In order to increase adoption, liquidity, and legitimacy I believe that we should discuss the inclusion of the leading large cap coins - specifically BTC, XRP, and LTC - as mTokens.
Enabling the holders of these coins to safely invest and earn a steady 6.25% return on their coins while waiting for a potential bull run would provide a massive increase in liquidity and adoption of the DMM ecosystem. With a combined market cap of $242 billion dollars, this is what we should be targeting in order to maximize the investment in this space.
As I have stated in another thread, until we can target average retail investors (through return.network, potentially), our target audience is our fellow crypto community. Generally more informed and savvy (at least in our own minds) and willing to take on risk, the broader crypto community is not hoping for a steady 6.25% return - they’re dreaming of a repeat of 2017. By opening our doors to the largest of these pools and offering a safe and steady income stream while people wait for the “big one” we have the potential of bringing on a much larger pool of capital.
Although there are plenty of pros to this idea, there are a number of cons and uncertainties. Some specifics that come to mind are the risk associated with volatility, the risk of rapid loss of liquidity based upon major price changes and selling behavior, and challenges with technical implementation due to the fact that BTC, XRP, and LTC are not ERC20 tokens.
As a hedge against massive losses we can do a couple things (probably a lot of things, but I’m only listing two here):
1 - We can maintain a predefined ratio of stable coins to volatile coins, which could help cushion the impact of major price swings.
2 - We can discuss the idea of time-locking the investments of folks when they enter the DMM ecosystem. For example, we could require a minimum amount of time in the network before being eligible to withdraw the base tokens. For example, if someone were to convert 10 BTC into mBTC there could be a minimum investment period of 30 days or 60 days (or whatever) until they can pull those BTC back out. They’d be able to pull out their accrued interest at any time, but we could at least provide something of a stop against a massive exodus of capital. Alternatively, it could be a several hold on withdrawals - when a person looks to pull out capital or accrued interest, it has a hold period of 3 days or 5 days or whatever. Again, this provides a small cushion against rapid withdrawals. Of course, this could turn some people off to investing, but that’s just one potential risk. Its all about give and take and finding the right balance.
Of course, all of this could be moot due to technical difficulty in implementing non-ERC20 tokens.