Mochi

Mochi is a cross-chain, autonomously governed decentralized stablecoin protocol that lets users deposit a wide variety of crypto assets — including long-tail tokens, yield-bearing assets, LP tokens, and NFTs — as collateral to mint the USDM overcollateralized stablecoin. Vault parameters such as collateral factor, liquidation factor, credit cap, and stability fees are set algorithmically and updated dynamically based on on-chain liquidity depth and credit utilization, enabling ungated, condition-based listing without governance votes. The protocol is designed to unlock productivity from diverse collateral types that traditional lending protocols cannot safely support.

Mochi generates yield from several fees that keep the protocol healthy and reward different participants.

Borrowers (people who deposit collateral to mint USDM) pay two kinds of fees:

• Origination fee — a one-time charge of 0.5% on the loan amount when the vault is first created.
• Stability fee — an ongoing, variable annual fee (paid in USDM) that changes based on two things: the risk category of the collateral (called RFC, rated 1 to 6) and how much of the vault's credit limit is currently borrowed. The formula is a simple sliding scale: a base minimum fee plus extra cost that rises as the vault gets closer to its credit cap. The DAO (the protocol's governing community) sets the floor and ceiling for each risk category.

Liquidation fees kick in when a vault becomes undercollateralized (its collateral value drops to the liquidation threshold). A Dutch auction (a falling-price auction) sells off the collateral. The fee depends on the collateral's risk category, ranging from 4.5% to 20% of the debt. From this, the person who triggers the liquidation gets a reward (0.5% to 3% of the debt), and the rest goes to the protocol treasury.

Flash loan fees — USDM flash loans cost 0.1337%. These are single-transaction loans that let users run liquidations efficiently without needing their own capital.

On the deposit side, USDM holders can stake their USDM into the protocol's Curve pool (linked with Convex). This earns them swap fees and yield-bearing rewards from a stable-swap pool, which also helps keep USDM's value stable.

All protocol revenue — from stability fees, origination fees, liquidation fees, and flash loan fees — flows into the Mochi treasury. According to the whitepaper, this treasury funds early Curve and Convex voting incentives and ongoing protocol operations.