MNT Buyback
Minterest’s Buyback process is central to the protocol’s design, with the function supporting the attraction of substantive, long term liquidity. Minterest is designed to capture greater value than contemporary money market platforms due to its ability to earn fees from liquidations in addition to interest and flash loans. This value is then used to acquire its own native MNT tokens on-market, and to distribute them back to protocol users who stake their MNT and participate in the governance process.

MNT Buyback Flow

The Minterest protocol accumulates tokens through the activity of its value capture functions which results in value being held as stablecoins. The protocol periodically swaps these accumulated tokens on-market for MNT tokens so that they can be distributed to users.
The Buyback flow includes the following steps:
  • Accumulation of fees. All leftover assets after liquidation events are swapped into stablecoins and stored in the protocol’s Preliminary Treasury. Surpluses captured from interest rate differentials applied to Minterest’s various token markets are stored directly in these pools and then later extracted and swapped into stablecoins.
  • Exchanging assets for MNT tokens. Stablecoins accumulated in the Preliminary Treasury are swapped for MNT tokens on-market. The goal of these exchange events is to reduce holdings of stablecoins and accumulate MNT tokens in the Treasury ready for distribution to users.
  • Distribution. Each month, a percentage of all fees accumulated in the Treasury go into the Buyback for distribution. The proportion to be applied to the Buyback is able to be determined by governance and is influenced by the current and predicted effectiveness of the protocol in executing its value capture mechanisms, as well as any historically accumulated balances. MNT is distributed to users who are participants in the protocol’s governance processes and is proportionally in accordance with:
    1. 1.
      the amount of MNT they have staked, and
    2. 2.
      the duration of time they have staked MNT, which is further defined below regarding MNT Loyalty Rewards.
  • The protocol triggers a Buyback Rewards Distribution event on a recurring basis. During each Buyback Rewards Distribution event, the protocol distributes the appropriate portion of the user’s MNT Buyback rewards. This forms a ‘dripping sequence’ of rewards instead of a single large distribution, which prevents gaming by users in the timing of their protocol interactions.
Brief from Josh, CEO at Minterest.

MNT Loyalty Reward

The proportion of emission rewarded to each user is determined by the user’s relative proportion of total MNT staked plus a loyalty reward adjustment determined by the duration of their MNT staking. When the Minterest protocol distributes Buyback rewards, each user’s proportions are adjusted to account for this Loyalty Reward.
The Loyalty Reward creates an incentive structure for staking MNT and participating in protocol governance over time. Additionally, it creates a switching cost for users in transferring MNT out of the protocol and so financially incentivises them to be long term holders of MNT tokens which reduces on-market supply, further supporting its value and so as detailed above, the total APY the protocol is able to provide its users.