Mimo - Decentralized Stablecoin Pegged to the Euro

Nick Sawinyh on 01 Jun 2021

Claude told us about Euro stablecoin and token issuance protocol they are building at Mimo.

Disclosure: This article was sponsored by Mimo

Hello! What’s your background, and what are you working on?

Hi! I’m Claude Eguienta, working as a CEO for Mimo. I’m a software engineer by trade, specialized in distributed systems, but I’ve been building companies for quite some time now. I got into crypto because of a link to bitcoin.org shared on Hackernews in 2010. I was pretty mesmerized by the concept but didn’t even consider buying it. I remember running a node on my laptop for about 10 minutes and instantly closing it, thinking I would never get any coin. However, the bug had caught me, and I’ve been lurking on forums ever since, in hopes that at some point, somebody would try to leverage the distributed power of cryptocurrencies to bring back privacy and ownership to the masses. At some point, I realized I should contribute to the effort myself. Engineers don’t like to wait for other people to solve their problems.

I’ve been in the founding team of a few businesses, the most recent one being Telcoin, where I served as a CEO until mid-2020 when I joined the TenX team to build Mimo (and eventually turn TenX into Mimo).

Mimo aims to simplify the relationship people have with crypto, starting with European users.

Our first product, Mimo DeFi, helps people access usable liquidity by leveraging their crypto assets as collateral rather than selling them. Mimo isn’t the first company to provide this type of service, but it is the first to enable its users to access liquidity denominated in Euro. The way it works is simple, the hundreds of users of Mimo have deposited and locked crypto assets as collateral in what we call Vaults, and it has allowed them to mint Parallel (PAR) tokens, which are Euro stable tokens. These users can unlock their collateral when they return the stable tokens to the platform, plus a small fee currently set to 2% per year.

Mimo can therefore fulfill the currently high demand for Euro stable tokens, using people who need liquidity as sources of assets to back these tokens. This system simplifies people’s relationships with crypto in two ways. First, there is no more obligation to bet on USD to exit volatility for European users; secondly, it provides ETH, BTC, and USDC holders an alternative to selling their assets and losing their exposure.

From what I know, the people currently using it are either long-term believers in crypto or miners looking for an alternative to sell their freshly mined ETH to buy new hardware.

This video here explains how it works: https://vimeo.com/552321292/7156a6a5de.

What’s Mimo’s backstory?

Mimo came from the straightforward observation that there was an unmet need for a Euro stablecoin. With the negative interest rates in the zone, making a viable stablecoin was challenging, and companies had to resort to creative approaches to build their coins. We’ve decided to apply a radically different model, which already existed in the USD tokens sphere, limiting our dependence on interest rates. We knew there was demand because we had data from onboarding users for years in Europe, so we just had to build the product.

We’ve tested the idea by doing an open beta under a new name without revealing our identities, forcing us to work from a clean slate, without the noise of an established brand. It caught, and we’re still iterating heavily on the product.

Being heavily experienced in crypto compliance and tech, we had what we needed to build this project, but we took no chances and went straight to Quantstamp to audit the project before communicating to anyone about it.

What went into building Mimo?

Mimo wasn’t built in a day.

Mimo DeFi’s development took about six months, including a full audit of the platform by Quantstamp. If it sounds long, let me provide a bit of context. We were taking care of issues in our previous line of business as our former payment processing partner faced trouble worldwide (read, they essentially shut down). We were working on multiple parts of Mimo at the same time as we have rather specialized engineers. Only one of these parts is currently out; the rest will come a bit later.

As we were building Mimo, we’ve seen the DeFi world go from confidential to hype and ending up becoming a pillar of the industry. This evolution has allowed us to leverage even better tooling than was available at the project’s inception, such as better AMM pool software.

It was clear from the beginning that we needed to start on Ethereum. We knew the fees would be an issue, but it’s the devil you know against the devil you don’t. Ethereum is still the most open and distributed, which is of utmost importance to us. Building on Ethereum also meant that we’d have to use Solidity, which is not the most straightforward language to write secure software (I’m a Rust/Haskell/Clojure guy, and I might be biased, so please read this with a grain of salt). Thankfully, we have a solid (no pun intended) tech team, led by Badredine and Toby, and we could get Quantstamp to audit every version of our software. We’ve recently got Certik to audit as well, as a single opinion, as good as it is, is not enough considering the ambition we have and the safety we want for our users.

It was also crucial that Mimo could leverage and help multiple parts of the crypto community, so we wanted a chain allowing us to evolve towards the listing of various collaterals. We understand the risk factors that come with listing collaterals outside of the native token of the chain we pick. However, we consider that the protocol can manage these risks using a few parameters, such as debt ceilings and minimum collateralization ratios, which we can implement in Solidity. With this growth ambition and these tradeoffs in mind, Ethereum was the only good platform to start.

The single most helpful tool we’ve had in our toolbelt was Chainlink. A great staff of ours had recently left to go work with them, and this turned out to be a significant component in what makes Mimo a trustworthy platform because it relies on their excellent price feeds.

Interestingly, as soon as we launched, the Ethereum gas fees skyrocketed, resulting in many users interested but unable to try the platform for small amounts. These fees hurt initial growth, but we understood it was a price to pay before leveraging an L2 solution or allowing people to use Mimo on another chain. These growing pains helped us adjust the steering wheel from a technical standpoint while still gathering instrumental data, and we’re now confident in our technical roadmap, which now includes both L2 and other chains.

Other projects have come to light since we’ve started, and to be fully honest, we already see a few exciting concepts that will likely make it to Mimo shortly. Without disclosing too much before we’re ready, it is mostly about providing users with much more efficient use of their capital (lower the MCR), lower gas fees, and more collateral options.

What’s your business model?

We do not charge people to use Mimo.

As surprising as it will sound, Mimo, as a company, can not make money from the protocol. The small minting fee currently only pays for filling up the safety reserve and will likely eventually be redirected to incentivize PAR liquidity as the protocol grows. However, the protocol rewards its users in governance tokens in ways decided by the governance token holders. Therefore, we are strictly aligning ourselves with all the users of Mimo to make the platform successful, as the company has been a user from the first day. Interestingly, we already have deep talks about the protocol’s future with early heavy users outside of the company, and they have as much of a say as anyone else with MIMO tokens. This governance structure could sound counterintuitive, but this is by design. We are committed to building an open protocol where users are owners.

You might wonder how else we’ll keep the lights on, and the answer lies in the parts of Mimo that will reside outside of the protocol and aren’t there yet. I wish we could tell you more, but this is still a work in progress. I can share that it’s reliant on partnerships that are already established, signed, but still private because we don’t want to hype people up before products come out.

We consider our target audience to be anyone with the need for a trusted Euro crypto experience, and there is a lot we can do to serve it.

What’s your position on the regulatory landscape today?

Mimo needs to be usable and accessible for the long term, so regulations matter for us.

When talking about regulations in the context of Mimo, it’s important to dissociate the two parts of the protocol. The stable token on one side and the lending platform on the other side. The two need each other to exist, but they tend to be subject to different regulatory regimes.

It is news to no reader of Defiprime that stablecoins are now being subject to increased scrutiny. From what I’m seeing, this is healthy, but the core definition of stablecoins must be made very clear by regulators. The landscape is currently moving towards defining assets backed one-for-one by fiat money in bank accounts as stablecoins. This structure will allow regulators to reuse part of their existing e-money frameworks and enable consumers to know what they can trust. Tokens like the Parallel (PAR) token are not falling under this category as they are algorithmically pegged to their targets and technically come with no guarantees. However, I believe that we have a duty of transparency on this front, and I’m glad to see that the industry is not shying away from differentiating the algo tokens from the classic stablecoins.

When it comes to regulations in regards to DeFi platforms, the landscape is currently way less defined. This blur is not a reason to act like cowboys, and I would not encourage anyone to use a platform that they don’t fully understand and hasn’t been audited. Regulators are not the only instances that can protect users; cryptocurrency is fantastic because it puts the power back in our hands, so it’s the industry’s duty to self regulate and of the users to conduct their due diligence.

Based on my experience, dialogue with regulators works, so at Mimo, we took a few measures to limit risk and ensure we could provide service. We’ve hired the former CEO of the FMA to work with us and used a top law firm (Linklaters) to help us decide on a jurisdiction where we wouldn’t have to rely on blur but could be clear on how legitimately we could deploy Mimo. We’ve selected the UK.

What are your goals for the future?

Mimo exists to serve users, and as described above, we have quite a few people that we can help.

We’ll keep growing via direct consumer access or partnerships until it is clear that the problem we need to solve has been taken care of. It’s Europe first, but we have large geographical ambitions due to where we’ve all been conducting business so far. The way to get there is clear:

  • Make sure we’re operating legally everywhere we grow.
  • Provide kickass and secure software with excellent interfaces.
  • Connect with the best partners.
  • Provide more services to more users.

From a product standpoint, helping users not sell their assets is only one part of the story. Turning swap fees into annual returns for European users is another part that we want to bring and scale up, as the fiat consumer banking situation is not exactly exciting there. It’s time to let crypto yield shine in the hands of the masses. Our friends at Swissborg know a thing or two about this.

The biggest roadblocks we expect to face are the instability of the regulatory environment and the relationships with larger institutions if the hype around crypto starts to cool off. Everyone is your friend until the prices go sideways. We’re therefore proactively engaging with regulators, taking part in the shaping of regulations to help the industry as a whole, enabling better relationships with large institutions.

What are your future thoughts on the DeFi market?

Mimo is here for the long term, and DeFi will keep growing.

I believe DeFi as a whole is going to constitute a layer of defense for the negativity perceived around the crypto industry as a whole. First, so much staking occurring creates a price dampener which is a healthy way to limit volatility for large caps. Then, DEXes, algo stable coins, and lending platforms can turn into tremendous tools when the prices aren’t very volatile. More people are not traders than traders, and for them, DeFi is where the action takes place. Bull run? Lending platforms and DEXes shine as they enable users to seize price hike opportunities without the arbitrary limitations and withdrawal limits of centralized exchanges. Bear market? Anything leading to predictable yield, stable tokens, and even derivatives (like shorts) can boom, and that’s DeFi again. Flat waters? Then the traditional way to bank big is to leverage, which means borrowing, and DeFi is here for you again!

DeFi also represents the best alternative we have to classic trading to bring people the advantage of cryptocurrencies with a carefully selected exposure to volatility. Therefore, it will be simpler to embrace for regulators as they will see it as less disruptive for the stability of the financial systems, and DeFi users will require less protection.

DeFi is already where everything happens ahead of the rest of the space, so it is bound to grow as innovation keeps happening. When a new use-case for Ethereum tokens happens, it reaches users through DeFi first as most protocols nullify the barrier to entry (anyone can create an Uniswap pool, for example, but getting listed on a decent centralized exchange is tricky).

As Layer 2 solutions keep growing and non-custodial ways to use the blockchain reach users en masse, centralized players will need to readjust their value proposition. This growth is meaningful for users, as they will benefit from this competition between the centralized and decentralized worlds, which will inevitably lead to better products and services.

DeFi is here to stay, and it’s positive for all of us in this sphere.

Where can we go to learn more?

About the author
Nick Sawinyh
Nick Sawinyh is an LA-based crypto entrepreneur. After having spent over four years in the blockchain industry, Nick founded DeFiprime in 2019, with the idea to provide information about emerging DeFi ecosystem. He owns modest amounts of various cryptocurrencies.

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