# 1. Introduction The following documentation covers the essential information to know about the Growth DeFi ecosystem. It details product structures, tokenomics, and overall dynamics between tokens and products. ## **Products** ### ***MOR*** MOR is a stablecoin overcollateralized by yield-bearing collaterals. ### ***WHEAT Vaults (stkTokens)*** Wheat is a yield optimizer and tokenization of yield farming positions. These yield farming positions can be used as collateral to mint MOR.
## **Tokens** ### ***GRO*** GRO is the governance token of the ecosystem. MOR’s system surplus buybacks and burns GRO. ### ***WHEAT*** Wheat is the incentive token of the ecosystem. Buyback and burn mechanics are implemented through performance fees on stkTokens in combination with fee collectors. ### ***gROOT*** gROOT is the index token of the ecosystem. It uses the ecosystem’s products (as well as other BSC DeFi platforms) to generate yield. Extremely low supply. All of the above products and tokens are explained in detail in this documentation.\
# 2. MOR Tokenomics **MOR Tokenomics**
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# 3.1 Types of Stablecoins MOR is an overcollateralized stablecoin that is soft-pegged to the dollar. It resembles the collateralization mechanisms of DAI with the key difference of focusing heavily in supporting collaterals which are earning yield. #### Algorithmic Stablecoins Throughout 2020 and 2021, many attempts have been made to create the most capital-efficient stablecoin. This has mainly been tried through different algorithmic stablecoins which back the peg either partially or totally by having different game mechanics/incentives to return the “stablecoin” to the peg when it has deviated too much. However, they all share one major obstacle: if a user doesn’t have the necessary collateral to fund token redemptions, a single black swan event (which resembles a bank run) can wipe out a borrower’s position. The most popular example of this type of algorithmic stablecoin was IRON, which was a mismanaged version of FRAX. Users could mint IRON with BUSD (in the BSC version; USDC on Polygon) and redeem it for BUSD + some protocol tokens (STEEL in BSC, TITAN in Polygon). Whenever someone minted IRON, it used a portion of that BUSD to buyback the protocol’s token, which caused a pump in the price of the token, but left IRON only partially backed with collateral. The promise was that the remaining part of the stablecoin’s value relied on the protocol’s token marketcap to be able to redeem the full value of $1. In a bank run—which is what happened—many holders attempted to redeem their IRON, but the portion of reserves that the protocol token was supposed to cover quickly became worthless, leaving IRON holders with only the value in actual collateral (BUSD or USDC) for redemptions. #### CDP Stablecoins The king of decentralized stablecoins is and has been from the start DAI. It is by far the most liquid on DEXs and CEXs, has the largest outstanding supply, and different collaterals backing it—mainly ETH and USDC. The two most common criticisms of DAI are (1) having too much USDC in its Peg-Stability Module and (2) not being capital efficient, since a user must lock up a substantial amount of ETH or other tokens as collateral in order to mint it. The first criticism is only temporary. One only has to read through Maker DAO’s forum page to realize that there are many proposals and possible solutions that will, over time, reduce the concentration of USDC as a percentage of the total DAI supply. The second criticism is a valid one. However, choosing to not even be 100% collateralized for a stablecoin can be extremely risky. Even if it is supposed to be more capital efficient, it often ends in disaster and is not worthwhile. *The MOR Solution* This is where MOR differs. Instead of trying to decrease how much collateral is backing each MOR, it focuses on earning a yield on the collaterals deposited in its vaults. The first risk that needs to be addressed is the added smart contract risk that would somehow need to be priced/calculated. This is solved by adding yield to a user’s collateral, which means that stability fees can be higher, while the net borrow rate (stability fee − yield) for the user is much lower or even negative. (Yes, the user can earn more in yield than their interest payments.) This increase in stability fees is what makes up for smart contract risk. The protocol can accumulate a larger system surplus much faster, giving it a comfortable buffer to cover for these types of events. #### Fiat-Backed Let’s take a brief look at the other category of stablecoin: those backed by cash/cash equivalents/other financial assets sitting in non-blockchain systems. The top three issuers are Tether \[USDT], Circle \[USDC] and Paxos \[BUSD and PAX]. When looking at their latest reserves compositions we can conclude that the ranking from most conservative to least conservative in terms of collateral management would be: 1. Paxos (BUSD and PAX) 2. Circle (USDC) 3. Tether (USDT) Paxos is ranked first because they have the highest percentage of reserves in cash and treasury bills. This is why the Peg-Stability Module for MOR uses BUSD and it always treats BUSD as 1:1 to USD. Note: There is no difference between holding BUSD or PAX, as Binance just provides the brand to BUSD. Binance uses a service from Paxos called “Stablecoin as a Service” which is used by some exchanges including Binance’s BUSD and Huobi’s HUSD. Paxos is actually the one holding the reserves.
# 3.2 Peg-Stability Module(PSM) PSMs are a key component of DAI and Maker. MOR uses much of DAI’s architecture, and the PSM is one of the key stability mechanisms. The PSM enables anyone to mint MOR using BUSD and redeem MOR for BUSD. The initial parameters for the PSM would be: Debt Ceiling: TBD Mint Fee (tin): 0.1% Redeem Fee (tout): 1% This means that as long as the debt ceiling has not been reached, you can mint as much MOR as you want at a fixed rate of 1.001 BUSD. Arbitrageurs can take advantage of this if demand pushes the price above this threshold. A user can also redeem their MOR at a fixed rate of 0.99 BUSD. Again, if sell pressure pushes the price temporarily below this threshold, arbitrageurs can take advantage of the price difference. The reason for having a wider spread (110 bps compared to DAI’s 10 bps) is that the main trading pair of MOR is the MOR/BUSD ApeSwap Liquidity Pool. This pool has a swap fee of 20 bps, bringing its total buy/sell spread to 40 bps. With a 110 bps PSM spread, it leaves enough margin for the MOR price to fluctuate around the peg and trade most of the volume on ApeSwap. This provides additional benefit to ApeSwap via the trading fees from higher volume and in turns helps to incentivize MOR/BUSD LPs. As an additional benefit, even if the PSM has lower volume than it would with tighter spreads, the overall net system surplus generated will likely still be much higher, assuming a similar trend to DAI’s USDC PSM. Please note that 100% of the BUSD that comes into the PSM from minting MOR stays in the contract waiting for MOR redemptions. No BUSD is used to buyback GRO. This alone further overcollateralizes MOR. This means that, for example, if 1,000 MOR is minted in a day, and then redeemed, the contract holds the 11 BUSD in spread fees for whenever another MOR holder wants to redeem for BUSD. In the case of DAI, one of the biggest concerns is holding too many stablecoins in the PSM. For MOR, there is an easy fix for this simply by increasing the debt ceiling of yielding stablecoin collaterals. These yielding collaterals enable users to capture the yield spread between the stability fee they are paying to the protocol and the yield they are earning from the collateral (e.g. yield farming on PancakeSwap). With a 102% minimum collateralization ratio (50x max leverage), users can jump in and turn a standard sub 10% yield on stablecoins into hundreds of percentage points. This makes it very attractive to capture whenever the debt ceiling is raised. For example: * Collateral (Ilk) type: stkBUSD/USDC PancakeSwap LP * Yield: 8.5% APY * Stability Fee: 6% * Yield Spread: 2.5% + Put Extrinsic Value * Minimum Collateralization Ratio: 102% (50x max leverage) * Max Yield with 50x leverage: 270% APY With max leverage, users can turn a 8.5% APY into a max of 270% APY. In addition, they have a Put on MOR for free, as they didn’t have to pay a premium. This means that if MOR deviates and its price temporarily falls, they can profit extra as seen in the following example: * Leverage used: 50x (49 MOR borrowed, 1 BUSD worth of equity) * Average Sell Price: 1 BUSD/MOR * Current Price: 0.99 BUSD/MOR If the user buys back and closes down their position, they would earn 0.49 BUSD of profit for every 1 BUSD they deposited (an extra 49% ROI). The further MOR’s price decreases, the more incentivized users are to buyback MOR and close their positions. Here is an example:\
| Amount BUSD/MOR | ROI | | --------------- | ---- | | 1 | 0% | | .99 | 49% | | .98 | 98% | | .95 | 245% | Note: A user can use these types of vaults to short MOR if they are bearish and think its price will decrease. While their position is open, they will also be earning the yield spread.
# 3.3 MOR Vaults There are two ways users can mint MOR: 1. Through the Peg-Stability Module, minting MOR with BUSD at a fixed rate. 2. Creating a MOR Vault and depositing collateral into it. There are a few key parameters to each vault that you need to get familiar with and they are specific to each collateral: Note: the definition of “ilk” is a collateral type (part of [Maker’s Glossary](https://docs.makerdao.com/other-documentation/system-glossary)). #### Debt Ceiling This is the maximum amount of MOR that can be minted by all users with an ilk. This parameter allows the protocol to limit the desired maximum exposure to an ilk. Having too much concentration in a single ilk can be risky due to concentration. #### Stability Fee The stability fee is paid continuously on the outstanding MOR debt balance of the user; it can only be changed by the Growth DeFi DAO through executive governance votes. How high or low the stability fee is depends on several factors including: A. Market conditions This is due to fluctuations in demand for leverage: bull markets have higher stability fees, whereas bear markets have lower stability fees. B. Ilk type Riskier collaterals are likely to have higher stability fees. C. Minimum Collateralization Ratio/Liquidation Ratio Lower minimum collateralization ratios are inherently riskier and are likely to have higher stability fees. This stability fee difference would apply if there are two vaults with the same ilk but different minimum collateralization ratios. D. Yield Most ilks are stkTokens which earn yield through protocols like ApeSwap and PancakeSwap. The higher the yield of an ilk, the higher stability fee the user is willing to pay. The best example of how yield affects the stability fee is with stablecoin ilks such as stkBUSD/USDC PCS LP tokens: If the yield on this ilk is 8% APY, then the user would be willing to pay a 6% stability fee since they are keeping a 2% yield spread (which is the difference between the yield and the stability fee), and these yield spreads are maximized with leverage. #### Minimum Collateralization Ratio/Liquidation Ratio This is the minimum collateral percentage a user must maintain in their vault to avoid liquidation. Users should consider always opening vaults at a much higher collateralization ratio than this parameter just to be safe. For example: If the minimum collateralization ratio is 150%, it would be safest to start with a collateralization ratio higher than 200%. MOR is designed to reward those who can use conservative leverage to increase their yield while avoiding liquidations, even in black swan events. #### Liquidation Penalty A penalty is applied to successful liquidations, this penalty increases the system surplus and acts as safety reserves in the event that a liquidation fails and a position becomes undercollateralized. The liquidation penalty can vary based on the under-collateralization risk of a collateral. #### Yield Though this is not a parameter of MOR vaults, most ilks are stkTokens which do have a yield, and users can benefit and capture all of the yield APY. Here are a few examples on supported ilks and where they get their yield: * stkBANANA (BANANA compounding) * stkCAKE (CAKE compounding) * stkMOR/BUSD ApeSwap LP Token (BANANA + Swap Fees) * stkBNB/BUSD PCS LP Token (CAKE + Swap Fees) * stkBTCB/BUSD PCS LP Token (CAKE + Swap Fees) * stkBUSD/USDC PCS LP Token (CAKE + Swap Fees) The true edge with MOR comes from combining low stability fees (compared to money market protocols), yield on ilks, and conservative leverage to avoid liquidations. When a user creates a new vault, they can input how much collateral they want to provide and how much MOR to initially mint. Once they have created the vault, they can manage it from their personal dashboard. Users are able to watch the evolution of their collateral and debt, and manage minting more MOR, repaying their MOR debt partially or completely, and depositing/withdrawing collateral as long as they meet the minimum collateralization ratio criteria.
# 3.4 System Surplus Buffer The system surplus buffer is the retained earnings of the protocol. It also shows how much MOR would be missing if everyone were to repay their outstanding debt and redeem any remaining MOR for BUSD through the PSM. It has the following use cases: 1. Cover potential losses 2. Fund operating expenses and expansions. 3. Hedge the treasury with non-MOR yielding assets. 4. Buyback and Burn GRO 5. Fund staking rewards 6. Artificial demand #### 3.4.1 Covering Potential Losses There are two main situations in which losses can appear: A. Undercollateralized vaults in black swan events Vaults can become undercollateralized if the price falls below the 100% collateralization ratio mark before the liquidation auction system goes through successfully. The odds of this happening are proportional to the liquidation ratio of the ilk and the volatility/expected max drawdown. In order to reduce the risk of these events happening, it is important to have safe and high liquidation ratios for each ilk, which limits the max leverage allowed. Each time a vault is liquidated successfully there is a liquidation penalty applied which builds the system surplus. This penalty is applied to cover potential losses in the aforementioned events. For example: If the liquidation penalty applied is 15%, then that would be more than enough to cover the losses as long as for every $1 in losses there have been more than $6.67 worth of successful liquidations. B. Smart Contract Risk: Each ilk has smart contract risk, whether it is from the token contract itself or the mechanism through which it accrues yield. The way that MOR makes up for this risk is by charging higher stability fees than if it were not to support yielding ilks. For example: If MOR supports the BUSD/USDC PancakeSwap LP Token without compounding the CAKE rewards, it would only be able to charge a 1% stability fee, whereas by adding the compounding rewards onto the yielding ilk it is able to charge a 5% stability fee. This 4% yield spread works as the premium for insurance on the smart contract risk, the expected outcome is that this spread more than makes up for the risk being taken. To minimize smart contract risk as much as possible, the stkToken contracts (i.e. Wheat Vaults) have been audited by ConsenSys Diligence, whose audit report [you can read here](https://consensys.net/diligence/audits/2021/06/growthdefi-wheat/). #### 3.4.2 Fund operating expenses and fund expansions The end goal of Growth DeFi is to be a fully self-governed DAO managed by GRO token holders. As such, GRO holders can allocate the system surplus where they see fit to best spend it to boost the ecosystem’s growth and development. #### 3.4.3 Hedge the treasury with non-MOR-yielding assets As part of the DAO’s job in regards to DAO treasury management, they can diversify part of the system surplus (denominated in MOR) into other assets that may produce some yield and hedge having too much concentration on a single token. #### 3.4.4 Buyback & Burn GRO When there is more MOR in the system surplus than its buffer target, the protocol will auction MOR which users can then bid on with GRO. The winning bid receives the MOR and burns their GRO. This process works in the same way as Flap Auctions on Maker. #### 3.4.5 Fund Staking Rewards The DAO can fund staking rewards through stkGRO, GRO Yield, or other mechanisms if desired. #### 3.4.6 Artificial Demand This is a side benefit of having a large system surplus. The formula for calculating system surplus is: Outstanding MOR Debt + BUSD in the PSM − MOR in Circulation = System Surplus What this means is that the larger the system surplus is relative to the MOR in circulation, the bigger the artificial demand push will be. In other words, there is simply too much MOR that needs to be bought to repay debts and too little in circulation. Since MOR has a Peg-Stability Module, the price of MOR during these supply shocks is capped at 1.001 BUSD, and anyone can mint MOR at this price through the PSM and arbitrage the difference. The result of this is an increase in the BUSD held in the PSM contract. In order to reduce this, the debt ceiling for stablecoin vaults can be raised. These vaults offer a decent yield spread with a very high max leverage which can get swallowed up quickly. It is important to have sizable BUSD reserves before raising the debt ceiling on these stablecoin vaults. If not, the sell pressure caused by users minting MOR and selling it for BUSD and USDC could deplete the PSM resources. Note that all of the extra MOR minted by stablecoin vault users has to be repaid at some point either from the market, or minted through the PSM (future supply shock), and is accruing a stability fee that increases the system surplus. Then users can just rinse and repeat based on artificial demand.
# 3.5 ApeSwap x Growth DeFi One of the key parts of MOR is the symbiotic relationship that exists between ApeSwap (a popular AMM on BSC) and MOR. MOR enables ApeSwap users to get the most out of their BANANA by allowing them to keep earning yield from staking rewards while being able to mint MOR with the collateral. Growth DeFi Benefits: * MOR/BUSD ApeSwap LP Token farm incentivized with BANANA (which means increased liquidity for MOR) ApeSwap Benefits: * Most trades using MOR are routed through the MOR/BUSD ApeSwap Liquidity Pool (with the exception of arbitrages between the ApeSwap LP and the PSM). As a result, whenever someone buys/sells MOR for leveraging/deleveraging/trading, they are adding volume to ApeSwap. * stkBANANA supported as an ilk to mint MOR (which means users can leverage up on their BANANA positions and earn a higher yield) * 2% of all BANANA farmed by the stkBANANA contract is burned * 5% of all BANANA farmed by stkTokens that use ApeSwap LP Tokens is burned The goal is to become one of the dominant pools in ApeSwap, both in terms of volume and TVL.
# 3.6 Stability Mechanisms There are four main mechanisms that MOR uses to maintain the soft peg to the dollar: #### A. Peg-Stability Module (PSM) Whenever there is a surplus in demand, the PSM builds up a reserve of BUSD from arbitrageurs minting MOR at 1.001 BUSD and selling it on ApeSwap for a profit. These BUSD reserves maintain the peg when there is significant sell pressure. As long as there is BUSD in the PSM, the price of MOR can’t go below 0.99 BUSD. And if it did, it would be arbitraged away. This PSM is the primary stability mechanism and in most scenarios wouldn’t be broken. 100% of the BUSD used for minting MOR in the PSM is held in the contract for redeems, and it also keeps the spread profits in BUSD to cover additional redeems. #### B. Liquidation Demand When it comes to liquidations, the protocol always treats MOR as worth 1 BUSD, regardless of its market price. If the price of MOR is below the peg liquidators, the protocol will buy it back to be able to get cheap collateral from liquidation auctions. #### C. stkMOR/BUSD ApeSwap LP Token Liquidations This is related to the aforementioned point. stkMOR/BUSD is composed of 50% MOR and of 50% BUSD. The protocol values this MOR at market price, so if the price of MOR were to deviate substantially from the peg, it would liquidate those stkMOR/BUSD LP farmers with the highest leverage multiples (20-50x leverage). For these liquidations, the 50% of the collateral which is held in BUSD would be market sold to buy MOR—pushing the price closer to the peg. #### D. Borrowers Incentives If a user has minted MOR in a vault and it temporarily deviates from the peg, this is the best time to repay their outstanding MOR debt and profit the difference. This is especially true for leveraged yield farmers in ilks such as stkBUSD/USDC. For example: If you have minted 1,000,000 MOR you are profiting 10,000 BUSD for every 0.01 BUSD that MOR falls from the peg, assuming you buyback the MOR to repay your position. Since these depegging scenarios are temporary all the borrowers are incentivized to rush and repay their outstanding debt and pocket the difference, by doing so they are pushing the price of MOR closer to the peg. #### E. System Surplus Buffer The formula for calculating system surplus is: Outstanding MOR Debt + BUSD in the PSM − MOR in Circulation = System Surplus The surplus shows how much MOR would be missing if everyone was to repay their outstanding debt and redeem any remaining MOR for BUSD through the PSM. The larger the system surplus gets, the easier it is to have a supply shock (i.e. not enough MOR in circulation to meet demand). During a supply shock, the price of MOR is arbitraged by minting MOR in the PSM, which puts more BUSD in the PSM contract. #### F. Speculators If speculators notice that MOR is trading below the peg, they can buy the dip to pocket the difference when it repegs. Users can access metrics such as the system surplus and the health of ilks across all the vaults to ensure that it is just a market mispricing event.
# 4.1 WHEAT Vaults (stkTokens V2) *Wheat Contract Address (BSC): 0x3ab63309f85df5d4c3351ff8eacb87980e05da4e* Wheat is the incentive token of the ecosystem, including Growth DeFi’s yield optimizer of the same name. Buyback and burn mechanics are implemented through performance fees on stkTokens in combination with fee collectors. This will eventually make WHEAT deflationary over time.
stkTokens are tokenized yield farming positions in different protocols such as ApeSwap and PancakeSwap. The standard performance fee for stkTokens is 5% of the token it is yield farming. In the case of ApeSwap and PancakeSwap strategies, these fees go to the respective fee collectors. There are no deposit or withdrawal fees in stkTokens V2. They are used as ilks for MOR, and having deposit/withdrawal fees would only add friction. stkTokens have been audited by ConsenSys Diligence, you can [*read the audit report here*](https://consensys.net/diligence/audits/2021/06/growthdefi-wheat/)*.*
# 4.2 Fee Collectors *CAKE Fee Collector Address: 0x14bAc5f216337F8da5f41Bb920514Af98ef62c36* *BANANA Fee Collector Address: 0xe13e62830D300C6Fa64287F7dDEf3af6894B4868* As a protocol, it is best to have exposure to the protocols that users are yield farming and maximize the outcome of the performance fees collected. This is why rather than selling the BANANA or CAKE collected from performance fees and selling them to buyback WHEAT, the fee collectors stake them to get rewards. These rewards are then used to put up constant and sustainable buy pressure for WHEAT. As a side benefit, WHEAT benefits even more when the price of these tokens go up, as more WHEAT is able to be bought by the fee collectors.
# 4.3 WHEAT Tokenomics Emission Rate: 0.1 WHEAT/block (will be heavily reduced overtime) Inflows: performance fees from stkTokens + staking rewards from CAKE and BANANA fee collectors The long-term goals for WHEAT are: 1. Decreasing the emission rate overtime 2. Increasing the total fees collected from performance fees through larger adoption of MOR (resulting in more TVL for stkTokens) 3. Increase the holdings of CAKE and BANANA in the fee collectors 4. Lower the WHEAT supply through constant buybacks with the fee collectors # 5. GRO *GRO Contract Address (BSC): 0x336ed56d8615271b38ecee6f4786b55d0ee91b96* *GRO Contract Address (ETH): 0x09e64c2b61a5f1690ee6fbed9baf5d6990f8dfd0* Circulating Supply: Approximately 380,000 GRO is the core governance token of the Growth DeFi ecosystem. It is bought back and burned using the excess system surplus in MOR. System Surplus increases from three sources: 1. Stability Fees 2. Liquidation Penalties 3. PSM Fees It is ideal to always have some MOR reserved in the system surplus to protect against black swan events. This excess amount is used to buyback and burn GRO. GRO is the governance token used to vote on the important decisions for MOR such as stability fees, debt ceilings and other important parameters.\ \ \ \ \ \ \
# 6. gROOT *gROOT Contract Address (BSC): 0x8b571fe684133aca1e926beb86cb545e549c832d* Circulating Supply: Approximately 1,600 gROOT is a diversified way to invest into Growth DeFi products such as stkTokens and MOR. Deflationary Mechanisms for gROOT: * 3% of every deposit/withdrawal in gROOT Harvest buybacks gROOT * The gROOT treasury buybacks gROOT with part of its cash flow over time Long-Term goals for gROOT: 1\. Increase the treasury holdings 2\. Increase the amount distributed back to gROOT holders through gROOT Harvest 3\. Decrease the circulating and total supply
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