General

Risks

Supply

Borrowing

Liquidations

Staking

Mutuum (MUTM) is a decentralized, non-custodial liquidity protocol that enables users to engage as lenders, borrowers, or liquidators. Lenders deposit their crypto assets into Mutuum’s liquidity pools to earn interest, while borrowers can obtain overcollateralized loans by securing them with sufficient collateral.

Lenders contribute to liquidity by depositing cryptocurrencies into a pooled contract. Concurrently, borrowers can access these funds by providing collateral within the same contract. This system does not require individual loan matching but instead operates based on the collective pool of funds and the associated collaterals and borrowings.

Mutuum’s interest rates for both lenders and borrowers adjust automatically based on market conditions. For borrowers, the variable rate is tied to the available funds in each liquidity pool: when a high portion of the pool’s assets is borrowed, the borrowing rate increases. This mechanism encourages a balanced utilization of capital.

Meanwhile, lenders earn yields that align with the borrowers’ interest payments, and a reserve factor helps ensure that liquidity remains accessible at all times. By maintaining this liquidity buffer, Mutuum aims to provide lenders with uninterrupted access to their deposits. This dynamic model rewards stakeholders who supply capital while preserving sufficient on-chain liquidity for borrowers across the ecosystem.

Supplying liquidity in Mutuum underpins the lending ecosystem by allowing depositors to make their assets work passively. Each deposited token, whether it’s a major stablecoin or a more volatile crypto asset, feeds into a framework that balances capital efficiency with overcollateralization principles. In P2C mode, assets go into common pools with variable interest rates driven by utilization, while P2P deposits enable direct interactions with borrowers who negotiate custom terms on riskier tokens.

Every supplier receives mtTokens representing their share of the deposit plus accrued interest, tracked through smart contracts that uphold non-custodial custody. Liquidation safeguards and audits support the protocol’s resilience, ensuring higher-risk positions do not endanger the liquidity of more secure pools. Through automated rate adjustments and transparent open-source code, Mutuum aligns incentives so that both conservative and more adventurous lenders can benefit from real-time interest mechanisms and a user-centric architecture.

In Mutuum, liquidations occur when a borrower’s Stability Factor dips below a predetermined threshold, indicating their collateral no longer sufficiently backs the loan. This threshold accounts for market volatility, real-time price feeds, and risk parameters established for each asset. Once the protocol detects under-collateralization, it flags the position for liquidation. Third-party liquidators can then repay a portion of the debt, receiving the borrower’s collateral at a discount. This process reduces the outstanding debt while freeing up liquidity in the pools or resolving risk in a P2P agreement, thus preventing broad systemic issues.

When a liquidation is triggered, liquidators step in by covering part or all of the borrower’s undersecured debt. In return, they buy collateral at a liquidation penalty rate that rewards them for mitigating the protocol’s exposure to bad debt. Because all borrowing within Mutuum requires overcollateralization, these liquidators typically face minimal risk if they act promptly. Meanwhile, borrowers have the option to add more collateral or repay debt before reaching the critical threshold to avoid liquidation. By aligning incentives and maintaining strict margin requirements, Mutuum ensures a robust safety net that upholds the protocol’s solvency across both its P2C and P2P environments.

Borrowing in Mutuum revolves around the principle of overcollateralization. Users lock a certain amount of collateral—through either the P2C or P2P model—and receive the ability to borrow a proportionate value of assets. In the P2C setting, loans come directly from communal pools governed by real-time utilization rates, while the P2P framework matches borrowers and lenders for riskier tokens under custom terms. Regardless of the mode, borrowers retain ownership of their collateral unless their Stability Factor drops below safe thresholds, at which point liquidation mechanisms may step in. This approach offers flexibility: individuals can tap into liquidity without parting with potentially appreciating assets, and the protocol secures itself via automated checks, liquidation incentives, and overcollateralized buffers.

Interest rates within Mutuum adapt to supply-demand dynamics. In the P2C pools, a higher utilization raises borrowing costs and thus bolsters depositor yields. By contrast, users opting for P2P loans negotiate rates directly with counterparties, possibly securing more favorable or specialized terms, yet bearing higher market risk. Whether a borrower chooses stable or variable rates, they can repay any or all of their debt at any point, as long as there is sufficient liquidity. Upon repayment, the user’s borrowed tokens are returned to the pool (or lender), the accrued interest flows into the protocol’s revenue mechanisms, and the borrower regains full access to their collateral—provided no liquidation event has occurred.

Mutuum’s stablecoin is designed to provide liquidity without necessitating a dedicated asset pool. When borrowers lock eligible collateral in excess of the stablecoin’s face value, the protocol mints new tokens on demand. This overcollateralization approach ensures that each minted unit is backed by more than its nominal amount, helping prevent sudden de-pegging events. The stablecoin’s protocol-defined price remains pegged to the U.S. dollar, offering borrowers a reliable way to tap into the value of their holdings without liquidating potentially appreciating assets.

Unlike conventional borrowed assets that rely on user-supplied liquidity, Mutuum’s stablecoin charges interest directly to its borrowers, and that interest flows into the protocol’s revenue mechanisms, reinforcing overall system resilience. Should the stablecoin’s market price deviate from its peg, arbitrage opportunities encourage users to either mint and sell or buy and repay, guiding the price back toward equilibrium. As an overcollateralized token minted in a decentralized lending environment, Mutuum’s stablecoin enables dynamic liquidity for participants while retaining core protections against sudden market shifts.

In Mutuum, the act of withdrawing refers to reclaiming one’s deposited funds—whether staked in the protocol’s P2C pools or offered in P2P arrangements—along with any accrued interest. Users hold mtTokens that represent ownership of these deposits, and returning those mtTokens to Mutuum triggers the release of the underlying assets. This process remains non-custodial: the protocol’s smart contracts facilitate withdrawals automatically, provided there is enough available liquidity to cover the request. If pool utilization is high or if a P2P loan remains partially funded, withdrawal amounts may be limited until borrowers repay or until other depositors step in.

When withdrawing collateral used to back an open borrowing position, users must first ensure their outstanding debt is sufficiently repaid or the overall Stability Factor stays above liquidation thresholds. This prevents excessive exposure that might undermine the pool’s resilience. Once conditions permit, the user can withdraw all or part of their collateral, regaining full control over the assets. Throughout the process, Mutuum’s overcollateralization and liquidation safeguards maintain a stable environment for depositors and borrowers alike, ensuring safe exits and preserving solvency across the platform’s diverse lending models.

mtTokens serve as the on-chain representation of a user’s deposit within Mutuum’s liquidity ecosystem. When users supply assets they receive mtTokens corresponding to their share of the deposit. These mtTokens accumulate value in real time, reflecting both the principal and any interest generated as borrowers tap into the underlying liquidity. Because mtTokens are fully compliant ERC-20 tokens, they are transferable and can potentially integrate with other DeFi protocols or secondary markets.

Holding mtTokens effectively means you own a fraction of the protocol’s lending pool. Over time, the value or redeemable amount of these mtTokens increases according to the interest rates and overall utilization of the respective pool or arrangement. When you wish to withdraw, you return the mtTokens to Mutuum’s smart contracts, which release your original assets plus accrued returns, subject to available liquidity. This mechanic streamlines the user experience: you no longer need to actively claim or compound your gains—the mtToken itself encapsulates every increment of accrued interest. By design, this system enhances transparency and enables non-custodial ownership, letting users freely monitor and transfer their deposit positions across Mutuum’s various lending scenarios.

In Mutuum, a portion of protocol income—derived from interest, liquidation fees, or stablecoin minting—is periodically allocated toward purchasing MUTM tokens on the open market. This buyback process effectively adds value to the ecosystem by increasing buying pressure for MUTM. The protocol then distributes these purchased tokens as dividends to stakers in the designated safety module or similar staking contracts, rewarding users who support the system’s health and security.

By tying direct dividends to Mutuum’s overall performance, this approach incentivizes long-term participation and fosters confidence in the platform’s risk mitigation features. Stakers benefit from both potential appreciation of the token and periodic “dividend drops,” while the rest of the ecosystem sees improved token stability through buyback-driven demand. This mechanism also promotes greater transparency, as the community can track protocol revenue and evaluate how it translates into tangible rewards for those who stake and maintain robust collateral conditions across the platform.

Allocation Usage

• Liquidity Mining & Incentives: These tokens are issued as incentives for suppliers and borrowers. In the lending and borrowing sector, the liquidity contributed by participants—both suppliers and borrowers—is crucial to the platform’s growth and expansion. Every platform competes for this liquidity by offering the highest yield to suppliers and the lowest interest rate to borrowers. Consequently, allocating native tokens for liquidity mining and incentives is essential for remaining competitive, as it enables the platform to offer more attractive conditions by rewarding participants. Emission: We are considering either a block-by-block or a weekly distribution model to balance real-time rewards with operational efficiency. A block-by-block approach enables participants to receive incremental incentives in near real-time, reinforcing continuous engagement and transparency. However, this can increase on-chain complexity and gas usage. By contrast, a weekly distribution simplifies accounting processes and can lower transaction costs for users. Yet it may slightly delay rewards, requiring participants to wait for the weekly cycle to collect their earnings. In weighing these options, our goal is to choose a schedule that fosters sustained participation, remains cost-effective, and aligns with the broader objectives of an accessible and inclusive DeFi ecosystem

• Ecosystem Growth & Developer Rewards: These rewards utilize a portion of reserve revenue to incentivize developers, contributors, participants, and any projects that contribute to the ecosystem. Mutuum is not governed by a DAO, however, a portion of the tokens is set aside to encourage developers to contribute to the platform’s development and security. This allocation is key to driving continuous innovation, new features, and improvements within the ecosystem.

• Security & Shortfall Reserve: Designated for security initiatives, allocated initially to cover any shortfall events. No protocol or code is risk-free. Performing regular internal and external audits, following best practices, and accepting only the safest assets on the platform can drastically reduce risk. Nonetheless, it is vital to reserve a portion of tokens to cover potential shortfalls and maintain the platform’s stability—particularly in its initial phase, when the security pool funded by users has not yet reached sufficient levels.

• Liquidity: This allocation is dedicated to ensuring the MUTM token has sufficient liquidity on exchanges and various markets where it will be listed. Specifically, these tokens may be deployed to provide liquidity in DEX pools and aggregators, thereby reducing slippage and enhancing price stability. Maintaining robust liquidity is essential for seamless trading and attracting new users. The liquidity allocated here will remain locked (“locked liquidity”) for a certain period to reassure investors that it will not be withdrawn unexpectedly.

  Locked Liquidity:

  We have chosen to implement an initial 6 month liquidity lock to strike a balance between fostering investor confidence and maintaining strategic flexibility. By securing the liquidity for half a year, we aim to mitigate the risk of sudden market dumps or speculative short-term behavior, reassuring early supporters about our long-term commitment. Simultaneously, a six-month timeframe gives us the latitude to adapt to evolving market conditions, explore new partnerships, and address potential regulatory changes. We believe this approach supports our overarching goal of sustainable growth while meeting the expectations of the broader DeFi community.

• Partnerships: These tokens enable the formation of strategic partnerships with other protocols, platforms, or DeFi projects. Such partnerships can involve technological integrations, co-marketing initiatives, ecosystem expansion, and collaborative research and development. Through these efforts, Mutuum can grow alongside relevant partners by sharing resources and opportunities. The specific nature of each agreement may vary. Some partners or advisors may receive tokens subject to vesting (or at least a lockup) to ensure long-term collaboration.

• Community Incentives & Giveaways: This fund is designed to reward the community over the long term through promotional campaigns, special events, selective airdrops, and loyalty programs. The objective is to maintain user engagement and foster active participation by supporting community-building initiatives and recognizing ongoing contributions from those who back the protocol. Tokens in this category will be distributed over time via reward mechanisms and airdrops that follow a set schedule based on community milestones.

Vesting Schedules

Presale Vesting

Team & Founders Vesting

The positive performance of the platform’s native token, MUTM, is essential to the platform’s success - particularly since Mutuum is new to the market and must meet investors’ expectations. For this reason, we intend to adopt the best strategy to attract new users to the platform through various incentives, while simultaneously implementing mechanisms that boost buy pressure.

The initial strategy is to reinvest the majority of the profits earned from platform fees into a buy-and-distribute process for MUTM. These tokens will then be allocated to mtTOKEN stakers who contribute to the Safety Module for a specific period of time, accepting a potential slashing risk in the event of a shortfall. This approach helps absorb potential sell pressure stemming from purchases during the early phases of the public presale, as well as balance the liquidity mining emissions necessary to provide the most favorable participation conditions for both suppliers and borrowers.

Subsequently, we will transition to a model in which most of the profit is reinvested in the platform to enlarge the pools, safety funds, marketing initiatives, etc. Nevertheless, the previous strategy will remain in place but be applied more conservatively, with a predetermined maximum number of rewards for the buy-and-distribute program so as not to hinder the protocol’s growth and expansion.

It is crucial to implement vesting mechanisms to reduce sell pressure at the least stable time (i.e., at launch) for all public presale investors, team members, and funders, as well as liquidity lock, emission schedule, and milestone-based distribution for all other MUTM allocations. Moreover, vesting increases the impact of growth driven by new buyers (resulting from exchange listings) and enhances the efficiency of the buy-and-distribute strategy. These measures will ensure the most successful possible launch for MUTM and are necessary to protect the interests of long-term investors. Such protection extends beyond the early stages of the protocol, supporting sustained and stable development.

MUTM Token

Mutuum is a decentralized platform designed to bring fluidity and accessibility to lending and borrowing. By offering two primary modes—P2C (peer-to-contract) for more stable assets and P2P (peer-to-peer) for speculative tokens—Mutuum accommodates a wide range of risk appetites, capitalizing on a flexible, trustless environment where users can earn interest, leverage collateral, and protect their positions via overcollateralization.

P2C (Peer-to-Contract)

In the P2C model, lenders pool their assets into audited smart contracts, collectively supplying liquidity to borrowers who provide overcollateralized collateral. Rates for each asset dynamically adjust according to pool usage: as utilization increases, so does the interest rate, incentivizing more suppliers to deposit assets and dissuading excessive borrowing. This system ensures a robust feedback loop that maintains solvency while maximizing capital efficiency.

When depositors provide funds in this mode, they receive mtTokens, representing both their share of the pool and any accrued interest. These mtTokens may also serve as collateral for borrowing other assets. Over time, depositors can withdraw their principal plus earned interest, subject to liquidity availability. Variable borrow rates let experienced borrowers respond to market fluctuations, whereas stable borrow rates allow greater repayment predictability if needed.

P2P (Peer-to-Peer)

For riskier or less liquid tokens—meme coins like PEPE, for instance—Mutuum offers a separate P2P experience, isolating these assets to shield the core pools from undue volatility. Borrowers and lenders negotiate terms directly: interest rates, loan durations, or partial fills. Because there is no shared liquidity pool in P2P, lenders face increased risk—and potentially higher returns—when dealing with volatile assets, while the protocol’s overall safety is preserved.

Collateral and Liquidation

All loans in Mutuum, regardless of whether they occur in P2C or P2P mode, require overcollateralization. The protocol’s “Stability Factor” measures how secure a borrower’s collateral is against their borrowed amount. Should the collateral’s value drop below threshold levels, liquidation is triggered. Liquidators repurchase the outstanding debt at a discount, stabilizing the system and preventing bad debt from affecting other users.

Mutuum organizes its lending markets around dedicated liquidity pools for each supported cryptocurrency. When lenders deposit their assets into these pools, they receive a corresponding yield based on the pool’s utilization rate. Borrowers access these reserves by locking collateral of higher value than the loan amount to ensure overcollateralization.

The protocol determines which assets may serve as collateral by evaluating factors like volatility, liquidity, and several different risk parameters, aiming to reduce risk for depositors and the system at large. Each asset in Mutuum’s ecosystem has a Loan-To-Value (LTV) ratio assigned to it, indicating the maximum borrowing power relative to its collateral value. If borrowers combine multiple forms of collateral, the protocol calculates a weighted LTV by converting each asset into a common reference unit.

Borrowers can choose from variable and stable interest rates (or any future rate models), and there is no preset deadline for repayment. They can repay their borrow positions in part or in full at any time, as long as they maintain a sufficient collateral-to-debt ratio to avoid liquidation. By offering flexible terms and robust risk controls, Mutuum strives to create a secure, user-friendly environment for both lenders and borrowers.

Mutuum employs a deposit-token mechanism for users who supply assets to its lending pools. When a depositor provides liquidity, the protocol mints “mtTokens” at a 1:1 nominal ratio to the deposited asset (e.g., mtETH for ETH, mtDAI for DAI). Instead of altering the exchange rate, Mutuum directly updates the redemption value of each mtToken to reflect accrued interest, meaning that over time, each mtToken can be redeemed for an increasing amount of the underlying asset. Returning mtTokens to the protocol reverses the initial deposit process. Upon redemption, the holder exchanges their mtTokens back for the corresponding amount of the underlying asset, which now includes the interest accrued during the holding period. Once redeemed, the mtTokens are typically burned (removed from circulation) by the protocol to maintain the correct overall supply.

This system simplifies user experience by keeping the minting ratio intuitive at the start (1:1), while automatically adjusting each mtToken’s redeemable worth as interest is generated. In effect, a depositor’s mtToken balance represents both their original contribution and the continuous interest earned from borrowers.

Since mtTokens are fully compliant with the ERC20 standard, users can transfer them to any compatible address. If a secondary market is established—such as a pool on a decentralized exchange - mtTokens can also be traded, opening up further opportunities for liquidity providers and external market participants. Regardless of where the tokens reside, they keep accumulating interest, as the protocol updates their redeemable value in real time.

By adopting this deposit-token model, Mutuum offers transparency (each mtToken shows precisely how much underlying asset it represents at any given moment) and flexibility (tokens can be used in various DeFi scenarios). This dynamic approach to interest accrual helps ensure a seamless experience for both lenders and borrowers within the Mutuum ecosystem

Mutuum enforces a liquidation threshold to protect lenders from undercollateralized positions. If the market value of a borrower’s collateral falls below this threshold, the protocol triggers a liquidation event. In such cases, liquidators are rewarded with a liquidation incentive, allowing them to acquire the collateral at a price lower than its prevailing market value.

When users pledge more than one type of collateral, Mutuum calculates a composite liquidation threshold by converting each collateral asset into a common reference unit and applying a weighted average of each asset’s individual threshold. This mechanism ensures that the overall risk of a multi-collateral position is accurately represented.

A position’s stability factor reflects the ratio between the adjusted collateral value and the outstanding debt. If the stability factor slips below a critical level, liquidation may occur. Borrowers have the flexibility to stabilize their positions by adding more collateral or repaying part of their loan before reaching the liquidation point, enabling them to manage risk in a volatile market environment.

Mutuum aims to rely on robust oracle infrastructure to determine fair market values for supported assets. While the protocol is not yet live, its design anticipates the use of Chainlink data feeds—a widely recognized provider of decentralized price oracles. These feeds are capable of returning prices based on USD and various native assets (e.g., ETH, MATIC, AVAX), ensuring flexible integration across multiple blockchains.

Since precision and timeliness are paramount for liquidations and safe overcollateralization, Mutuum’s roadmap contemplates:

• Fallback Oracles: Alternate data feeds that can step in if the primary oracle experiences latency or an outage, helping ensure uninterrupted price updates.

• Aggregated Feeds: Potentially combining multiple oracle services, which can reduce dependency on a single data source and mitigate vulnerabilities.

• On-Chain Metrics: In cases where sufficient on-chain liquidity exists, using decentralized exchange (DEX) price data—such as time-weighted average price calculations—can serve as an additional reference point for valuations.

Mutuum anticipates leveraging external blockchain intelligence services to prevent interactions from wallets suspected of engaging in illicit activities. These services combine on-chain analytics with real-world investigative data to identify behaviors associated with financial crimes, fraud, or other prohibited conduct. If a wallet is flagged, it may be blocked from accessing Mutuum’s front-end, helping ensure compliance with applicable regulations and maintaining a safe environment for legitimate users.

When users attempt to connect a wallet, Mutuum’s interface sends the wallet address to a proxy endpoint maintained by the protocol’s infrastructure. This endpoint forwards the address directly to the third-party screening service without storing additional user metadata or IP information. The screening platform evaluates whether the address is connected to potentially unlawful or restricted activities. If a high-risk status is detected, the wallet is denied access to the protocol’s user interface.

• No IP Sharing: Mutuum does not share user IP addresses with the third-party intelligence provider.

• No Extra Metadata: Aside from the wallet address itself, no other personal or transactional data is transmitted.

• Regulatory Compliance: By blocking flagged addresses, the protocol aims to align with relevant laws and regulations in various jurisdictions, reducing potential liability and safeguarding user funds against misuse.

Mutuum provides a framework where participants can supply and borrow various digital assets through dedicated liquidity pools. Upon depositing funds, lenders receive protocol-issued “mtTokens,” which hold not only the contributed assets but also any accrued interest. Each borrowing position must be collateralized to safeguard against default, meaning collateral plays a pivotal role in mitigating risks to both lenders and the platform as a whole. Selecting assets as collateral has a fundamental impact on the protocol’s viability, as it directly influences solvency. If highly volatile or illiquid tokens are approved, the platform’s stability can be adversely affected.

Integrating new tokens into Mutuum can expand user options, but it also brings operational and financial considerations that must be carefully weighed. Below is an overview of these key aspects, illustrating how new assets might influence both the protocol’s stability and user experience.

1. Transaction Costs Each new onboarded token adds incremental code complexity, slightly raising gas usage for every interaction with the protocol. If a token demands specialized logic—such as unique oracle pricing or collateral factors—these modifications can further increase costs for all users

2. Liquidity and Volatility Risks Enabling additional tokens as collateral within a lending protocol can increase the platform’s exposure to insolvency. From a balance-sheet perspective, collateralized tokens represent the protocol’s assets, while outstanding borrowed amounts function as liabilities. A natural mismatch arises when stable assets—such as stablecoins—are borrowed against more volatile collateral, magnifying risk during market volatility.

   To mitigate potential systemic challenges, it is crucial that only assets with strong risk profiles receive standard collateral status. Tokens deemed riskier due to high price fluctuation or lower liquidity may be granted collateral eligibility solely under an isolation or restricted mode, where usage is controlled and potential fallout contained. In particular, newly introduced tokens that exhibit limited liquidity or uncertain market dynamics should only be considered for onboarding under such constraints, whether for borrowing, collateralization, or both.

   By adhering to stringent listing criteria and restricting the riskiest assets to specialized frameworks, the protocol aims to protect overall solvency while still offering a diverse array of lending and borrowing opportunities for its participants.

3. Centralization Vulnerabilities Some assets rely on a centralized issuer or custodian, creating single points of failure. If an authority can freeze or seize tokens, or if the issuer becomes insolvent, those risks flow into Mutuum, potentially undermining the protocol’s trustless nature. Before listing such tokens, the team weighs the benefit of user demand against the risk of a central authority’s intervention.

4. Safeguards Against Oracle Manipulation Tokens susceptible to price manipulation or dependent on unreliable oracles may be restricted to “single-borrow” or “non-collateral” status. (Limiting how these assets can be used provides a safeguard against exploit attempts that rely on sudden price spikes or dips.)

5. Balancing Growth with Systemic Safety Tokens restricted solely to supply-and-borrow functionality (i.e., not usable as collateral) impose a lower solvency risk on the protocol. Because collateral effectively represents the protocol’s assets, these holdings must continuously exceed the protocol’s borrowed liabilities to maintain solvency. Consequently, any token that cannot be pledged as collateral needs to be excessively backed by other collateralized assets to avert a shortfall.

6. Asset Diversification and Risk Mitigation Allowing multiple tokens to coexist within the protocol’s liquidity pools can lessen the overall risk through diversification. A sudden price swing or liquidity shortfall in one asset, for example, may be mitigated by the relative stability of other tokens. By spreading potential volatility across a broader base of assets, the platform aims to sustain a more balanced lending environment.

   Nevertheless, diversification alone does not eliminate systemic risk. The protocol must implement prudent risk parameters—such as collateral factors, liquidation thresholds, and reliable oracle feeds—for each newly introduced token. Ensuring that all listed assets meet defined standards of liquidity, market maturity, and price transparency helps uphold a robust and resilient foundation for all participants.

   Before approving any additional tokens-particularly as collateral-an in-depth evaluation of each token’s technical, counterparty, and market risks is essential. This assessment incorporates audits, code maturity, governance frameworks, liquidity, volatility, and more. Appropriate risk mitigation parameters (e.g., Loan to Value, liquidation thresholds, liquidation bonuses) can then be calibrated in response to a token’s specific risk profile.

7. Technical Security Tokens that rely on complex or relatively untested smart contracts inevitably carry additional vulnerabilities. Rigorous code audits by reputable third parties are crucial for reducing the likelihood of exploitable flaws, yet no amount of review can remove risk entirely. Metrics such as the number of days a contract has been live and the volume of transactions passing through it can provide insight into its maturity and reliability.

   • Bug Bounties: Incentivized testing programs encourage developers and security researchers to disclose newly discovered flaws, further minimizing potential risks.

   • Ongoing Vigilance: Even with all these precautions, continuous monitoring is necessary because vulnerabilities may still surface over time.

8. Governance & Centralization Counterparty risk involves examining how an asset is governed and who holds administrative or operational authority over its protocol. Tokens managed by a few entities, or tokens with permissioned functionality, tend to introduce higher centralization risk.

   • Decentralization Degree: The distribution of decision-making power influences the potential for unilateral contract changes or asset freezes.

   • Permission Hierarchies: Understanding any privileges or backdoor controls embedded in the code helps determine the level of autonomy granted to administrators.

9. Market Depth & Volatility Market risk pertains to liquidity constraints, price swings, and trading volume. When using a token as collateral, it is important to confirm that the underlying markets can handle potential liquidations without triggering excessive price slippage.

   • Average Daily Volume: A higher daily volume generally indicates sufficient liquidity to support emergency sell-offs, reducing the possibility of a steep price drop during liquidation events.

   • Price Volatility: Tokens prone to sudden spikes or crashes can rapidly undermine a borrower’s collateral value. If an asset’s price rises abruptly, the protocol may readjust parameters for new borrowing activities to mitigate systemic risk.

   • Market Capitalization: Larger-cap tokens often exhibit greater market depth, lowering the impact of any single liquidation. Smaller-cap tokens, on the other hand, can be more vulnerable to extreme price movements.

   • Collateralization Levels (Loan to Value): Higher volatility assets necessitate more conservative LTV ratios to ensure the collateral’s value remains sufficient to cover loans.

   • Liquidation Threshold and Bonus: These settings incentivize third parties to quickly close out positions when the collateral’s value falls, thereby protecting the protocol from undercollateralized debt.

   • Dynamic Adjustments: Periodic reviews and real-time monitoring may prompt tweaks to risk parameters, especially when token liquidity, volatility, or user adoption changes substantially.

Mutuum employs a bug bounty program to strengthen the security of its smart contracts and overall infrastructure. This initiative incentivizes developers, researchers, and security experts to thoroughly inspect the protocol’s code, identify potential vulnerabilities, and responsibly disclose them to the Mutuum team. By rewarding accurate bug reports, the program fosters a cooperative relationship between the protocol and the global security community.

The bounty extends to all smart contracts, libraries, and off-chain services directly impacting the protocol’s functionality, including:

• Core Lending and Borrowing Contracts: Vulnerabilities that might cause loss of user funds, incorrect interest calculations, or compromised collateral.

• mtToken Mechanisms: Issues involving the minting, burning, or interest accrual logic of Mutuum’s deposit-token model.

• Price Oracles and Integrations: Manipulation in oracle data sources or fallback mechanisms that might trigger erroneous liquidations or mispriced assets.

• Protocol Interfaces and APIs: Attack vectors in front-end applications or APIs that could compromise user interactions or leak sensitive data.

Managing on-chain liquidity and trading volume is crucial for the liquidation process within Mutuum. Adequate liquidity ensures distressed positions can be closed out promptly without incurring undue price slippage. In turn, caps and liquidation parameters help control exposure; for instance, when asset liquidity is limited, the protocol may offer higher incentives to liquidators to maintain effective coverage.

Price fluctuations also affect the collateral that underpins open borrow positions. If market volatility causes the collateral’s value to dip below what is owed, the protocol’s solvency is threatened. Ensuring an appropriate Loan-to-Value (LTV) ratio helps mitigate this risk by providing a necessary cushion. Moreover, the liquidation threshold must be set at a level that preserves sufficient headroom for liquidators to profit while stabilizing at-risk loans.

• Lower-volatility assets, such as stablecoins and ETH, can sustain higher LTVs (e.g., up to 75%) and typically feature an 80% liquidation threshold.

• More volatile tokens are constrained to lower LTVs in the 35–40% range, with liquidation thresholds closer to 65%. These parameters minimize the chance that a sudden price drop leads to undercollateralization and subsequent liquidation events.

Finally, each asset’s overall risk rating informs the reserve factor applied. Less volatile assets might incur a share around 10%, while riskier ones can reach 35%. This structure strikes a balance between securing the protocol’s health and fostering broader participation for diverse token offerings.

The borrow interest rate is derived from the utilization rate, which indicates how much capital is actively being borrowed compared to the total pool supply. This rate model helps Mutuum balance liquidity through incentives:

• When capital is abundant: Interest rates remain comparatively low, encouraging borrowers to take loans, thus putting idle assets to use.

• When capital is scarce: Interest rates escalate to motivate loan repayments (reducing outstanding debt) and attract additional deposits from potential lenders seeking higher yields.

Mutuum’s future roadmap includes several strategies designed to reduce the risk of insolvency and enable swift adaptation to market fluctuations. These measures largely focus on controlling exposure to high-volatility tokens, setting prudent collateral requirements, and maintaining a flexible in-house process for adjusting critical parameters as needed. One planned tactic involves a mode that confines riskier or experimental tokens to limited borrowing options, allowing users to access only stable and sufficiently liquid assets with a single form of high-risk collateral at a time. By compartmentalizing volatile tokens in this manner, the protocol aims to contain any severe market swings that could otherwise threaten its solvency.

Another intended safeguard addresses tokens whose price feeds could be easily manipulated. In these cases, the protocol may restrict such assets to a supply-only status, meaning they cannot be pledged as collateral. This approach protects Mutuum from scenarios where artificially inflated collateral leads to undercollateralized borrowing positions. Because Mutuum does not employ a DAO structure, any immediate changes to parameters—such as Loan-to-Value ratios or liquidation thresholds—would be managed by an internal team or appointed roles. This arrangement allows rapid responses to emergent threats, such as unexpected price anomalies or vulnerabilities.

An additional method involves imposing caps on the total amount of a given token that can be supplied or borrowed. These ceilings limit the protocol’s exposure to highly unstable or thinly traded assets and curb the potential for infinite minting exploits. In tandem, a variable liquidation mechanism would adjust the liquidation process depending on how close a position is to becoming dangerously undercollateralized. Positions that edge only slightly below the acceptable threshold might see partial liquidation, preserving some borrower assets while restoring health to the system. In more extreme cases, the protocol could authorize a full liquidation to preempt severe losses.

Monitoring oracle activity is another crucial element, particularly for Layer 2 networks or sidechains, which may suffer downtime or manipulation. If price data becomes unreliable, the protocol might temporarily disable borrowing of the affected asset until the issue can be investigated and addressed. By implementing these diverse yet complementary measures—ranging from limited collateral modes and supply-only classifications to internal risk management, caps on supply and borrowing, flexible liquidation rules, and vigilant oracle oversight—Mutuum intends to be well-prepared for adverse market conditions when it ultimately launches.

In Mutuum’s envisioned framework, it is important to differentiate between assets primarily used as collateral (typically volatile tokens) and those that serve other liquidity needs. Collateral-oriented assets require strong liquidity to facilitate prompt liquidations, ensuring that lenders’ capital remains protected. Meanwhile, tokens with lower liquidity demand more conservative interest rate parameters to reduce the risk of sudden utilization spikes or capital shortages.

Market conditions also factor significantly into deciding a token’s borrowing cost and interest rate structure. If yields on external platforms become more attractive, arbitrage seekers may borrow heavily from Mutuum to exploit those opportunities, leaving the protocol at risk of liquidity depletion. By adjusting core parameters - such as the optimal utilization target for each asset and interest rate slopes - Mutuum aims to keep borrowing costs at a level consistent with broader market rates, discouraging excessive arbitrage-induced outflows.

Reducing the optimal utilization rate for specific assets, or raising interest rates more sharply when pool utilization spikes, can help maintain an equilibrium. This mechanism ensures that the cost of borrowing on Mutuum remains competitive with other yield opportunities, mitigating the risk of the protocol running out of capital during periods of strong market demand.

Liquidity mining programs may offer extra incentives for those who supply liquidity, partially offsetting higher borrowing costs for users seeking capital. Mutuum’s token, for example, could be distributed to providers of pivotal assets, compensating them for placing their capital at the protocol’s disposal. This reward system helps preserve liquidity in the protocol, even under volatile market conditions.

Not all assets necessarily qualify for liquidity rewards, however. Strategically directing these incentives toward a select group of tokens can both foster protocol stability and discourage unbridled token inflation. Tokens that are well-capitalized (such as major cryptocurrencies or widely adopted stablecoins) may receive more substantial rewards due to their essential role in lending and collateral use. In contrast, smaller or more volatile assets can introduce disproportionate liquidity risks and may not be prioritized for incentives.

1. Attracting Key Liquidity Encouraging liquidity in stablecoins and major cryptocurrencies helps ensure the protocol remains stable. These assets commonly underpin lending and collateral strategies, so maintaining robust supply deepens the borrowing pool and safeguards solvency.

2. Risk Management Tokens with higher volatility or reduced market depth pose increased risks for lenders and liquidators. By withholding incentives for such assets, Mutuum can minimize undesirable volatility.

3. Limited Resource Allocation Spreading incentives too widely may dilute the token’s value. Focusing on the most crucial assets helps Mutuum optimize yield rewards without weakening the broader token economy.

When users deposit assets in Mutuum’s lending pools, they receive mtTokens in return - tokenized representations of their deposits that continuously accrue interest. Although these mtTokens can typically be redeemed directly through the protocol, certain market conditions could result in limited on-chain liquidity, making immediate redemption challenging. If much of the pool’s capital is borrowed out, there may not be enough underlying assets (e.g., DAI, USDC, or ETH) available to honor all withdrawals right away.

To address potential liquidity shortfalls, Mutuum envisions providing additional redemption avenues. By fostering liquidity pools on decentralized exchanges and automated market makers, users can trade their mtTokens for other assets—even when the protocol’s main pool is under strain. In other words, the existence of external liquidity pools helps reduce reliance on the protocol’s internal reserves for redemptions.

1. DEX Liquidity Pools

Uniswap, Balancer, and Beyond: Mutuum may encourage the creation of pools that pair mtTokens (e.g., mtDAI, mtUSDC, mtUSDT) with corresponding base assets or other crypto tokens. If a user holds mtDAI and there is insufficient DAI available within Mutuum’s primary pool, the user could swap mtDAI for DAI, USDC, or another token in these external liquidity pools.

1. Specialized Stable Pools

Curve-Style Solutions: For tokens linked to stablecoins or correlated assets, establishing specialized AMM pools can be particularly effective. These pools (modeled on platforms like Curve) minimize slippage and optimize rates for assets with similar price targets.

Advantages of External Liquidity:

• Easier Withdrawals: By tapping into external pools, users can redeem mtTokens for base assets even when Mutuum’s internal reserves are temporarily low.

• Reduced Liquidity Pressure: Offloading some redemption demand to external AMMs decreases the chance that a sudden withdrawal wave will deplete the protocol’s liquidity.

In a lending protocol, each supported asset is assigned parameters that reflect its risk profile. These parameters determine how the asset can be supplied, borrowed, and collateralized. The underlying goal is to mitigate the market and liquidity risks tied to different token behaviors, ensuring the system remains solvent.

Overcollateralization and Liquidations

Borrowers are typically required to provide overcollateralization, acknowledging that collateralized assets can fluctuate in value. Sufficient headroom and clear incentives help keep positions safe when market prices move against borrowers. If the collateral value sinks below a set threshold, a portion of that collateral becomes eligible for liquidation. Liquidators are incentivized via a liquidation bonus, acquired when they purchase discounted collateral to repay part of the borrower’s debt. This mechanism aims to maintain a healthy buffer between the protocol’s assets and liabilities.

Deposit Caps

Deposit caps define the maximum quantity of a particular asset that can be supplied to Mutuum. Imposing these limits helps the protocol avoid outsized exposure to potentially risky or illiquid tokens, while mitigating exploits related to unlimited asset minting. Determining an appropriate deposit cap generally involves evaluating on-chain trading volume, price stability, and the historical performance of the asset.

Borrow Caps

Borrow caps represent a ceiling on how much of a given asset can be borrowed within Mutuum. These caps are crucial for tokens prone to price manipulation or liquidity shortfalls. By restricting the borrowing volume—whether for regular or flash loans—Mutuum significantly reduces the chance of insolvency tied to sharp or manipulated price fluctuations

Restricted Collateralization Mode

Mutuum may categorize certain high-risk or illiquid tokens under a Restricted Collateralization Mode. In this configuration, a single collateral asset can be used solely for borrowing that same asset (or with stringent limitations). If a token’s oracle data is easily influenced, restricting its usage lessens the threat of wide-scale defaults caused by sudden or artificial price swings.

Enhanced Collateral Efficiency

For assets with closely correlated price movements (for instance, well-known stablecoins), Mutuum offers an Enhanced Collateral Efficiency (ECE) feature. ECE grants elevated borrowing limits when both the borrowed and collateralized asset belong to the same correlated group. As a result, participants benefit from improved capital efficiency while containing systemic risk. Only tokens demonstrating consistent pegs or near-identical market behavior typically qualify for ECE.

Loan-to-Value (LTV)

The Loan-to-Value ratio caps how much a participant may borrow relative to the value of their collateral. For example, at 75% LTV, a user pledging 1 ETH worth of collateral can borrow up to 0.75 ETH worth of another token. The effective LTV of an open position fluctuates over time in tandem with asset prices.

Liquidation Trigger

The liquidation trigger refers to the threshold at which a debt becomes undercollateralized. If a position’s borrowed amount surpasses this threshold (e.g., 70% of collateral value), Mutuum deems the loan unsafe. Liquidators may then acquire the collateral at a discount to stabilize the position and avert further losses for the protocol.

Liquidation Penalty

Once a position enters liquidation, a liquidation penalty (equivalent to a liquidation bonus to liquidators) applies. A portion of this surcharge may be redirected to the protocol’s treasury, functioning as compensation for risk. The allocation factor determines how much of the surcharge is assigned to the treasury versus what is captured by liquidators, balancing incentives for rapid liquidation with the protocol’s long-term solvency.

Reserve Factor

A reserve factor collects a fraction of borrower interest through Mutuum’s reserve factor. This aggregated pool offsets potential defaults and extreme market events. Tokens perceived as more stable often carry a smaller reserve factor, while riskier or more volatile assets are assigned higher ones to account for the added uncertainty.

The following measures help defend against threats and maintain a robust environment:

1. DDoS Protection

Mutuum plans to implement cloud-based DDoS mitigation services that continuously monitor incoming requests and filter out malicious traffic before it reaches the application infrastructure. These scalable solutions will help ensure the platform remains accessible during surges in demand or targeted attacks, thereby preserving a consistent user experience.

1. Domain Integrity

To protect against DNS spoofing and unauthorized domain transfers, Mutuum intends to deploy DNSSEC (Domain Name System Security Extensions). This method will validate DNS data and reduce the risk of tampering attempts. Ongoing monitoring and regular DNS configuration updates will further reinforce the protocol’s domain-level security.

1. IPFS Deployment and Naming

Each new build of Mutuum’s user interface will be deployed to a decentralized storage solution—such as IPFS—and tracked using a DNSLink standard or similar approach. By pinning deployments to unique IPFS hashes, Mutuum can provide tamper-evident updates to its front-end, improving transparency and trust among community members.

1. Intrusion Detection Systems (IDS)

The front-end will be protected by state-of-the-art IDS that detect suspicious activity. By analyzing traffic patterns in real time, these systems can swiftly identify and respond to potential intrusions, minimizing the risk of data breaches and unauthorized access to the protocol’s infrastructure.

1. Code Modification Checks

To prevent malicious changes, Mutuum aims to employ Content Security Policy (CSP) and Subresource Integrity (SRI). These measures validate hashes of static resources, ensuring that only approved scripts run within the interface. Unauthorized modifications will be swiftly identified, preserving the integrity of the platform.

In certain market conditions, Mutuum may allow stable rates for borrowers who prefer predictable repayment costs.

• Initial Rate Lock: A stable interest rate is calculated at the time of borrowing, typically starting as a weighted average of the current variable rate, along with other market indicators.

• Higher Starting Rate: Since borrowers gain the benefit of rate predictability, the stable rate is usually higher than the initial variable rate would be, compensating for the reduced risk of future interest rate hikes.

• Rebalancing Condition: Stable rates may be subject to rebalancing if market conditions change drastically. Specifically, rebalancing could be triggered when the current supply rate is at or below 90% of the variable rate that would apply if all borrows were variable. In effect, if the market variable rate becomes significantly higher than the stable rate, the protocol can increase the borrower’s stable rate to avoid an overly generous gap. Example of a Rebalance Criterion: Current supply rate ≤ (Supply rate if all borrows are variable) × 0.9. If the variable rate outpaces the existing stable rate beyond a certain margin, the protocol rebalances to maintain fairness and protect its liquidity. Not all tokens qualify for stable borrowing. Highly volatile or low-liquidity assets pose an elevated risk to the protocol, making stable-rate borrowing unsuitable.

Mutuum’s stablecoin concept includes a mechanism by which issuers - approved entities or smart contracts - can create or destroy the stablecoin according to specified strategies. Each issuer operates under an Allocation, which represents the maximum amount of stablecoin the agent can generate. Mutuum’s internal governance or authorized maintainers set these Allocations and can revise them over time to maintain protocol-wide stability.

Rather than relying on a single model, Mutuum envisions multiple issuers employing different stabilization strategies. By distributing Allocations among various issuers, the protocol can diversify how its stablecoin is issued, potentially improving liquidity, maintaining a robust peg to the U.S. Dollar, and encouraging creative approaches to collateralization. Some issuers might use a straightforward, overcollateralized structure, while others could incorporate novel features to help the stablecoin adapt to changing market conditions.

A foundational principle of Mutuum’s stablecoin is overcollateralization. At least one issuer may operate on a robust model where every stablecoin minted is backed by collateral exceeding its nominal value. This ensures a strong safety margin for users and protects the system from sudden market fluctuations. Over time, Mutuum’s internal governance might approve other issuers with distinct risk parameters, as long as they collectively uphold the stability and solvency of the protocol.

In Mutuum’s envisioned model, collateral supplied to the protocol remains actively engaged in lending pools. As a result, the collateral itself can accrue interest from borrowers using those assets. This arrangement has an immediate benefit for stablecoin minters: earnings on the collateral effectively offset a portion of the interest owed on their stablecoin borrow positions. Consequently, even while locked in a borrowing arrangement, users’ assets continue to generate yield, contributing to a more capital-efficient experience.

Mutuum is developing an overcollateralized stablecoin that will be minted from collateral supplied within Mutuum’s lending protocol, ensuring that every token in circulation is backed by sufficient on-chain assets. The stablecoin’s value will be algorithmically aligned with the U.S. Dollar through market-driven mechanisms. As a permissionless and decentralized token on Ethereum, it is created when users deposit collateral above a specified ratio, similar to how borrowers secure other types of loans in Mutuum.

When a user repays their stablecoin loan - or if their position is liquidated - the minted stablecoin is returned to Mutuum and subsequently burned. Consequently, the supply of the stablecoin is dynamically adjusted based on actual demand and on-chain collateralization. In contrast to standard borrowing processes, where interest is partially distributed to liquidity providers, all interest generated by stablecoin loans remains within Mutuum’s treasury, strengthening the protocol’s reserves over time.

Mutuum’s stablecoin introduces distinctive elements beyond typical borrowing processes. When someone borrows the stablecoin, there is no separate liquidity pool composed of user deposits for that specific asset, so the entirety of interest payments flows directly into the protocol treasury. Upon repayment or liquidation, the stablecoin tokens are definitively burned, removing them from circulation and preserving the overcollateralized model. This contrasts with standard loans, where the principal remains in circulation even after repayment.

While numerous stablecoins exist, decentralized and overcollateralized versions continue to show room for increased adoption. Many stablecoins in the market rely heavily on centralized custody or opaque backing, which can undermine confidence. Mutuum’s stablecoin aspires to bring added transparency, resilience, and predictability to both users and the broader DeFi ecosystem, leveraging the protocol’s security and efficient collateralization approach to fill these gaps.

Initially, Mutuum’s primary lending protocol is expected to act as the main issuer, trustlessly minting and burning the stablecoin based on collateralized positions. Additional issuers may be introduced to support advanced use cases (e.g., arbitrage or quick liquidity). Although Mutuum does not operate under a DAO, it can still offer a framework for external development teams to propose new issuers or functionality, subject to review by relevant stakeholders or the protocol’s maintainers.

Mutuum’s stablecoin will align with the ethos of decentralization. The stablecoin’s open-source code will undergo thorough smart contract audits before launch, and any upgrades or parameter adjustments will follow an organized review process. This level of transparency aims to distinguish Mutuum’s stablecoin from more centralized alternatives by ensuring censorship-resistance and publicly verifiable changes.

In many traditional DeFi systems, minting a decentralized stablecoin involves single-asset vaults, where each collateral type is siloed in a separate position. Mutuum, however, envisions a multi-collateral approach, allowing users to deposit various supported assets into the protocol and mint its stablecoin from a consolidated pool of collateral. Because multiple asset types can back a single borrowing position, the stablecoin’s value remains secured by a diverse range of tokens.

From a user’s perspective, the borrowing process remains straightforward. After supplying collateral to Mutuum and marking it as available for borrowing, users can then open a multi-collateral position to generate the stablecoin. This design confers greater flexibility, particularly in terms of managing exposure to price fluctuations. When several assets underpin a single debt, users avoid the need to juggle multiple positions, stability factors, or distinct vaults. If a user’s objective is to enhance their overall collateralization, they can deposit additional assets without having to close or refactor a separate position for each token.

By eliminating the friction of single-asset vaults, multi-collateralization also provides a more robust defense against volatility - if one collateral experiences a downturn, the risk is partially mitigated by other assets in the same position. In summary, multi-collateral borrowing within Mutuum’s ecosystem expands user control, streamlines collateral management, and maintains a simpler, more unified approach to decentralized stablecoin minting.

Stablecoins rely heavily on trust and reliability, and Mutuum’s design considers the need for clear, robust issuance mechanisms. One proposal involves designating certain roles or “issuers” with permission to mint and burn the stablecoin in a trustless manner, governed by smart contracts. Each approved issuer could apply distinctive strategies for generating and managing the stablecoin supply, provided the protocol’s risk parameters are upheld. Any updates or expansions to this issuance framework may be reviewed by the protocol’s internal governance or administrative teams to ensure consistency with security and risk policies.

Mutuum’s stablecoin is minted and burned on demand whenever a user borrows or repays through the protocol. Unlike other crypto assets, it does not need to be deposited beforehand; there is no separate reserve of the stablecoin within Mutuum’s lending pools. Typically, if someone wants to borrow a token like LINK, another user must have supplied LINK to the pool. This requirement does not apply to Mutuum’s stablecoin, which is created directly via the smart contracts when needed.

When the user repays their stablecoin debt (or is liquidated), the repaid stablecoin is burned, rather than returning to liquidity providers. This unique mechanism grants additional flexibility compared to conventional lending pools, where a borrow must rely on the availability of that specific asset. Because the stablecoin is minted on demand, a user who deposits USDC, for example, can borrow the stablecoin without waiting for it to be supplied by others.

The protocol values the stablecoin at 1 USD regardless of market conditions. This fixed on-chain price anchors the stablecoin at one dollar, driving borrowers and arbitrageurs to align its market price around this peg. For example, if the stablecoin trades above $1, market participants can generate more of it for exactly $1 worth of debt, sell it at a premium, and later repay that debt at $1 - thus expanding the supply and normalizing the price. Conversely, if the stablecoin falls below $1 in the open market, users can acquire it for less than $1 to repay their loans, reducing supply and pushing the price back up.

Every unit of Mutuum’s stablecoin is backed by collateral exceeding its notional value—an approach with a proven track record of resilience in DeFi. If a user’s collateral dips below a safe threshold due to price shifts, their position may be liquidated, similar to how other tokens in Mutuum’s ecosystem are safeguarded.

In a typical borrowing scenario, the interest rate for an asset depends on how heavily that asset is utilized in the pool: the higher the utilization, the higher the rate. By contrast, the stablecoin’s interest rate is decoupled from the supply-demand dynamics of a traditional reserve. Instead, the protocol periodically adjusts the stablecoin’s rate, guided by internal governance or maintainers, to sustain price stability. If the stablecoin’s market price rises significantly above $1, the rate may be lowered to incentivize new borrowing (which increases supply). Conversely, if the stablecoin’s market price dips below $1, the interest rate may be raised, compelling users to repay their loans and shrink supply - helping restore the peg.

Because there is no separate pool of stablecoin suppliers, no external party is entitled to receive interest on stablecoin borrow positions. Instead, all interest generated by stablecoin loans flows to Mutuum’s treasury. This mechanism bolsters the protocol’s overall reserves, potentially funding security modules or development initiatives. By capturing 100% of the interest proceeds, the protocol can strengthen its capital base over time.

Any asset enabled as collateral within Mutuum’s ecosystem can secure the stablecoin, exactly as with other borrowed tokens. When market conditions cause collateral value to decline, a user’s stability factor can drop too low, triggering liquidation. This ensures that the stablecoin - although minted on demand - maintains firm overcollateralization. Users may also bridge the stablecoin across different chains if third-party bridges integrate it, but the specifics of such bridging will rely on external services.

Mutuum places strong emphasis on security in the planned development of its stablecoin, aiming to follow best practices long before any official release. Although no code has been finalized or deployed at this stage, the intended approach involves extensive internal checks, external audits, and active bug bounty incentives. By engaging third-party auditors and community contributors for code reviews, the protocol seeks to identify and address vulnerabilities ahead of launch. While it is impossible to eliminate smart contract risk entirely, Mutuum believes that rigorous scrutiny, responsible development processes, and transparent verification can reduce it significantly. Once development milestones are met, the audit reports and formal verification details for Mutuum’s stablecoin are expected to be made publicly available, allowing prospective users and partners to assess the protocol’s commitment to robust security standards.

When users repay their stablecoin debt or face liquidation, the repaid tokens are burned rather than returned to any supplier. Before repayment or liquidation, the smart contracts check that the user or liquidator can adequately cover the outstanding amount. Since the stablecoin does not rely on external suppliers, any interest paid during repayment is transferred entirely to Mutuum’s treasury. The principal portion is removed from circulation, and the Issuer’s outstanding stablecoin level decreases accordingly.

Example Scenario

1. The user holds 100 debt tokens representing 100 units of borrowed stablecoin.

2. Over time, the debt accrues interest, increasing slightly (e.g., 100.0000012).

3. The user decides to repay and purchases enough stablecoins from the market—say an additional 900 stablecoins - to bring their total on-hand to 1000.

4. The user grants approval to Mutuum’s protocol so it can withdraw the stablecoins for repayment.

5. Upon repayment, the 100.0000012 stablecoin tokens are moved to the protocol, burning the principal portion (100) and forwarding the interest portion (0.0000012) to Mutuum’s treasury. Correspondingly, the 100 debt tokens are burned as the user’s debt is cleared.

The liquidation process for the stablecoin functions similarly to other borrowed assets in Mutuum. If a user’s stability factor falls below a certain level due to collateral depreciation, liquidators can step in to repay a portion of the user’s debt and purchase the collateral at a discount. This mechanic incentivizes rapid resolution of undercollateralized positions and helps maintain the stablecoin’s overcollateralized status. Borrowers looking to avoid liquidation can either add more collateral or repay part of their borrowed stablecoins, restoring their stability factor to a safer level.

Mutuum’s stablecoin is designed with a fixed on-chain valuation of $1, creating potential arbitrage whenever the market price deviates above or below that threshold. Arbitrage plays a key role in stabilizing the stablecoin’s price and maintaining its peg to one U.S. dollar.

If the stablecoin’s market price exceeds $1 (e.g., $1.05), borrowers can mint new stablecoins at the protocol’s $1 baseline and sell them on the open market at the higher price, pocketing the difference. This process expands the stablecoin supply and applies downward pressure on its market value. Once the price moves back toward $1, the user can repurchase the stablecoins at or near $1 to repay the debt, retaining any profit. By increasing supply during periods of higher market pricing, arbitrage participants help bring the stablecoin back in line with its $1 peg.

If the stablecoin trades under $1 (e.g., $0.95), users with outstanding borrow positions can purchase it at a discount and repay their debt, effectively retiring $1 worth of liability for less than the nominal cost. This action reduces the stablecoin supply and pushes the price upward. Arbitrageurs who spot this opportunity buy tokens under $1, repay their loans, and save the gap between the discount price and the protocol’s $1 reference.

An overcollateralized stablecoin depends on an interest rate to maintain price stability, and this rate will be coded into Mutuum’s smart contracts. Unlike typical supply-and-demand models for interest, the stablecoin’s rate may be adjusted according to certain policy rules set by Mutuum’s maintainers. If desired, a discount mechanism could reward select users or stakeholders with lower borrowing costs. This dual structure - consisting of a protocol-wide rate and an optional discount for stakers - gives Mutuum the flexibility to adapt to market conditions while incentivizing community engagement.

Borrowing Mutuum’s stablecoin essentially involves generating fresh tokens within the protocol’s lending process. A user must provide collateral above a specified ratio, just as they would when borrowing any other asset, but rather than needing someone else to supply the stablecoin, the protocol creates it on demand through its approved Issuers. Because these tokens are overcollateralized, the value of the borrowed stablecoin is secured by collateral worth more than the stablecoin’s nominal amount. This approach protects against price swings in the underlying collateral during periods of volatility.

When a user borrows Mutuum’s stablecoin, both the newly created stablecoins and corresponding debt tokens are transferred to the user. Over time, the debt may grow slightly due to accrued interest. If the requested amount exceeds an Issuer’s current capacity, the borrow transaction will fail. In addition, standard risk controls apply: changes in collateral price can reduce the user’s stability factor, and if it dips below 1, liquidation of the collateral may occur.

For instance, imagine a user deposits 1 ETH into Mutuum as collateral and receives a deposit token (like mtETH) in return. The user then mints 100 units of Mutuum’s stablecoin, effectively borrowing against their ETH. In this scenario, the user also receives a debt token signifying the borrowed amount. After some time, the debt could accrue interest, so the borrower might see it become 100.0000012 stablecoin units instead of exactly 100. As with any borrowed position in Mutuum, the user’s stability factor will fluctuate with market conditions - if the collateral’s price falls and the stability factor drops too low, a liquidation event could occur to maintain protocol solvency.

Phase 1 - Introducing Mutuum

• Initiation of the Presale

• Launch of Marketing Campaigns for Community Growth

• Commencement of the Giveaway

• External Audit of MUTM Smart Contract

• Listing on Tracking Platforms

• Creation of Educational Content on Mutuum (Functionality, Principles, Algorithm)

• Implementation of an AI-Powered Helpdesk

• Formation of a Legal and Compliance Team

Phase 2 - Building Mutuum

• Commencement of Core Smart Contract Development

• Initiation of DApp Front-end Development

• Beginning of Back-end Development and Infrastructure Setup

• Implementation of Advanced Features

• Regular Code Reviews by Internal Auditors

• Regular Code Reviews by External Auditors

• Implementation of Risk Parameters

• Development of Advanced Analytics Tools

Phase 3 - Finalizing Mutuum

• Establishment of Bug Reporting System

• Beta Testing of the Demo Version on Testnet

• Launch of Functional Demo Version

• Preparation for Exchange Listings

• Completion of Core Smart Contract Development

• Completion of DApp Front-end Development

• Completion of DApp Back-end Development and Infrastructure

• Final Security Check and Extensive Audit by Multiple External Firms

• Finalization of Documentation

• Regulatory Compliance Alignment

• Conclusion of Presale

Phase 4 - Delivering Mutuum

• Launch of the Live Version of the Mutuum Platform

• Listing of the MUTM Token on Exchanges

• Activation of the MUTM Claim Process

• Establishment of a Bug Bounty Program

• Achievement of Regional Compliance

• Initiation of Institutional Partnerships

• Development of Advanced Features

• Expansion to Multiple Blockchain Networks

• Implementation of Platform Enhancements

• Talent Acquisition Plan

Mutuum plans to optimize transaction costs on Layer 2 (L2) networks by focusing on the primary factor contributing to fees: calldata. Rather than passing multiple full-size parameters, the protocol intends to compress all necessary information into a single byte-encoded string, thereby reducing both on-chain storage and per-transaction expenses. Because Mutuum anticipates supporting a limited set of assets, it can assign each token a compact identifier (for instance, using 16 bits) instead of the full 160-bit address. This approach helps contain the size of calldata whenever users interact with the protocol. Additionally, Mutuum may implement specialized contract logic tailored to the unique structure of rollup environments such as Arbitrum or Optimism, ensuring that transactions remain affordable and efficient. By minimizing the overhead of data transmission and leveraging short-form asset identifiers, Mutuum seeks to offer a rapid, cost-effective user experience on L2 chains, aligning with its goal of delivering greater scalability and accessibility for borrowers and lenders alike.