The Malt Stablecoin
Last updated
Last updated
The Malt stablecoin is an ERC20 token designed to maintain a stable value, initially pegged to $1. Unlike traditional stablecoins, Malt doesn't rely on a centralized entity to maintain its peg. Instead, it uses a combination of algorithmic supply adjustments via the MaltSwap DEX and arbitrage strategies to grow its collateral to sustainably maintain its peg.
Malt is backed by a diverse basket of crypto assets held in smart contracts. The composition of this basket can change over time based on market conditions and protocol activity. Each asset in the basket has an associated "risk factor" that determines how much of its value counts towards Malt's collateral. The amount of collateral Malt actually counts towards its backing is always the risk adjusted value of the assets in the basket.
There is no way for any individual to mint or redeem Malt tokens. Instead all supply changes are executed by the protocol itself in response to the Malt price on stable pools (more on stable/floating pools in the MaltSwap Dex section). For example if Malt is trading at 1 Malt for 1.01 USDC and the USDC oracle price is exactly $1, then the protocol will react by minting more Malt into that pool to bring the price back to 1:1. If Malt is trading at less than $1 against another stablecoin then it will use some internal collateral to buy back Malt.
Because the protocol is always selling for more than $1 and always buying for less than $1, it is able to generate a profit from the market. This kind of seigniorage profit exists for many other stablecoins, but in many cases that profit only goes to those capable of writing the bots to capture it. Malt captures it automatically and distributes it towards growing collateral and rewarding LPs.
It is also worth noting that all of this is only happening on stable pools. Floating pools benefit from arbitrage. This means that all supply changes to Malt are tied to collateral changes in other stablecoins. So the core initial base of Malt collateral will be large majority other stablecoins. Over time arbitrage profits will start to diversify the collateral base.
