MGP‑8 – MENTO Buyback-And‑Burn Program (min. USD 5 million)

Governance
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Update: The proposal is live on-chain: MGP‑8 – MENTO Buyback-And‑Burn Program (min. USD 5 million)

Summary

The Mento Reserve currently holds ≈ USD 75 million in assets against ≈ USD 22 million outstanding Mento stablecoins, a collateral ratio of 3.4 × (≈ USD 53 million surplus as of Jul 24, 2025) (see reserve.mento.org). MGP‑8 directs the Reserve stewards to deploy at least USD 5 million of that surplus over the next 12 months to buy back MENTO on the open market and immediately burn the acquired tokens. This measure returns part of the protocol’s accumulated excess value to MENTO token holders and strengthens the economic link between real-world usage of Mento stable assets and the MENTO governance token.

Background & motivation

  • Where the surplus comes from
    • Mento V2 today – the Reserve earns:
      • staking / lending yield on idle Mento Reserve collateral;
      • swap fees from the on‑chain Mento FX pools.
    • Mento V3 (in development) – new modules will add Collateral-Debt-Position (CDP) interest, which is expected to boost protocol income further.
  • Why a buyback‑and‑burn?
    • MENTO is the governance and value‑accrual token of the protocol (1 bn max supply, veMENTO locking for votes, see docs.mento.org).
    • Redirecting a modest share of realized earnings towards permanent removal of supply will reward long‑term contributors while preserving a healthy collateralization ratio for all outstanding stable assets and tying protocol income more closely to MENTO token economics.

Instruction to the Reserve stewards

Total budget: USD 5 000 000 of liquid reserve assets - additional budget possible if economic conditions allow for it, but would require another governance approval.

Time frame: Up to 12 months after execution. Stewards may execute faster or slower within the window, in any trade size they deem prudent, provided the full amount is converted into MENTO and these MENTO are burned

Execution flexibility: Stewards select trading venues, order types, and sizing based on best execution and market liquidity.

Custody of purchased tokens: Tokens must be sent to the zero address (irreversible burn).

Capital protection rule*: The stewards are instructed to pause purchases if the Mento Reserve collateral ratio drops below 135 %*; activity may resume once the ratio is back above that level.

Compliance with Reserve mandate

The Reserve’s policy requires at least 100% backing of all outstanding stable assets and aims for ≥ 110% in low-risk stable collateral before holding diversified assets (see reseve.mento.org). Even after allocating USD 5 million to this program, the projected collateral ratio remains well above the thresholds, leaving a buffer of over USD 48 million at current levels (as of Jan 24, 2025) to protect against market volatility and potential liquidity constraints of reserve assets.

Expected impact

  • Token economics – Burning reduces circulating MENTO, increasing each remaining token’s share of expected future protocol revenue.
  • Governance signalling – Demonstrates that excess value captured by the protocol is channelled back to its governing community.
  • Liquidity – A regular, predictable buyer underpins secondary‑market depth during the first year of autonomous Mento governance and MENTO token trading.

Future Token Buyback Programs

  • After the 12 month period, is intended that the Mento Protocol will continue to allocate a minimum of 50% of the protocol surplus from CDP interest, reserve yield, and protocol fees towards additional buyback programs in the future.

Implementation of this mandate can commence immediately upon execution of the proposal.

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