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Mezo MUSD

3.1
MUSD / Ethereum (bridged from Mezo chain via Wormhole NTT) / March 20, 2026
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Score Breakdown

CategoryWeightScore
Audits & Historical20%3.50
Centralization & Control30%3.20
Funds Management30%2.50
Liquidity Risk15%4.00
Operational Risk5%2.00
Final Score3.1 / 5.0
20%30%30%15%
Medium Risk

Overview

Mezo is a Bitcoin-focused Layer-1 appchain (EVM-compatible, Cosmos SDK-based) described as "the onchain Bitcoin banking platform." MUSD is Mezo's native stablecoin, a Liquity V1 fork that allows users to borrow MUSD against BTC collateral (via tBTC) through a CDP (Collateralized Debt Position) model. Each MUSD is fully backed by Bitcoin and can be redeemed for BTC at face value.

Key modifications from Liquity V1:

  • Fixed interest rates (1-5% APR) instead of Liquity's one-time borrowing fee
  • BTC-only collateral (via tBTC) instead of ETH
  • Interest Rate Manager for governance-set global rates
  • Protocol Controlled Value (PCV) with a 100M MUSD bootstrap loan into the Stability Pool at genesis
  • Refinancing mechanism for borrowers to update their rate
  • Solidity 0.8.24 (Liquity V1 used 0.6.x)

MUSD is minted on the Mezo chain and bridged to Ethereum via Wormhole's Native Token Transfer (NTT) protocol.

The protocol is built by Thesis, the crypto venture studio that previously built Keep Network, tBTC, and Threshold Network. Thesis has been building Bitcoin DeFi infrastructure since 2018-2019.

Links:

Risk Summary

Key Strengths

  • Battle-tested base code: Liquity V1 fork — the core CDP architecture has been live since April 2021 with no smart contract exploits
  • Experienced team: Thesis has 6+ years building Bitcoin DeFi infrastructure (tBTC, Keep, Threshold)
  • Over-collateralized: Minimum 110% collateral ratio with robust liquidation mechanics
  • Transparent: Open-source code, onchain verifiable collateral, documented security policy
  • Conservative parameters: MCR (110%) and CCR (150%) are identical to Liquity V1's proven settings

Key Risks

  • Very new protocol: MUSD has been live for only ~2 months. Limited production track record.
  • Chain risk: Mezo is a new L1 — chain stability, validator decentralization, and liveness are unproven
  • Double bridge risk: MUSD on Ethereum depends on both tBTC (BTC→Mezo bridge) and Wormhole NTT (Mezo→Ethereum bridge)
  • Deteriorating liquidity: ~$2.0M DEX liquidity on Ethereum (down 38.5% from ~$3.26M in early March), with two Uniswap V4 pools completely drained and 24h volume collapsed ~90% to ~$71K
  • Persistent net outflows: MUSD supply on Ethereum decreased ~33% over 6 weeks (from ~2.57M to ~1.72M), indicating sustained bridge outflows
  • No bug bounty: No formal bug bounty program with defined payouts
  • Single audit for MUSD: Only one independent audit (Cantina, April 2025). "Thesis Defense" audits are from an affiliated entity

Critical Risks

  • Bridge dependency: If Wormhole NTT is compromised or paused, MUSD on Ethereum becomes non-redeemable until bridge is restored. The 2/4 pauser multisig has a low threshold.
  • New chain single point of failure: All MUSD collateral lives on Mezo chain. If the Mezo chain experiences extended downtime or consensus failure, Ethereum MUSD holders cannot redeem.
  • Bootstrap loan: 100M MUSD bootstrap loan into Stability Pool creates significant protocol-owned debt — the system's initial capitalization is not from organic demand.
Full Report

Contract Addresses

Mezo Chain (Chain ID: 31612)

Contract Address
MUSD Token 0xdD468A1DDc392dcdbEf6db6e34E89AA338F9F186
ActivePool 0x3012C2fE1240e3754E5C200A0946bb0E07474876
DefaultPool 0xE4B5913C0c82dB2eFC553b95c0173efb90a07c8B
CollSurplusPool 0xBF51807ACb3394B8550f0554FB9098856Ef5F491
GasPool 0x3EB418BdBE95b4b9cf465ecfBD8424685ACD1Bc1
PriceFeed (proxy) 0xc5aC5A8892230E0A3e1c473881A2de7353fFcA88
Price Oracle Precompile 0x7b7c000000000000000000000000000000000015

Ethereum Mainnet

Contract Address Notes
MUSD Token 0xdD468A1DDc392dcdbEf6db6e34E89AA338F9F186 ERC20, mint/burn controlled via whitelist
NTT Manager (Bridge) 0x5293158bf7a81ED05418DA497a80F7e6Dbf4477E Wormhole NTT, burn/mint mode
Wormhole Transceiver 0x76ddB3f1dDe02391Ef0A28664499B74C29d18d3E ERC1967Proxy → WormholeTransceiver
Mezo Multisig 0x98D8899c3030741925BE630C710A98B57F397C7a Gnosis Safe, 5/9 threshold
NTT Pauser Multisig 0x40C7b9612B394212394EA860cACd0e176CA4Ae5B Gnosis Safe, 2/4 threshold

MUSD Ethereum Token Details:

  • Name: Mezo USD
  • Symbol: MUSD
  • Decimals: 18
  • Total Supply on Ethereum: ~1,719,626 MUSD (as of 2026-03-20)
  • Circulating Supply: ~18,877,133 MUSD (across all chains)
  • Owner: Mezo Multisig (5/9)

Mint/Burn Permissions on Ethereum MUSD:

The MUSD token on Ethereum uses a mintList/burnList whitelist set via setSystemContracts() and addToMintList()/addToBurnList(). On Ethereum, the Liquity system contracts (TroveManager, StabilityPool, BorrowerOperations, InterestRateManager) are deployed as NoOp placeholder contracts — they exist only to satisfy the token's system contract address requirements since the actual CDP logic runs on the Mezo chain. Only the NTT Manager performs real mint/burn operations on Ethereum.

Address Can Mint Can Burn Role
0x5293158bf7a81ED05418DA497a80F7e6Dbf4477E Yes Yes NTT Manager (Wormhole bridge) — only active minter/burner
0x52b952d9e77fc89c7a0ab5b766e6560df778c35a Yes Yes BorrowerOperations (NoOp placeholder)
0xe9c3d269d259d3a336147714dca60e3ff639079a Yes No InterestRateManager (NoOp placeholder)
0x70ce34942fa5513ca189ed958f93b0d55eecbd94 No Yes TroveManager or StabilityPool (NoOp placeholder)
0x1d5b85d4099958de09fee8bc252a546b42590daf No Yes TroveManager or StabilityPool (NoOp placeholder)

Audits and Due Diligence Disclosures

MUSD is a fork of Liquity V1, which itself was extensively audited. The Mezo team has conducted audits on their modifications.

MUSD-Specific Audits

Auditor Scope Date Link
Cantina MUSD smart contracts April 2025 PDF
Thesis Defense Mezo Earn January 2026 Listed in audits repo

Other Mezo Audits

Auditor Scope Date Link
Halborn mezod (chain client) January 2025 PDF
Halborn mezod (chain client) October 2024 PDF
Halborn Mezo Native Bridge September 2025 PDF
OtterSec Bridge March 2025 PDF
Thesis Defense MezoBridge contract September 2025 PDF
Quantstamp Passport/App May 2024 PDF

Note: "Thesis Defense" appears to be an internal/affiliated security team, not an independent third-party auditor. The only independent MUSD-specific audit is by Cantina (April 2025).

Underlying Liquity V1 Audits

The base Liquity V1 code has been extensively audited:

  • Trail of Bits — 3 separate audit reports (protocol, stability pool, proxy contracts)
  • Coinspect — Security review
  • Certora — Formal verification
  • Liquity V1 has been live on Ethereum since April 2021 with $0 lost to smart contract exploits.

Smart Contract Complexity

Moderate complexity. The core CDP logic follows Liquity V1's proven architecture (TroveManager, BorrowerOperations, StabilityPool, SortedTroves, ActivePool, DefaultPool). Key additions include InterestRateManager, PCV, and BorrowerOperationsSignatures. The codebase uses Solidity 0.8.24 with Echidna fuzz testing.

Bug Bounty

  • No Immunefi, Sherlock, or Cantina bug bounty program found.
  • Not registered with SEAL Safe Harbor.
  • Mezo has a security policy at security@mezo.org with a 48-hour response SLA. See SECURITY.md.
  • No formal bug bounty with defined payouts was identified.

Historical Track Record

  • Production History: Mezo Borrow (MUSD) first appears on DeFiLlama on 2026-01-20. The Mezo chain launched earlier with bridge functionality. MUSD has been live for approximately 2 months at time of assessment.
  • TVL: Mezo Borrow TVL is ~$19.85M (2026-03-20).
  • MUSD Supply on Ethereum: ~1,719,626 MUSD bridged to Ethereum (decreased from ~2.57M in February and ~1.94M in early March, indicating persistent net outflows).
  • Market Cap: ~$18.77M circulating market cap (CoinGecko).
  • Incidents: No reported security incidents or exploits found for Mezo or MUSD.
  • Peg Stability (CoinGecko data, 2025-08-14 to 2026-03-20):
    • Current price: ~$0.9948 (slight discount to peg)
    • Mean price: ~$0.995
    • Min: $0.9635 (-3.65% from peg)
    • Max: $1.055 (+5.5% from peg)
    • ATH: $1.055 (Oct 2025)
    • ATL: $0.9635 (Nov 2025)
    • Recent trend: Trading at slight discount (~$0.99-$0.995).
  • Concentration Risk: With ~$1.72M MUSD on Ethereum and ~$19.85M TVL on Mezo chain, the user base is likely concentrated among early adopters.

Funds Management

MUSD operates as a CDP stablecoin — it does not delegate funds to other protocols. All collateral (BTC) is held within the protocol's own pool contracts (ActivePool, DefaultPool).

Accessibility

  • Minting: Anyone can mint MUSD by depositing BTC collateral on the Mezo chain and opening a trove (CDP). Minimum collateral: $1,800 USD worth of BTC.
  • Bridging: MUSD is bridged to Ethereum via Wormhole NTT (burn on Mezo, mint on Ethereum and vice versa).
  • Redemption: Anyone can redeem MUSD for BTC at face value on the Mezo chain (Liquity-style redemptions against lowest-collateral-ratio troves). 0.75% redemption fee for non-borrowers.
  • Fees:
Fee Type Amount Notes
Interest Rate 1-5% APR (fixed) Set at loan opening, fixed for life of loan
Issuance Fee 0.1% On borrowed MUSD amount
Refinance Fee 0.1% Fraction of issuance fee
Redemption Fee 0.75% For non-borrowers redeeming MUSD for BTC
Gas Deposit 200 MUSD Returned when loan is closed

Collateralization

  • Backing: MUSD is 100% backed by BTC collateral (specifically tBTC) on the Mezo chain. Over-collateralized by design.
  • Minimum Collateral Ratio (MCR): 110% (same as Liquity V1)
  • Critical Collateral Ratio (CCR): 150% — below this, Recovery Mode is triggered
  • Liquidation: Positions below 110% ICR are liquidated. The Stability Pool absorbs debt first; if depleted, debt is redistributed to remaining borrowers.
  • Recovery Mode: When system TCR < 150%, liquidation threshold rises to 150%.
  • PCV Bootstrap: The protocol minted a 100M MUSD bootstrap loan into the Stability Pool at genesis — this provides initial liquidation buffer but creates protocol-owned debt.
  • Collateral Quality: BTC via tBTC (Threshold Network's decentralized Bitcoin bridge). tBTC has 24,000+ BTC bridged since 2020 with no loss events. However, tBTC itself introduces bridge/signer risk.

Provability

  • Onchain Verification: Collateral is held in onchain pool contracts on the Mezo chain (ActivePool, DefaultPool). Anyone can verify total collateral and total debt.
  • No Exchange Rate: MUSD targets 1:1 USD peg through arbitrage mechanics (not an exchange-rate model). No PPS/rate calculations needed.
  • Oracle: BTC/USD price feed powered by Skip Connect (formerly Slinky), a consensus-level oracle built on Cosmos SDK's ABCI++ vote extensions. Each Mezo validator runs a Skip Connect sidecar that pulls prices from 9 CEXs (Binance, Bybit, Coinbase, Huobi, Kraken, KuCoin, MEXC, OKX, Crypto.com), aggregated via stake-weighted median. The oracle is exposed to EVM contracts via a precompile at 0x7b7c000000000000000000000000000000000015 implementing the Chainlink AggregatorV3 interface for compatibility. The MUSD PriceFeed contract (0xc5aC5A8892230E0A3e1c473881A2de7353fFcA88) consumes this precompile with a 60-second staleness check. Prices are updated every block as part of consensus, requiring a minimum of 3 providers to report.
  • tBTC Proof of Reserves: Available at tbtcscan.com/wallets for verifying BTC backing of tBTC itself.
  • Cross-chain Complexity: Verifying MUSD backing requires checking the Mezo chain, not Ethereum. On Ethereum, MUSD is purely a bridged token — its backing exists on the Mezo chain.

Liquidity Risk

On-Chain Liquidity (Ethereum)

Pool Platform Address TVL MUSD Share Notes
MUSD/crv2pool Curve 0xB5571E76693ba60110B5811DD650FFefce1C955f ~$1,140,000 74.4% MUSD is quote token; imbalanced toward MUSD
MUSD/USDC Uniswap V3 0x748C05B80d07de9692d976bd3173F301356aB945 ~$645,000 60.9% Primary remaining MUSD/USDC pair
OUSD/MUSD Curve 0x23b78Dc3b1b0A27f3838219e97d806Aae377a1b2 ~$219,000 78.6% Imbalanced toward MUSD
MUSD/USDC Uniswap V4 0xa9bf5691768ef950a99efd74d722961ff2df3fec $0 — Empty (previously ~$925K)
MUSD/tBTC Uniswap V4 0x0dd11e1def156d20c60de1e7b4f7f4268c411ee9 $0 — Empty (previously ~$304K)
Total ~$2,004,000

24h Trading Volume: ~$71,083 (CoinGecko, 2026-03-20) — down ~90% from early March (~$739K)

Liquidity Assessment

  • Total DEX liquidity: ~$2.0M across Ethereum DEXes — down 38.5% from ~$3.26M in early March. Two Uniswap V4 pools have been completely drained.
  • Pool imbalance: MUSD is the majority asset in both active Curve pools (74-79%), indicating persistent selling pressure or insufficient demand-side liquidity.
  • Slippage: For a $100K MUSD→USDC swap, expect >3-5% slippage given reduced pool depths (~$252K USDC in Uniswap V3) and imbalances.
  • Volume collapse: 24h trading volume dropped ~90% from ~$739K to ~$71K, indicating very low market activity.
  • Redemption mechanism: On the Mezo chain, MUSD can be redeemed 1:1 for BTC collateral (minus 0.75% fee). This is the primary exit path. On Ethereum, exit requires either DEX swap or bridging back to Mezo for redemption.
  • No withdrawal queues: Liquity-style redemptions are instant against troves.
  • Bridge dependency: Exiting via redemption requires bridging MUSD back to Mezo chain (Wormhole NTT), adding latency and bridge risk.
  • Supply trend: MUSD on Ethereum has been in persistent decline — from ~2.57M (February) → ~1.94M (early March) → ~1.72M (March 20), a cumulative ~33% decrease over ~6 weeks, indicating sustained net bridge outflows.

Centralization & Control Risks

Governance

On Ethereum (bridged MUSD):

  • MUSD Token Owner: Mezo Multisig 0x98D8899c3030741925BE630C710A98B57F397C7a — 5/9 Gnosis Safe
  • NTT Manager Owner: Same Mezo Multisig (5/9)
  • Wormhole Transceiver Owner: Same Mezo Multisig (5/9)
  • NTT Pauser: Separate Safe 0x40C7b9612B394212394EA860cACd0e176CA4Ae5B — 2/4 threshold (lower threshold allows fast pause in emergencies)
  • No Timelock: No timelock was found on the Ethereum MUSD contracts. The 5/9 multisig has direct control.
  • Mint/Burn Control: The multisig-owned MUSD contract has a mintList/burnList whitelist. The owner can add/remove addresses with minting/burning privileges.
  • Signers: 9 EOA signers, identities not publicly disclosed (verified onchain 2026-03-20).
  • Bridge pausability: NTT Manager is currently unpaused (verified onchain 2026-03-20). The 2/4 pauser multisig can pause bridging.

On Mezo Chain (native MUSD):

  • The Mezo chain is a new L1 with its own validator set. Governance uses veBTC/veMEZO vote-escrow model.
  • Core MUSD contracts (TroveManager, BorrowerOperations, StabilityPool) follow Liquity V1 architecture which is largely immutable once deployed — however the addition of InterestRateManager introduces governable parameters.
  • Interest rates are set by governance (controlled by early participants with veBTC/veMEZO).

Privileged Roles:

  • Multisig can update the MUSD mint/burn whitelist on Ethereum
  • Multisig owns the bridge contracts (can upgrade NTT Manager proxy)
  • InterestRateManager can change borrowing rates on Mezo chain
  • PCV contract manages the 100M MUSD bootstrap loan

Programmability

  • Core CDP Logic: Fully programmatic onchain (Liquity V1 model). Liquidations, redemptions, and collateral management are all automated.
  • No PPS/Exchange Rate: MUSD is a 1:1 stablecoin, not a vault token. No admin-controlled rate.
  • Bridge Operations: Wormhole NTT relies on Wormhole Guardian network (19 guardians, 13/19 threshold) for cross-chain message verification — semi-decentralized.
  • Interest Rate Changes: Require governance action, not fully programmatic.

External Dependencies

Dependency Criticality Risk Level
tBTC (Threshold Network) Critical — sole collateral type Medium. Decentralized Bitcoin bridge with 6+ years of operation, but adds bridge risk layer
Wormhole NTT Critical — only bridge for MUSD to Ethereum Medium. Wormhole is a major bridge protocol with 19 guardians, but has had a $320M exploit in Feb 2022 (on a different product)
Mezo Chain Critical — MUSD is minted here High. New L1 chain with limited track record
BTC/USD Oracle Critical — used for collateral ratio calculations Medium. Skip Connect consensus-level oracle via validator vote extensions, aggregating prices from 9 CEXs. Uses a Chainlink AggregatorV3-compatible precompile (0x7b7c000000000000000000000000000000000015)

Operational Risk

  • Team Transparency: Built by Thesis (thesis.co), a well-known crypto venture studio founded by Matt Luongo. Previously built Keep Network, tBTC, and Threshold Network. Team is mostly known/doxxed in crypto circles.
  • Documentation Quality: Good. Comprehensive docs at mezo.org/docs/users, open-source codebase at github.com/mezo-org/musd.
  • Legal Structure: Thesis is a company (US-based). The Supernormal Foundation holds 10% of MEZO token supply for ecosystem development. Investor contact: IR@thesis.co.
  • Incident Response: Security policy documented at security@mezo.org with 48-hour response SLA. No incidents to evaluate response quality.
  • MEZO Token Distribution: Team (20%) + Investors (30%) = 50% with vesting (1-year cliff, 3-year linear). Foundation (10%) unlocked at TGE. Community (40%).

Monitoring

Key Contracts to Monitor

Ethereum:

Critical Events and Functions to Monitor

Event / Metric Contract Function / Event Threshold
Mint/Burn whitelist changes MUSD Token addToMintList(address), addToBurnList(address), setSystemContracts(...) Any change
MUSD total supply on Ethereum MUSD Token totalSupply() Alert if >$5M or <$500K
NTT Manager upgrades NTT Manager (proxy) Upgraded(address) event Any upgrade
Bridge pauses NTT Manager isPaused(), NotPaused() / Paused() events Any state change
Multisig config changes Mezo Multisig AddedOwner(address), RemovedOwner(address), ChangedThreshold(uint256) Any change
Large bridge transfers MUSD Token Transfer(address,address,uint256) to/from NTT Manager >100K MUSD per tx
MUSD peg deviation DEX pools Offchain: CoinGecko / DEX price feeds >2% deviation from $1.00
Curve pool imbalance Curve MUSD/crv2pool balances(0) vs balances(1) MUSD share >80%
Uniswap V3 pool depth Uniswap V3 MUSD/USDC slot0() for price, token balanceOf() for depth USDC balance <$100K
MUSD token ownership change MUSD Token OwnershipTransferred(address,address) Any change

Recommended Frequency

  • Hourly: Peg monitoring, bridge transaction volume, pool balance ratios
  • Daily: Total supply changes, TVL changes, multisig activity, trading volume
  • Weekly: Collateral ratio trends on Mezo chain, liquidity depth changes, Curve pool imbalance trends

Reassessment Triggers

  • Time-based: Reassess in 3 months (June 2026) — the protocol needs more production time
  • TVL-based: Reassess if MUSD supply on Ethereum grows above $5M or drops below $1M
  • Liquidity-based: Reassess if Ethereum DEX liquidity drops below $1M or Curve pool imbalances exceed 85% (currently at 74-79%)
  • Incident-based: Reassess after any exploit, bridge pause, Mezo chain downtime, or significant peg deviation (>5%)
  • Governance-based: Reassess if multisig threshold or signers change, or if a timelock is added
  • Audit-based: Reassess when additional independent audits are completed or a formal bug bounty is launched

Last verified: March 20, 2026

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