Decentralized Lending: A Conversation With mStable’s James Simpson

The following is an interview we recently had with James Simpson, Co-founder of mStable.

What's your background? How did you get involved in crypto/blockchain?

JS: I was working in a data analytics role for KPMG while living in China, and in 2015 I happened to meet some people in Shanghai who were in the crypto space. Later, when working for Apollo Capital back in Australia, the CIO and I got talking about DeFi, dealing with lending platforms, and so on. We came to the realisation that we could unite lending, swapping and stablecoins into one standard. In doing so, we determined that we could solve a lot of the friction points DeFi users run into, and so we founded mStable to attempt to resolve those issues.

What value does mStable bring to users? 

JS: The core of mStable is this idea of a liquidity pool. Within a smart contract we can make an AMM exchange. Users deposit stablecoins, and we have a mechanism that allows for the trading of those underlying stablecoins. That can actually form the core of a piece of financial infrastructure for the internet. From that liquidity pool, whoever deposits accepted USD stablecoins into it gets an equal number of mUSD back. So the shares that represent your ownership of the pool are actually stablecoins in their own right. We’re able to leverage and create a stablecoin from the liquidity pool, but also make the capital in that pool really efficient by lending it on third-party platforms like Compound and Aave, and that generates interest. You’re also able to swap between the underlying stablecoins, which generates fees. So from this liquidity pool and AMM you’re able to have an exchange, a stablecoin and a high yielding savings account on top of it.

Where do you see mStable five years from now?

JS: A big focus for 2021, assuming the community of governors supports this, will be launching more mStable assets like mBTC, mEUR, and mETH alongside continued building of partnerships with other DeFi projects and protocols. There is also an opportunity to capture a lot of mindshare early on with non-Ethereum blockchains, and the genesis team is already conducting due diligence so that thoughtful discussions can be had, and proposals put forth to the governors about which other blockchains, and perhaps which Ethereum Layer 2 solution, mStable should build upon.

On top of that, we will continue to decentralise mStable’s governance over 2021. This will include a migration to Staking v2 at some point, and on-chain voting for MTA token holders. This will likely be bundled in with a Recollateralisation mechanism, should our community governance processes approve it.

Beyond 2021, mStable aims to be a $1 billion protocol and there's really nothing stopping the community and genesis team from making that happen. As a protocol with decentralised governance as its core, it's really up to the individuals and businesses using mStable's assets and product to determine how to get there. 

What are the most common misconceptions you hear about decentralized lending? 

JS: I think the one misconception is that only wealthy people can make money lending. Lending is what banks do with our money every day. mStable opens up this opportunity to anyone with an mStable asset, and earn even more yield thanks to multiple sources of yield through lending earnings, swap fees and redemption fees. 

What’s next for decentralized lending in 2021?

JS: I don't think anyone can predict what's next for decentralized lending!