Predicate and Mento: Policies for Launching Decentralized Stablecoins
December 12 2024
by Victoria Calmon
As a technical infrastructure provider for local partners to issue stablecoins, Mento Labs provides its partners support in key areas including regulatory guidance, legal expertise and help with user integration. Stablecoins launched on the Mento Platform are created in a fully decentralized manner with following community driven proposals and votes, with no central entity managing the process. Once the proposal is approved, the minting of the stablecoin is executed automatically via a smart contract.To uphold regulatory standards, Mento Platform integrates tools like Predicate, which verify that stablecoin issuers comply with MiCAR, AML, and community requirements during the minting process.
Predicate Network
The Predicate Network enables developers to integrate transaction prerequisites into their application in a modular fashion. It is designed to be transparent, verifiable, and open. Any entity—whether an individual, organization, or DAO—can create, manage, and own their prerequisites through Predicate.
Partnering with Mento Labs
Stablecoin issuers, both centralized entities and decentralized ecosystems, have policies, (e.g. legal, reputational, and community values) on what liquidity can be used to mint new stablecoins. For example, in order to meet Markets in Crypto-Assets Regulation (“MiCAR”) requirements, an institutional stablecoin issuer may need to ensure that its stablecoin is not being utilized or minted by addresses involved in illicit finance. Another policy could prevent hackers involved in an Ethereum-based exploit from using stolen funds to mint stablecoins. Separately, a community currency project could restrict minting to specific users within their local community.
Predicate can be leveraged by communities and issuers to build policies and enforce prerequisites directly at the smart contract level when preparing to launch a new decentralized stablecoin on Mento. Once a policy is implemented, Predicate validates the inbound assets used to mint new stablecoins, ensuring they meet the policy’s criteria. This validation can draw from both onchain and offchain data, such as historical flow of funds, blockchain analytics, verifiable credentials, dynamic allowlists, and more based on the policy requirements. To ensure that policy enforcement is trust-minimized, Predicate leverages EigenLayer for a distributed network of economically incentivized operators. These operators reference the policy and issue signatures for each transaction. Signature issuance is deterministic, and any minting attempt without a valid Predicate signature is automatically rejected.
Importantly, Predicate upholds the core principles of openness, verifiability, and ownership central to the Mento Platform. Onchain policies are fully owned and can be modified by the stablecoin creators, whether they are centralized asset issuers or decentralized ecosystems. This flexibility allows for highly customizable policies that cater to the diverse needs of stablecoin issuers using the Mento Platform.
Looking Ahead
Enabling the community and issuers to mint decentralized stablecoins that meet issuer and community requirements through the Mento Platform is just the beginning of a broader collaboration between Mento Labs and Predicate. Decentralized stablecoins enable the creation of highly programmable assets with unique, customizable features. Transaction prerequisites provide a framework for developing truly innovative assets with expressive logic, such as transfer restrictions, rate limits, automated executions, and collateral rebalancing. Together, our goal is to lay the foundation for a new class of programmable stablecoins governed by communities.
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