Protocol Mechanics & Reward Programmability

The M0 protocol is the platform powering builders of safe, programmable, interoperable stablecoins. It introduces a superior coordination mechanism that democratizes access to the generation and management of programmable, digital cash instruments. There are a few key areas to understand how value flows through the protocol:

Eligible Collateral

With the goal of maintaining a standard issuance layer, as well as ensuring stablecoins built on M0 are interoperable, M0 prescribes a list of portfolio components that are deemed eligible as reserve, or collateral, for stablecoins minted on the M0 network. These assets must be held in legally isolated SPVs or similarly bankruptcy-remote structures with independent Validators confirming daily their fair market value on-chain.

The spirit of those eligibility criteria remains that of ensuring that only the safest and regulatory aligned assets will continue to constitute the value reserve, limiting regulatory arbitrage in a scenario of international issuance. While reserves remain fully orphaned and issuer-specific as part of the protocol-enabled issuance, M0 has the ability to force issuance to rely on the most stringent standards in the interest of the end customers. The current US regulatory landscape, thanks to the regulatory advancement brought forward by the GENIUS act, is running in that direction.

Mint Ratio

The mint ratio defines the percentage of a minter's collateral value that can be used to generate M0-powered stablecoins. It sets the required level of over-collateralization for each issuer and ensures that the system remains fully backed while accounting for operational and risk management needs.

Minter Rate

M0 is an accrual-based, rather than cash-based, system. The minter rate is a universal, continuously compounding rate applied to each minter's outstanding issued supply on the network. This rate is typically calibrated below the yield possibly obtained from Eligible Collateral to allow for coverage of operational costs and ensure there is a viable business for issuers.

Earner Rate

The protocol also sets an Earner Rate paid (only) to approved Earners on their holdings. Smart contracts ensure that value paid out via the Earner Rate does not exceed what accrued via the Minter Rate. When set equal to the Minter Rate—and 100% of holdings sit in approved earning extensions—100% of Minters' payments flow through as yield to Earners, continuously and programmatically.

Automatic Fee Distribution

All fees accumulate within the protocol and are redistributed automatically via smart contracts. Minters do not need to make manual payments. Instead, protocol logics take care of internal accounting (indexing) and ensure that all risk and reward parameters flow consistently across all the different environments where M0-powered stablecoins exist.

The superiority of an on-chain native, rather than off-chain manual, reward streaming system grows exponentially with the nesting of reward distribution logics, and the omni-chain expansion of all those use cases. Effectively, universal indexing allows the seamless management of exponentially complex reward streaming configuration.

Extension Yield Allocation

Each extension defines how yield is allocated—whether directly to users, to a treasury, or through customized logic. The protocol continuously streams rewards on-chain, allowing balances to grow incrementally instead of through periodic payouts. This transparency and programmability enable flexible product designs, such as real-time savings or incentive systems tailored to each partner's needs.