Skip to content

Moria Protocol Test Run #1 Overview

A note on the first test run with start in December 2024.

This test run will end no later than May 2025 and will conclude with a sunset mechanism.

Participants are strongly encouraged to familiarize themselves with the experimental nature of this test run and the risks involved.

Introduction

The Moria Protocol is an experimental DeFi platform built on the Bitcoin Cash blockchain, enabling users to mint decentralized stablecoins backed by BCH.

Purpose of the Test Run

This test run serves as a proof of concept for the Moria Protocol, allowing developers and users to assess its functionality and performance in real-world conditions. The current deployment operates under the ticker "MUSD". A key objective of this test run is to identify bugs, issues, or systemic problems that may arise during operation. Additionally, the test aims to evaluate whether MUSD can maintain a price stability close to that of USD. Upon completion, the protocol will transition to a new test run or into its finalized deployment, using the same ticker, while the current ticker will be renamed "MUSDv0."

Key Features

  • Decentralized Loans: The protocol enables users to mint MUSD by depositing BCH as collateral.
  • Price Oracle: The protocol relies on an external oracle to track the BCH/USD price.

Collateralization and Liquidation

When a loan becomes undercollateralized due to market swings—such as a drop in the BCH price lowering the value of the collateral—all loans in this state become available for liquidation by other users. Liquidators repay the loan using MUSD, unlocking the collateral, which is then released to the liquidator.

To avoid liquidation, users must maintain a healthy collateralization ratio above the required threshold of 110%.

Acquiring MUSD for Loan Repayment

Users can obtain MUSD through various means, not just by minting it with the Moria Protocol. For example, users can swap BCH for MUSD on platforms like Cauldron. These acquired MUSD tokens can then be used within the Moria Protocol to repay other users' undercollateralized loans, unlocking the associated collateral.

Experimental Nature and Risks

  • Experimental Protocol: Moria is a test deployment and may have undetected bugs or vulnerabilities in the smart contracts, deployment process, or system design. These could result in partial or complete loss of funds.
  • Uncertain Longevity: The test run's duration depends on performance and stability. The protocol may be terminated early if severe issues are identified.
  • Oracle outside of protocols control: For this test run, the Moria protocol uses oracles.cash. These oracles provide no guarantee of longevity.
  • No Guarantees: Participation is entirely at the user’s own risk, and there are no guarantees of system performance, reliability, or security.

Sunset Mechanism

The test run will conclude with a "sunset" event, which marks the end of this deployment.

Planned End Time: No later than May 2025.

Early Sunset Triggers:

  • The "floating peg" of MUSD severely underperforms for three consecutive days.
  • The oracle is compromised or remains offline for an extended period.
  • The deployers reserve the right to trigger sunset of the protocol early at their sole discretion, with or without a specific reason.
  • The deployers reserve the right to refrain from triggering sunset, even when conditions for early termination are met.

What Happens During Sunset

During sunset, anyone can pay back an outstanding loan and redeem BCH equivalent to its MUSD value, regardless of ownership. MUSD holders can redeem BCH at a fixed rate of 1 USD == 1 MUSD by paying back any loan. Original loan owners receive all overcollateral left in the contract.

However, it is important to note that redemption is not guaranteed. If the protocol is compromised or if collateral is insufficient due to systemic issues, users may not be able to redeem their full amounts. Participation carries inherent risks associated with the experimental nature of the protocol.

User Guidance

  • Encouraged Exits: Users are advised to exit the protocol before sunset or soon after it has been triggered.
  • Risk Acknowledgment: Participation in this test run involves risks due to its experimental nature. The deployers will not guarantee the absence of bugs or system inefficiencies.

Post-Test Deployment

After the test run, a new deployment of the Moria Protocol will replace the current one, adopting the same ticker (MUSD). The experimental ticker will be renamed to "MUSDv0" to distinguish it from future iterations.

Disclaimer

The Moria Protocol is a highly experimental platform. Participants should exercise caution and consider their risk tolerance before interacting with the system. The deployers reserve the right to modify or terminate the test run without prior notice.