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Debt, Interest, and Penalties for Minters

Minters incur debt for the $M tokens they mint and are charged interest on this debt. The MinterGateway manages this system.

Debt and Interest

  • Debt Accrual: When a Minter mints $M, they incur an equivalent amount of debt.
  • Continuous Indexing: Minter debt, similar to MToken earning balances, is tracked using a continuous indexing system. The debt is stored as a principal amount that grows over time as interest accrues.
  • Interest Rate Model: The interest rate charged to Minters (MINTER_RATE_MODEL) is determined by an external smart contract, the address of which is set by M0 Governance and stored in the TTGRegistrar.
  • activeOwedM: This term represents the current total value of an active Minter's obligations, including all accrued interest. It is calculated by applying the current minter index to their principal debt.

Total Owed $M Accounting

The MinterGateway tracks various categories of Minter debt:

  • Active Owed $M: The sum of interest-accruing debt from all active Minters.
  • Inactive Owed $M: The sum of fixed, non-interest-accruing debt from all deactivated Minters.
  • Total Owed $M: The aggregate of activeOwedM and inactiveOwedM.
  • Excess Owed $M: The difference between totalOwedM (interest generated from Minters) and the total supply of $M (which grows at the earner rate). This excess, if positive, represents protocol revenue and is minted directly to the DistributionVault (TTGVault) during index updates.

Penalties

The protocol imposes penalties on Minters for failing to adhere to specific operational requirements, ensuring system discipline:

  1. Missed Collateral Updates Penalty: If a Minter fails to update their collateral within the UPDATE_COLLATERAL_INTERVAL, a penalty is applied.
    • Calculation: PENALTY_RATE * principalOfActiveOwedM * missedIntervals.
    • This penalty is charged once per missed interval.
  2. Undercollateralization Penalty: If a Minter's activeOwedM exceeds the maximum allowed by their verified collateral and the MINT_RATIO, they are penalized.
    • Calculation: PENALTY_RATE * principalOfExcessOwedM * (timeSpan / UPDATE_COLLATERAL_INTERVAL).
    • This penalty is proportional to the amount and duration of the undercollateralization.

Penalties are added to the Minter's debt.