MID Supply Adjustment

Ensuring a $1 Value for MID

Core Principle: MID is designed so that every newly created MID token is always backed by tangible assets. Over time, most MID tokens enter circulation through bonding (participants exchanging assets for MID at certain prices) and staking rewards (MID issued to participants committing their tokens long-term), in addition to the initial pMID → MID conversion. This ensures MID’s value isn’t purely speculative but rooted in genuine economic substance.

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Initial Issuance: pMID → MID Conversion

At the start, MID is introduced via:

$$1 \, pMID = 1 \, MID$$

Since pMID is backed by USDC pegged close to $1, each newly minted MID at this stage is inherently worth $1. This open, simple mechanism ensures no hidden allocations and establishes immediate trust and clarity.

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Beyond the Initial Phase: Bonding and Staking Rewards

1. Bonding: When users bond assets for MID, if the bond price $B > 1$, the difference B - 1 is a premium. For example, if $B = 1.05$, a $0.05 premium per MID goes into the treasury. These accumulated premiums strengthen MID’s backing, potentially allowing MID’s effective value to rise above $1.

2. Staking Rewards: Staking introduces new MID tokens over time. To ensure these additional tokens remain backed by at least $1, the treasury relies on previously gathered premiums. If enough premium has been accumulated, the newly issued MID through staking remains fully covered, preventing the price from dropping below $1.

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AI-Driven Supply Adjustments

The protocol’s AI agents continuously monitor the current MID price Pcurrent and compare it to the target Ptarget　approx 1$.

• If Pcurrent < 1$:

  Reduce supply:

  $$\Delta N = -k_3 \times (1 - P_{current})$$

  For instance, if Pcurrent = 0.95$ and k3 = 1000$:

  $$\Delta N = -1000 \times (1 - 0.95) = -1000 \times 0.05 = -50$$

  The protocol buys and burns 50 MID, pushing the price back toward $1.

• If Pcurrent > 1$:

  Increase supply or adjust incentives:

  $$\Delta N = k_3 \times (P_{current} - 1)$$

  For example, if Pcurrent = 1.10$ and k3 = 500$:

  $$\Delta N = 500 \times (1.10 - 1) = 500 \times 0.10 = 50$$

  Introducing these 50 MID can ease upward pressure and guide the price closer to $1. If premiums are abundant, the price might stabilize slightly above $1, reflecting surplus backing.

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Concrete Scenarios

• Price Above $1 (e.g. $1.05): Premium accumulation means the treasury is richer than the baseline $1 per MID. AI agents may allow slight supply increases or mildly higher staking rewards, keeping the price above $1 since the extra value supports it.

• No Premium (Price at $1): If bond prices are set around $1, no extra premium accumulates. The system remains stable at $1, with no upward or downward drift, as every MID is exactly backed by assets.

• Price Below $1 (e.g. $0.95): If the price dips below $1, AI agents reduce supply. In the earlier example, removing 50 MID pushes the price back up. Additionally, APY can be reduced to slow new MID issuance, helping restore $1 equilibrium.

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Summary

• The initial pMID → MID conversion ensures a fair start with $1 backing.

• Bonding introduces premiums, enabling MID to hold or surpass $1 in value as surplus accumulates.

• Staking rewards are underpinned by these premiums and assets, preventing dilution below $1.

• AI agents dynamically adjust supply and parameters to correct any deviation, ensuring MID remains at least $1 and can rise above it when conditions allow.