Not everyone who uses Mosaic will be a borrower. Some people don't want to take on debt — they want to earn. The Stability Pool is where those two sides meet.

In our previous post, we walked through the mechanics of borrowing MEUR against REEF. But borrowing is only half of how Mosaic works. The Stability Pool is the other half — and arguably the more important one. It's the mechanism that keeps the entire protocol solvent, makes liquidations instant, and allows Mosaic to operate with a collateral ratio as low as 110%. Without it, none of this would be possible.

This post explains what the Stability Pool is, how it earns, what the risks are, and why it's the single most important piece of Mosaic's infrastructure.

The Stability Pool is a reserve of MEUR deposited by users — called Stability Providers — that the protocol draws from to absorb the debt of liquidated Troves.

In simpler terms: it's a pool of money that the system uses to clean up bad positions. When a borrower's collateral falls too low and their Trove is liquidated, the Stability Pool steps in automatically. It burns enough MEUR to cancel the borrower's debt and distributes the borrower's REEF collateral to everyone who had MEUR deposited in the pool.

This happens instantly. There are no auctions. No waiting periods. No manual intervention. The pool absorbs the debt, the depositors receive the collateral, and the system stays healthy. It's why Mosaic — like Liquity before it — can offer a minimum collateral ratio of just 110%. Faster liquidations mean the protocol needs less of a cushion, and that translates to better capital efficiency for borrowers.

There are two ways you earn as a Stability Provider.

Every time a Trove is liquidated, the Stability Pool absorbs that Trove's MEUR debt and receives its REEF collateral in return. Because Troves are liquidated at or near the 110% collateral ratio, the REEF you receive is worth more than the MEUR you give up. That spread — roughly 10% — is your profit.

Let's walk through a concrete example.

Suppose the Stability Pool holds 1,000,000 MEUR in total, and you've deposited 100,000 MEUR. That gives you a 10% share of the pool.

Now, a borrower's Trove gets liquidated. Their Trove has 200,000 MEUR of debt and 25,000,000 REEF in collateral. At the time of liquidation, REEF is trading at €0.0088 per token, putting the collateral value at €220,000 — a collateral ratio of 110%.

Here's what happens to your position:

Your MEUR deposit decreases by 10% of the liquidated debt: 20,000 MEUR. Your deposit goes from 100,000 to 80,000 MEUR.

In return, you receive 10% of the liquidated collateral: 2,500,000 REEF, currently worth €22,000.

You gave up €20,000 worth of MEUR and received €22,000 worth of REEF. That's a net gain of €2,000, or roughly 10% on the portion of your deposit that was used.

This math works because Troves are overcollateralized. The collateral is always worth more than the debt, so absorbing liquidations is — under normal circumstances — a profitable trade for Stability Providers.

On top of liquidation gains, the protocol continuously distributes MSIC tokens to Stability Providers. This happens automatically and proportionally — the more MEUR you have in the pool and the longer you keep it deposited, the more MSIC you earn.

MSIC rewards follow a decaying issuance schedule, meaning the rate of distribution is highest in the early days and decreases over time. Early depositors earn a disproportionately large share of the total MSIC supply allocated to Stability Providers (32,000,000 MSIC out of the 100,000,000 total supply).

Those MSIC tokens aren't just a governance token sitting idle. You can stake them separately to earn a share of the protocol's ongoing revenue from borrowing fees and redemption fees. We'll cover MSIC tokenomics in detail in a future post.

This is an important nuance that's easy to miss: your MEUR balance in the Stability Pool goes down each time a liquidation occurs.

Every liquidation burns a proportional amount of MEUR from the pool. Your share decreases along with everyone else's. In exchange, you accumulate REEF from the liquidated collateral and MSIC from the protocol's issuance.

Over time, your position shifts: you hold less MEUR and more REEF. If you believe REEF will maintain or increase in value, this is a favorable trade — you're essentially buying REEF at a discount through the liquidation process. If REEF's price continues to fall sharply, the REEF you receive could be worth less by the time you withdraw it than the MEUR you lost.

This is the fundamental dynamic of the Stability Pool. You're not earning a fixed yield on a static deposit. You're providing a service — absorbing bad debt — and being compensated with discounted collateral and token rewards.

The Stability Pool is not a savings account and it's not risk-free. There are a few things to understand before depositing.

You're taking on REEF price exposure. When a liquidation occurs, you receive REEF in exchange for MEUR. If REEF's price continues to drop after the liquidation, the value of the REEF you received could decline below what you gave up in MEUR. This is most likely during sharp, sustained market downturns — exactly the scenarios when the most liquidations happen.

In practice, this risk is mitigated by the fact that you're receiving REEF at a discount (typically around 10% below market value at the time of liquidation). For the trade to result in a net loss, REEF would need to fall by more than 10% between the moment of liquidation and the moment you sell the REEF. Many Stability Providers are long-term REEF holders who are happy to accumulate more REEF at a discount regardless of short-term price action.

Extreme edge cases. While highly unlikely, if a Trove were somehow liquidated below 100% collateral ratio — for instance, in a flash crash that outpaces the oracle — the collateral received could be worth less than the debt absorbed. The Liquity v1 architecture that Mosaic is built on has been through multiple severe market events without such an incident occurring, but it's important to understand that the theoretical possibility exists.

Withdrawal timing. You can generally withdraw your MEUR from the Stability Pool at any time. However, withdrawals are temporarily suspended when there are liquidatable Troves in the system that haven't been processed yet. In practice, these pauses are very brief — liquidations happen quickly — but it means the pool is not instantly liquid under all conditions.

Even if you never deposit a single MEUR into the Stability Pool, its existence benefits you as a Mosaic user.

For borrowers, the Stability Pool is what makes the 110% collateral ratio possible. In protocols that rely on collateral auctions instead — like early versions of MakerDAO — liquidations are slower and riskier, so the protocol needs to demand higher collateral ratios (often 150% or more) to compensate. Mosaic's Stability Pool eliminates that inefficiency. Liquidations are instant, the system cleans up bad debt immediately, and borrowers get to operate with less collateral locked up.

For MEUR holders, the Stability Pool helps maintain the stablecoin's peg. When MEUR trades above €1, Stability Providers can withdraw their MEUR and sell it on the market for a small profit — adding sell pressure and pushing the price back toward the peg. This acts as a natural liquidity reserve that helps dampen volatility.

For the overall ecosystem, a well-funded Stability Pool means the system can absorb large liquidation events without distress. The more MEUR that's deposited, the more resilient Mosaic becomes. That's why the protocol incentivizes deposits with MSIC rewards — it's not a bonus, it's compensation for performing a critical function.

The Stability Pool is a good fit if:

You hold MEUR and want to put it to work. Rather than having MEUR sit idle in your wallet, depositing to the Stability Pool earns you both REEF from liquidations and MSIC from the protocol.

You're bullish on REEF long-term. Since your MEUR is gradually converted to REEF through liquidations, the Stability Pool naturally builds your REEF position — at a discount. If your outlook on REEF is positive, this is a compelling accumulation strategy.

You want passive income without active management. Unlike borrowing, which requires you to monitor your collateral ratio, the Stability Pool is largely hands-off. You deposit MEUR, and rewards accumulate automatically. You can check in periodically to claim your REEF and MSIC gains, or withdraw whenever you'd like.

You want to earn MSIC early. With the decaying issuance schedule, the highest rate of MSIC distribution happens in the protocol's early days. Early Stability Providers capture a disproportionately large share of total MSIC rewards.

• Step 1: Navigate to mosaic.markets and connect your Reef Chain wallet.

• Step 2: Go to the Stability Pool section of the dashboard.

• Step 3: Enter the amount of MEUR you'd like to deposit. There is no minimum deposit.

• Step 4: Confirm the transaction in your wallet.

That's it. Your deposit begins earning MSIC rewards immediately, and any liquidation gains will be automatically allocated to your account based on your proportional share of the pool.

To withdraw, you simply return to the Stability Pool dashboard and enter the amount you'd like to remove. Withdrawing also automatically claims any accumulated REEF and MSIC rewards.

Now you understand both sides of Mosaic: borrowing with Troves and earning with the Stability Pool. Together, they form a self-reinforcing system — borrowers create demand for MEUR, and Stability Providers ensure the system stays solvent while earning for their contribution.

In our next post, we'll zoom out and explore the bigger picture: why we chose to peg MEUR to the euro, what's happening in the Euro stablecoin market, and why the timing matters for Reef Chain and beyond.

Stay connected:

• Website: mosaic.markets

• Documentation: docs.mosaic.markets

• Discord: Join the server

• Telegram: Join the community

• X (Twitter): @MosaicProtocol

Mosaic Protocol — Decentralized borrowing. Euro stability. Built for chains that need it.

Not everyone who uses Mosaic will be a borrower. Some people don't want to take on debt — they want to earn. The Stability Pool is where those two sides meet.

In our previous post, we walked through the mechanics of borrowing MEUR against REEF. But borrowing is only half of how Mosaic works. The Stability Pool is the other half — and arguably the more important one. It's the mechanism that keeps the entire protocol solvent, makes liquidations instant, and allows Mosaic to operate with a collateral ratio as low as 110%. Without it, none of this would be possible.

This post explains what the Stability Pool is, how it earns, what the risks are, and why it's the single most important piece of Mosaic's infrastructure.

The Stability Pool is a reserve of MEUR deposited by users — called Stability Providers — that the protocol draws from to absorb the debt of liquidated Troves.

In simpler terms: it's a pool of money that the system uses to clean up bad positions. When a borrower's collateral falls too low and their Trove is liquidated, the Stability Pool steps in automatically. It burns enough MEUR to cancel the borrower's debt and distributes the borrower's REEF collateral to everyone who had MEUR deposited in the pool.

This happens instantly. There are no auctions. No waiting periods. No manual intervention. The pool absorbs the debt, the depositors receive the collateral, and the system stays healthy. It's why Mosaic — like Liquity before it — can offer a minimum collateral ratio of just 110%. Faster liquidations mean the protocol needs less of a cushion, and that translates to better capital efficiency for borrowers.

There are two ways you earn as a Stability Provider.

Every time a Trove is liquidated, the Stability Pool absorbs that Trove's MEUR debt and receives its REEF collateral in return. Because Troves are liquidated at or near the 110% collateral ratio, the REEF you receive is worth more than the MEUR you give up. That spread — roughly 10% — is your profit.

Let's walk through a concrete example.

Suppose the Stability Pool holds 1,000,000 MEUR in total, and you've deposited 100,000 MEUR. That gives you a 10% share of the pool.

Now, a borrower's Trove gets liquidated. Their Trove has 200,000 MEUR of debt and 25,000,000 REEF in collateral. At the time of liquidation, REEF is trading at €0.0088 per token, putting the collateral value at €220,000 — a collateral ratio of 110%.

Here's what happens to your position:

Your MEUR deposit decreases by 10% of the liquidated debt: 20,000 MEUR. Your deposit goes from 100,000 to 80,000 MEUR.

In return, you receive 10% of the liquidated collateral: 2,500,000 REEF, currently worth €22,000.

You gave up €20,000 worth of MEUR and received €22,000 worth of REEF. That's a net gain of €2,000, or roughly 10% on the portion of your deposit that was used.

This math works because Troves are overcollateralized. The collateral is always worth more than the debt, so absorbing liquidations is — under normal circumstances — a profitable trade for Stability Providers.

On top of liquidation gains, the protocol continuously distributes MSIC tokens to Stability Providers. This happens automatically and proportionally — the more MEUR you have in the pool and the longer you keep it deposited, the more MSIC you earn.

MSIC rewards follow a decaying issuance schedule, meaning the rate of distribution is highest in the early days and decreases over time. Early depositors earn a disproportionately large share of the total MSIC supply allocated to Stability Providers (32,000,000 MSIC out of the 100,000,000 total supply).

Those MSIC tokens aren't just a governance token sitting idle. You can stake them separately to earn a share of the protocol's ongoing revenue from borrowing fees and redemption fees. We'll cover MSIC tokenomics in detail in a future post.

This is an important nuance that's easy to miss: your MEUR balance in the Stability Pool goes down each time a liquidation occurs.

Every liquidation burns a proportional amount of MEUR from the pool. Your share decreases along with everyone else's. In exchange, you accumulate REEF from the liquidated collateral and MSIC from the protocol's issuance.

Over time, your position shifts: you hold less MEUR and more REEF. If you believe REEF will maintain or increase in value, this is a favorable trade — you're essentially buying REEF at a discount through the liquidation process. If REEF's price continues to fall sharply, the REEF you receive could be worth less by the time you withdraw it than the MEUR you lost.

This is the fundamental dynamic of the Stability Pool. You're not earning a fixed yield on a static deposit. You're providing a service — absorbing bad debt — and being compensated with discounted collateral and token rewards.

The Stability Pool is not a savings account and it's not risk-free. There are a few things to understand before depositing.

You're taking on REEF price exposure. When a liquidation occurs, you receive REEF in exchange for MEUR. If REEF's price continues to drop after the liquidation, the value of the REEF you received could decline below what you gave up in MEUR. This is most likely during sharp, sustained market downturns — exactly the scenarios when the most liquidations happen.

In practice, this risk is mitigated by the fact that you're receiving REEF at a discount (typically around 10% below market value at the time of liquidation). For the trade to result in a net loss, REEF would need to fall by more than 10% between the moment of liquidation and the moment you sell the REEF. Many Stability Providers are long-term REEF holders who are happy to accumulate more REEF at a discount regardless of short-term price action.

Extreme edge cases. While highly unlikely, if a Trove were somehow liquidated below 100% collateral ratio — for instance, in a flash crash that outpaces the oracle — the collateral received could be worth less than the debt absorbed. The Liquity v1 architecture that Mosaic is built on has been through multiple severe market events without such an incident occurring, but it's important to understand that the theoretical possibility exists.

Withdrawal timing. You can generally withdraw your MEUR from the Stability Pool at any time. However, withdrawals are temporarily suspended when there are liquidatable Troves in the system that haven't been processed yet. In practice, these pauses are very brief — liquidations happen quickly — but it means the pool is not instantly liquid under all conditions.

Even if you never deposit a single MEUR into the Stability Pool, its existence benefits you as a Mosaic user.

For borrowers, the Stability Pool is what makes the 110% collateral ratio possible. In protocols that rely on collateral auctions instead — like early versions of MakerDAO — liquidations are slower and riskier, so the protocol needs to demand higher collateral ratios (often 150% or more) to compensate. Mosaic's Stability Pool eliminates that inefficiency. Liquidations are instant, the system cleans up bad debt immediately, and borrowers get to operate with less collateral locked up.

For MEUR holders, the Stability Pool helps maintain the stablecoin's peg. When MEUR trades above €1, Stability Providers can withdraw their MEUR and sell it on the market for a small profit — adding sell pressure and pushing the price back toward the peg. This acts as a natural liquidity reserve that helps dampen volatility.

For the overall ecosystem, a well-funded Stability Pool means the system can absorb large liquidation events without distress. The more MEUR that's deposited, the more resilient Mosaic becomes. That's why the protocol incentivizes deposits with MSIC rewards — it's not a bonus, it's compensation for performing a critical function.

The Stability Pool is a good fit if:

You hold MEUR and want to put it to work. Rather than having MEUR sit idle in your wallet, depositing to the Stability Pool earns you both REEF from liquidations and MSIC from the protocol.

You're bullish on REEF long-term. Since your MEUR is gradually converted to REEF through liquidations, the Stability Pool naturally builds your REEF position — at a discount. If your outlook on REEF is positive, this is a compelling accumulation strategy.

You want passive income without active management. Unlike borrowing, which requires you to monitor your collateral ratio, the Stability Pool is largely hands-off. You deposit MEUR, and rewards accumulate automatically. You can check in periodically to claim your REEF and MSIC gains, or withdraw whenever you'd like.

You want to earn MSIC early. With the decaying issuance schedule, the highest rate of MSIC distribution happens in the protocol's early days. Early Stability Providers capture a disproportionately large share of total MSIC rewards.

• Step 1: Navigate to mosaic.markets and connect your Reef Chain wallet.

• Step 2: Go to the Stability Pool section of the dashboard.

• Step 3: Enter the amount of MEUR you'd like to deposit. There is no minimum deposit.

• Step 4: Confirm the transaction in your wallet.

That's it. Your deposit begins earning MSIC rewards immediately, and any liquidation gains will be automatically allocated to your account based on your proportional share of the pool.

To withdraw, you simply return to the Stability Pool dashboard and enter the amount you'd like to remove. Withdrawing also automatically claims any accumulated REEF and MSIC rewards.

Now you understand both sides of Mosaic: borrowing with Troves and earning with the Stability Pool. Together, they form a self-reinforcing system — borrowers create demand for MEUR, and Stability Providers ensure the system stays solvent while earning for their contribution.

In our next post, we'll zoom out and explore the bigger picture: why we chose to peg MEUR to the euro, what's happening in the Euro stablecoin market, and why the timing matters for Reef Chain and beyond.

Stay connected:

• Website: mosaic.markets

• Documentation: docs.mosaic.markets

• Discord: Join the server

• Telegram: Join the community

• X (Twitter): @MosaicProtocol

Mosaic Protocol — Decentralized borrowing. Euro stability. Built for chains that need it.