3.4.4 MU Token Dynamics

MU is the governance token of the ReSource protocol and will, as elaborated above, be used to underwrite debt accounts and pay network fees. For an overview of MUs token supply and distribution, please refer to the chapter titled “MU Governance Token” below.

The chart below depicts the flow of MU between the market and natural monetary sinks within the ReSource Network.

The ReSource Network consumes MU through: 1. The payment of fees by members, 2. Staking requirements imposed on underwriters. The ReSource Network emits MU to the market via: 1. Staking rewards paid to underwriters, and 2. The purchasing of rUSD to maintain its peg to cUSD (or, alternatively: via reimbursing rUSD holders in the form of rUSD to MU conversions as explained in chapter 3.4.1). Excess MU, that are not currently required to monetarily stabilize rUSD, are sequestered within the network’s Reserve.

It is important to note that fee payments and staking requirements are both facilitated via MU payments but denominated in rUSD. For example: a member might be obligated to pay a 3% transaction fee. This fee is denominated in rUSD, but will be paid in MU. I.e, a 100 rUSD transaction will entail 3 rUSD fee, which will be paid in MU.

If the current MU price is 1MU=3cUSD, one MU will be consumed by the transaction. If the price of MU drops to 1MU=1cUSD, 3 MU will be consumed by the transaction, etc.

Likewise, staking requirements are denominated in rUSD. If an underwriter is, for example, obligated to stake 20% of a credit line’s maximum overdraft amount, they would be required to stake 200 rUSD worth of MU to underwrite a credit line of up to 1000 rUSD. I.e, 100 MU in case that MU price equals 1MU=2rUSD. Consequently, if the price of MU rises above 2 rUSD, the staking contract will pay out the excess MU as staking rewards until the locked MU equals 200 rUSD again. Vice versa, if the MU price sinks below 2 rUSD, the staking contract will withhold staking rewards until locked MU equals 200 rUSD again.

This way fee payments and staked MU serve as a monetary buffer that smoothens the MU supply and keeps it primarily influenced by the size and transaction volume of the ReSource Network.

For more information about MU allocation, distribution, and supply, please refer to chapter 4.3 - “Initial MU Allocation and Distribution”.