Research Summary

The report discusses an investment in Mountain Protocol, the issuer of USDM, a yield-bearing stablecoin backed by US Treasuries. The report highlights the potential of yield-bearing stablecoins and the unique features of USDM, including its regulatory compliance and yield-sharing feature. It also outlines the potential use cases and growth opportunities for USDM.

Key Takeaways

Investment in Mountain Protocol

  • Investment Announcement: The report announces an investment in Mountain Protocol, the issuer of USDM, a yield-bearing stablecoin backed by US Treasuries. The investment was led in a Series A round that included Castle Island Ventures, Coinbase Ventures, and others.

Unique Features of USDM

  • Yield-Bearing Stablecoin: USDM is a yield-bearing stablecoin that satisfies several requirements, including earning a base yield, holding assets with the same sovereign risk as the underlying fiat currency, and being prudentially regulated in a respected jurisdiction. It is also backed entirely by US Treasuries.
  • Regulatory Compliance: USDM is regulated by the Bermuda Monetary Authority and has been audited by Open Zeppelin. It is also backed entirely by US Treasuries, making it safer than other fractional or multi-asset stablecoins.

Yield Sharing as a Competitive Advantage

  • Yield Sharing: The report contends that yield sharing is a key feature that can compete with the liquidity and brand recognition that USDC and USDT offer. USDM is natively yield-bearing, giving its users the ability to earn yield daily via auto-rebasing without taking on any additional risk assumptions.

Growth Opportunities for USDM

  • Market Potential: The report is optimistic that USDM will become the market leader and scale to billions of people due to its unique features and regulatory compliance. It also highlights the potential use cases for USDM, including treasury management, dollar savings, and derivatives collateral.

Mountain Protocol’s Business Model

  • Business Model: Mountain Protocol makes money by keeping a “net interest margin,” which is calculated by tracking the difference between yield generated from US treasury assets versus the yield passed on to users in the form of USDM yield.

Actionable Insights

  • Explore the Potential of Yield-Bearing Stablecoins: Given the unique features and potential of yield-bearing stablecoins like USDM, it may be beneficial to explore their potential in the crypto market.
  • Consider the Importance of Regulatory Compliance: The report highlights the importance of regulatory compliance for stablecoins. This suggests that companies in the crypto space should prioritize regulatory compliance to ensure their products do not fail.
  • Assess the Impact of Yield Sharing: The report suggests that yield sharing can be a competitive advantage for stablecoins. Companies in the crypto space may want to assess the impact of yield sharing on their products and consider implementing it if feasible.

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