Source: Mint Cash — Swapping stablecoins (Cash) of different fiat currency

This is enabled by a new synthetic forex lending module. Users can borrow CashUSD against stablecoins pegged to their domestic currencies, such as CashEUR (Euro) or CashKRW (Korean Won). The mechanism ensures that as long as there is Bitcoin liquidity against the fiat currency, users can mint Cash stablecoins. This provides an inclusive financial environment for non-USD currency users desiring to stay on their preferred currency of choice.

Also, Cash stablecoins deposited on Anchor Sail are not subject to taxation. However, its interest is taxed automatically and is either burnt or sent to the Treasury for rewarding Mint stakers.

What is Mint Cash Token (MINT)?

The project proposes two tokens: MINT, serving as the native token, and CASH, functioning as the stablecoin pegged to various fiat currencies, and backed by Bitcoin. The flagship stablecoin is named CashSDR.

MINT operates as a native proof-of-stake token and can only be issued with Bitcoin collateral, presenting an opportunity for effective capital control on a permissionless system.

MINT absorbs temporary value fluctuations that arise between the issued CASH and the Bitcoin held as collateral. Users who stake MINT receive rewards, compensating them for taking on the risks associated with these value fluctuations.

Proposed Tokenomics

Mint Cash’s whitepaper discusses a lot about its economic policies and how they can maintain monetary stability. However, specific details on tokenomics are currently unavailable as the project is still in its early stages. However, Mint Cash as at the time of writing, plans to airdrop early adopters; $oppaMINT (Mint call option token) and $ANCs (governance token for Anchor Sail).

Highlights

Burndrop: Mint Cash Asset Distribution for Burnt USTC

Source: Mint Cash

The Burndrop program will initiate the distribution of a “basket” of tokens. Initially, this basket comprises two confirmed assets, and additional tokens may be included as the program evolves during its development for final distribution.

Throughout the burndrop period, users of Terra Classic can burn their $USTC, leading to the redemption of $oppaMINT and $ANCs. This mechanism facilitates user participation and incentivizes the community during the burndrop program.

The following criteria are required for eligibility:

• UST or LUNA holders prior to the crash on May 10th, 2022.
• Users Lock and burn specified amounts of USTC with Mint Cash’s airdrop contract.

For more information about the airdrop, see Burndrop: Mint Cash asset distribution for burnt USTC and its post on X.

Terra’s Disclaimer

On the 27th of November, 2023 Terra released a disclaimer via its X account stating that “Terraform Labs is not involved in Mint Cash in any capacity.”