Research & Economics
Last updated
Last updated
The Mento Protocol represents a fundamental rethinking of how on-chain foreign exchange can work. By combining oracle-driven pricing with automated inventory management, Mento creates a system where stability emerges from aligned economic incentives rather than algorithmic supply controls.
Mento's economics rest on three pillars:
Arbitrage-Driven Stability: Price deviations create profit opportunities that naturally restore pegs. When market prices drift from targets, rational actors are incentivized to correct them.
Capital Efficiency: Fixed-price trading concentrates liquidity where it's needed most, at the real exchange rate. This delivers deep liquidity without the massive capital requirements of traditional AMMs.
Sustainable Incentives: Every participant, from arbitrageurs to liquidity providers, can profit from their role in maintaining the system. This creates a robust, self-reinforcing ecosystem.
For a comprehensive technical and economic analysis of the Mento Protocol:
📄 https://github.com/mento-protocol/whitepaper
The whitepaper details the mathematical foundations of FPMMs, liquidity strategies, incentive mechanisms, and the path toward becoming the definitive on-chain FX layer.
Explore specific aspects of Mento's economic design:
Deep dive into the mathematical models behind Mento's stability mechanisms, including simulations of various market conditions and stress scenarios.
Comprehensive analysis of protocol risks including oracle manipulation, inventory imbalances, and extreme market events, along with mitigation strategies.
The Mento community welcomes economic research and analysis. If you're interested in contributing:
Review our GitHub repositories
Join discussions in our forum
Propose improvements through governance