With its modular revenue and distribution models, M0 is a decentralized layer of stablecoin infrastructure that sets a new benchmark for the design of stablecoins. Noble, its first distributor, has revealed the USDN Noble Dollar in an attempt to disrupt the existing market.
Tether was the leading stablecoin in existence for the entirety of its history. Its market share on Ethereum dipped to 30% in 2022 — following growth in Circle’s USDC and Binance’s BUSD — but thanks to its near monopoly on the Tron blockchain, Tether’s market cap has reigned supreme in the stablecoin space.
With Tether ostensibly healthier than ever, it maintains a significant moat — but maybe not an insurmountable one. Robbie Petersen, of Delphi Digital wrote in August that M0’s approach was important. “[M^0] could be best positioned to challenge the Tether monopoly.”
The new Framework
M0 is a stablecoin that operates differently than traditional issuers. It uses a multi-issuer system, which creates a more decentralized model where issues follow the protocol rather than following centralized directives. M0’s standard stablecoin M serves as the foundation for custom branded stablecoins. Noble Dollar, also known as M extensions is their first.
This system offers issuers full programmability, allowing these branded M-extensions to distribute yield as they see fit — whether to liquidity pools, users or other stakeholders. Greg Di Prisco is the co-founder and CEO of M0. He says that this structure offers a level of scalability safety, liquidity, which traditional issuance models cannot match.
“We don’t believe that [a centralized issuer model] can possibly scale. You can’t have one company controlling the entire world’s money supply as stablecoins continue to grow. So, we built a protocol that enables a multi-issuer process,” Di Prisco said Blockworks.
Petersen stated that stablecoins are currently facing a core problem, which is the fact that many dapps do not support them. “capture none of the value they create on behalf of stablecoin issuers.” According to M0, the US Treasury yield could become “not only a meaningful source of revenue for apps, but possibly even the principal source.” He argues that this transformative power could result in a brand new business model: “Selling stablecoin distribution as a service (SDaaS).”
Noble intends to pass on 100% of the USDN native yield to holders of the token — at least initially — according to Jelena Djuric, co-founder and CEO of Noble.
“Our entire growth strategy has been keeping things as frictionless as possible,” Djuric informed Blockworks that Noble does not charge transaction fees for using any of their stablecoins. “We want to keep it like that, and the beauty [of] Cosmos and IBC is that it’s low fee and it’s fast — we wouldn’t want to compromise that in any way,” “She said”
Noble was known in the past for improving cross-chain routing and bringing USDC into IBC-connected chain. Djuric, however, said USDN would complement USDC in the Noble chain. He described M0 to be “if Circle and MakerDAO [now Sky] joined forces and had a baby.”
Modularity and interoperability
M^0 aims to meet the needs of appchains and fintech providers that want to launch their own branded stablecoins without worrying about the collateral backing, or interoperability — both are baked into the protocol underpinning M.
“All of the collateral management is done for them,” Di Prisco stated. “The big difference here between other [issuers] like Paxos…is that with Paxos, you’re going through months of negotiations, paperwork, legal documents, lawyers — [but] because we’re a protocol and fully onchain, [we] can give you your own branded stablecoin in minutes,” He said.
The issuers must maintain SPVs located in bankruptcy-remote locations and can only hold T-bills ranging from 0 to 180 days that have been marked at market. The actual balance of their collateral is checked every day. “They effectively can’t cheat as long as we maintain the right incentives in the ecosystem,” Di Prisco stated.
M-extensions by default will all be fungible, but brand partners may have some flexibility in exchanges.
This modular design allows Noble to focus their efforts on expanding the ecosystem. With the anticipated IBC Eureka upgrade — facilitating connections with non-Cosmos-based chains — plus integration into wormhole-supported chains, USDN will benefit from a large addressable market.
“You want to go between Osmosis and dYdX in one click with two separate tokens? You can do that on Noble,” Djuric explained
Launching the Noble Dollar with a campaign of points tied to an upcoming Noble token will further boost its adoption.
The launch of stablecoins such as Agora or M0 that provide an inherent yield has cemented the notion that all future stablecoin applications would start at a yield. It remains to be determined whether this model can truly overthrow the incumbents who do not provide a yield.
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