V. Offchain Ecosystem

The M0 protocol relies on the presence of several offchain actors and components, and a feedback process referred to as “guidance” to function properly.

V.I Guidance

The Guidance feedback loop.

It is anticipated that as the M0 ecosystem grows, an increasing number of stakeholders will have an interest in its continued development and improvement. These stakeholders are referred to as Think Tanks. Much as the Basel Committee and its cooperating international regulators have provided (theoretically non-committal) guidance and rules for the banking sector, it is anticipated that similar groups and perhaps new M0-specific institutions will provide guidance for the M0 ecosystem and protocol. The protocol is designed in such a way that it can formally adopt guidance through a governance vote and enforce this guidance throughout the system via the validators. It is intended to function as follows:

Step 1

Think Tanks provide guidance.

Step 2

The TTG adopts or rejects this guidance by voting on a hash of the public document containing it.

Step 3

Permissioned Actors adjust their behavior accordingly.

Step 4

Validators withhold signatures, Cancel Propose IDs, or Freeze Minters who have not adjusted their behavior to be in line with the guidance. If there is still non-compliance, the TTG can remove errant actors from the system.

This combination of steps creates the “guidance feedback loop.”

Example Think Tanks interested in the progress of the M0 ecosystem and protocol determine that only certain jurisdictions are appropriate to host Eligible Custody Solutions. These Think Tanks put out guidance amending the definition of an Eligible Custody Solution to include a list of appropriate jurisdictions, and stipulate that all Minters should be in compliance with this list within 180 days of the proposal’s execution. The document is hashed so that all actors can validate they have the same and correct version of the guidance, and this hash is submitted to the TTG under a guidance list. The POWER holders will then vote on the proposal. If it passes, the guidance should be considered approved and enforceable. Once the 180 day window is complete (which is also defined in the guidance), validators should begin to withhold signatures on Update Collateral calls from Minters that attempt to include Eligible Collateral held in an unapproved jurisdiction in their onchain collateral value. validators can also call Cancel or Freeze on a Minter that is errant in other ways not capturable in the Update Collateral method. validators not enforcing the approved guidance should expect to be removed by the TTG.

V.II Offchain Actors and Components

Key rules for eligible collateral, custody, custodians, and Minter wind-down procedures.

The following components and their associated guidance represent those contemplated for the launch of the protocol. This list is not exhaustive and will likely change over time. While much of the guidance is currently quantitative, there is nothing prohibiting qualitative guidance that is left to the interpretation of the various actors. The guidance will also include legal templates and agreements that will contain terms required to ensure smooth operation of the offchain components.

Eligible Collateral

A description of portfolio composition which can be placed in Eligible Custody Solutions and be used to generate an onchain Collateral Value, which is subsequently used in the generation of $M.

Guidance at launch: 30-90 day US Government T-bills.

Eligible Custody Solution

A description of entity structures, jurisdictions, contractual agreements, and other details that will suffice for the custody of Eligible Collateral.

Guidance at launch: Orphaned SPV in approved jurisdiction(s).

Administrative Buffer

An amount of value that a Minter may be compelled to set aside to the Eligible Custody Solution Operator that is not included in the Minter’s Eligible Collateral. This value is intended to be used by the Eligible Custody Solution Operator to facilitate the orderly wind-down of the facility should the Minter become inactive or incapacitated.

Guidance at launch: $100,000.

Eligible Custody Solution Operators

The professional corporate servicing agents (e.g. Trustees) that manage the Eligible Custody Solution.

Guidance at launch: Any governance-approved Operator that is technically and operationally equipped (and licensed, as applicable) to act as manager for an orphaned SPV structure in the approved jurisdiction(s) as well as capable to read and interpret the relevant onchain information.

Banks

The banks that hold deposits on behalf of the Eligible Custody Solution.

Guidance at launch: Any bank in the approved jurisdiction(s).

Custodians

The custodians that hold Eligible Collateral (excluding bank deposits) on behalf of the Eligible Custody Solution.

Guidance at launch: Any bank in the approved jurisdiction(s) that are operationally equipped to custody the Eligible Collateral.

Minter Wind Down Procedures

The procedures a Minter is expected to follow should they be removed from the Minter list.

Guidance at launch: Minters will be given a 90 day grace period after being removed from the Minter list to fully wind down their operations (a “cooperative wind down”). This means they will have ZERO remaining Owed $M. Should they fail to do so in this timeframe, the remainder of their offchain value will be forfeit including the Administrative Buffer. The Administrative Buffer, in addition to remaining offchain value in excess of Owed $M, is intended to be used to finance the various offchain actors that will be involved in the uncooperative wind down.