Mars Protocol lockdrop and MARS Token Launch

Published on: 25.09.2021

Mars will become an open, decentralized, community-maintained financial commons. This requires giving all participants (users and builders) a governance system through which they can coordinate activity and decision-making so that Mars appeals to all of them. MARS tokens (and their staked version, xMARS) are an important piece of this puzzle.

By staking Mars tokens in the Mars DAO (also known as the Martian Council) and receiving xMARS, community members assume part of the value and the risks of the Mars smart contracting system.

The Power of MARS

  1. xMARS provides voting power over Mars smart contract parameters and spending decisions regarding a decentralised MARS tokens treasury.
  2. xMARS rewards good governance with more governance power (additional MARS) and punishes poor governance with reduced governance power. Note that if the Mars smart contract system functions well, usage fees paid by users will accumulate, and MARS tokens will be automatically repurchased by the Mars smart contract system with these usage fees. If the Mars smart contract system does not function well, it may suffer shortfall events. In that case, staked MARS can be taken away from xMARS holders and given to users who suffered losses from the shortfall.
  3. Over time, because of how MARS is designed to be used within the Mars smart contract system, MARS and xMARS may become similar to decentralised shares in the value of the Mars smart contract system. This can also lead to MARS and xMARS gaining monetary value from the collective efforts of the community of Mars smart contract users and governance participants — however, because this result cannot be guaranteed, MARS and xMARS should initially be assumed to be completely valueless. MARS and xMARS can only gain value from participation by Mars smart contract users.

In order to align incentives, MARS tokens should be owned by those who build on or use the Mars smart contract system.

The MARS Lockdrop

A lockdrop is a way to fairly distribute tokens to early community members by allowing them to temporarily ‘lock’ one token (in this case, UST) in exchange for a reward in the form of another token (MARS). To bootstrap the supply side of the TerraUSD (UST) credit pool, a lockdrop will be organised before the launch of the Mars Protocol. During a 14-day window deemed the Ignition Phase, users can lock/deposit UST at marsprotocol.io for a fixed duration (anywhere from 1 to 52 weeks).

To reward participants who lock their UST for longer periods, a weight multiplier will be applied to their principal. This means users who deposit for longer periods will get more MARS tokens relative to those who deposit for shorter timeframes. Users can also make multiple deposits with varying lockup lengths. That is, they can lock x amount of UST for 1 week and y amount of UST for 52 weeks, etc.

However, lock drops aren’t without risk. As with any DeFi protocol, smart contracts can be subject to unforeseen vulnerabilities, as a result of which lockdrop participants’ locked UST could be subject to partial or total loss. Mars will undergo two security audits before launch in an attempt to discover vulnerabilities, but audits are not a guarantee of a lack of vulnerabilities or security of funds.

ABOUT Mars Protocol
Mars is a credit lending protocol for the Terra blockchain

RESOURCES
Medium

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