How to participate in governance token auctions? Twitter user shares mStable bidding record: This is not something that everyone can afford to play.
Matt Henderson has always been a professional investor who became familiar with Bitcoin many years ago. However, it wasn't until recently that he started to delve into projects like Ethereum. Due to his interest in DeFi, he participated in the auction of the governance token META (MTA) for mStable and shared his experiences and thoughts with his followers on Twitter.
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The Charm of DeFi
As an early participant in CeFi himself, he is optimistic about protocols like Aave and Synthetix. The biggest difference between CeFi and DeFi is the permissionless nature of the latter, much like the Bitcoin network. He gave an example:
"My son is too young to have a bank account, but he can deposit USD stablecoins in DeFi to earn interest, just like a savings account. And I can trade tokens on Uniswap without uploading a passport or proving the source of funds."
However, he also mentioned that in order to interact with DeFi, wallets like Coinbase Wallet for mobile and a universal web browser wallet like Metamask are needed, and there are fees incurred each time one interacts with DeFi, which can be costly during network congestion.
Stablecoin Aggregator Protocol mStable
With a background in product development, Henderson quickly became fascinated with mStable's excellent frontend design. He believed that compared to the retro interface of the stablecoin trading protocol Curve.fi, which looks like a dashboard on an antique airplane, mStable's design stood out. After some exploration, mStable announced the auction of 2.6 million governance tokens, META (MTA), and he decided to participate.
The auction took place on the decentralized exchange Mesa.eth on the Gnosis protocol. In the days leading up to the start of the auction, users could see public bids, with the process as follows:
- Swap USDC for mUSD
- Deposit mUSD into the Mesa platform
- Bid mUSD for MTA
- Bids may be surpassed and need to be adjusted accordingly
- Hope that the bid will be successful when the auction officially starts
"I found that very few people in the Discord community could understand the complete auction mechanism of mStable, as the resolver on the Mesa platform was too complex. It processes batch auctions every five minutes and prioritizes large bid orders. The quality of chat content on Discord was quite high a week before the auction started, but deteriorated rapidly in the last few days, with many users appearing who thought it was profitable but knew nothing about it," Henderson complained.
"Governance" Tokens Turn into a Game for Whales
mStable announced its initial price at $0.15, and by the last two days of the countdown, the public bidding had already reached $0.5. When mStable announced an investment from the quant firm Alameda Research and a strategic partnership with the exchange FTX, the price of MTA skyrocketed. Henderson himself couldn't understand whether the timing of this news release helped the token distribution to adhere to the so-called "fairness principle" or hurt it. He said:
"I decided to start bidding again at 2:00 p.m. on July 18th. Seeing that the bidding price had reached $1.20, I planned to bid $1.50 30 minutes before it started. However, just around the start of the auction, Ethereum gas fees surged. Placing an order cost around $0.70, but canceling it would cost me $180 after the auction started."
The auction was completed nonetheless, with the final clearing price at $1.80. Henderson did not acquire MTA tokens, and later MTA went live on Balancer and Uniswap, with the price nearly doubling to $3.00. Henderson pointed out:
"Many community members expressed dissatisfaction with the fairness of the auction, claiming that on-chain data showed that most tokens were acquired by about ten whales, and I share the same view."
Although he didn't win the MTA tokens in the auction, he could still become a liquidity provider on Balancer by depositing an equivalent amount of mUSD and USDC to earn MTA tokens.
Henderson concluded optimistically: "Many institutional funds have entered the DeFi field to learn. I hope to understand more. There are many new infrastructures being built. From a user experience perspective, I am very optimistic about the development of the DeFi sector. Compared to the continued friction experience of introducing KYC and anti-money laundering rules in CeFi, the permissionless nature of DeFi is refreshing and could become a force for achieving global financial inclusion."