With this post i want to discuss an idea to issue a new token called the $HICP which is pegged to the HICP(Harmonised Index of Consumer Prices) – Overall index.
Reason:
The consumerprice index is the only thing which is going up in an overall financial crisis, or total bear markets, so this would be the perfect „safe harbour“ against inflation and collapses of FIAT currencies. Also it would be a perfect solution to short against FIAT currencies, also when crypto is in a bear market.
Current situation:
Since 1996 the European Central Bank is measuring inflation of the € against the HICP Overall index. So in a market where everything is going down, the HICP Overall index ist the only index which is going up. So for difficult marketconditions the only safe harbour would be a token which is pegged to the HICP Overall index. Here you can see a chart since 1996:
Execution:
A token named $HICP should be issued with tokenomics similar to $PAR with the difference that the token is not pegged to € but to the HICP – Overall index. For that it is necessary to find an oracle which implements the index from the EU.
This is just a first idea which i would like to discuss with the community & team of Mimo Labs.
Maybe a better solution would be, that HICP will not be minted, but sold for USDC or other stablecoins. Issued from Mimo Labs or the protocoll.
Than that the HICP token would be funded from stable assets and it would be possible to integrate it in the MIMO Protocol and opening a vault and mint PAR from HICP Vault.
That would be the usecase for the token, shorting against euro with minting PAR. So it would also strengthen PAR.
Issuing a stablecoin indexed to HICP is a good idea in my opinion. However, I don’t think it is relevant considering the way Mimo works.
Mimo is designed in a way that users take the risks of the issued stablecoin (liquidity, price, etc.). Frax, which a few months ago launched a stablecoin indexed to the U.S. CPI-U (the U.S. equivalent of HICP in the European Union) works differently. Frax, as a protocol, takes on the risk of the stablecoin issued and uses the partial under-collateralization of the $FPI to hedge this risk, so that no one is aggrieved from a financial point of view (price, liquidity, liquidation, etc.).
Launching a stablecoin indexed to the HICP would only be viable if Mimo incentivizes the borrowing of it, because as explained above, the HICP price has only increased over the last 20 years. Indeed, there would be no economic incentive for a Mimo user to mine and then sell or add liquidity to an HICP-indexed stablecoin due to its steadily rising price; he would either suffer a net loss or impermanent loss (in the case of an LP HICP/PAR, for example).
One of the only relevant possibilities for Mimo to launch an HICP-indexed stablecoin in my opinion would be if another protocol also launched an HICP-based stablecoin (e.g. Frax, Angle, Jarvis). This would then allow users to mine and add liquidity to a stablecoin pool (no IL). However, there is still the problem of the incentive to add liquidity, the stable LP could for example be added as protected collateral to the Mimo x Midas pool, allowing leverage and generating sustainable income without a direct incentive from the pool. In addition to all this, Mimo could also deploy AMOs on this HICP-indexed stablecoin, allowing the protocol to generate additional revenue and have better liquidity while remaining overcollateralized by the tokens deposited as collateral on Mimo by users.
In conclusion, I think that launching a stablecoin based on HICP is a good idea, but the scope and mechanics of it need to be well defined to ensure its relevance.
