Mosaic Protocol's testnet is live on Reef Pelagia at testnet.mosaic.markets.

Everything we've described in the blog series is now something you can actually use. Open a Trove, deposit REEF as collateral, borrow MEUR, deposit to the Stability Pool, earn MSIC, stake it, and see the full economic loop in action — all with test tokens that cost nothing.

This post walks you through how to get set up, what you can do, and how to share feedback with the team.

What's Available on Testnet

The core Mosaic Protocol experience is fully functional on testnet:

Borrowing. Open a Trove by depositing testnet REEF as collateral and borrow MEUR against it. You'll see the full mechanics in action — the one-time borrowing fee, the Liquidation Reserve, your collateral ratio, and the ability to adjust your position at any time.

Stability Pool. Deposit your borrowed MEUR into the Stability Pool to begin earning MSIC rewards. This is the same decaying issuance schedule described in our tokenomics post — though on testnet, you'll be able to see the reward accrual mechanism working in real time.

MSIC staking. Claim your earned MSIC periodically from the Stability Pool, then stake it to earn a portion of the protocol revenue generated through borrowing fees, redemption fees, and liquidations. This completes the full economic loop: borrow → deposit → earn MSIC → stake MSIC → earn fees.

How to Get Started

You'll need to do two things before you can use the testnet app: add the Reef Pelagia testnet to your wallet, and claim some testnet REEF from the faucet.

Step 1: Add Reef Pelagia to your wallet.

Reef Pelagia is Reef Chain's testnet. You'll need to add it as a custom network in your wallet app (MetaMask or similar). The Reef team has published a step-by-step guide with all the network details you'll need — RPC URL, Chain ID, and block explorer:

👉 How to add Reef Pelagia to your wallet

Step 2: Claim testnet REEF from the faucet.

Once your wallet is connected to Reef Pelagia, you'll need testnet REEF to use as collateral and to pay for gas. Claim some from the faucet here:

👉 Reef Pelagia Faucet

For more background on the Reef Pelagia testnet, including how it works and what to expect, check out Reef's announcement post:

👉 Reef Pelagia Testnet Is Now Live

Step 3: Open the Mosaic testnet app.

Navigate to testnet.mosaic.markets, connect your wallet, and you're ready to go. Open a Trove, borrow MEUR, deposit to the Stability Pool, claim MSIC — the full experience is waiting for you.

A Quick Walkthrough

If you've read our borrowing guide, you already know the mechanics. Here's the condensed version for testnet:

Open a Trove. Connect your wallet, choose how much testnet REEF to deposit as collateral, and choose how much MEUR to borrow. Remember: the minimum collateral ratio is 110%, the minimum debt is 200 MEUR, and there's a 2 MEUR Liquidation Reserve. We recommend starting at a 200%+ collateral ratio to give yourself plenty of room to explore.

Deposit MEUR to the Stability Pool. Once you've borrowed MEUR, head to the Stability Pool section and deposit some or all of it. You'll begin earning MSIC rewards automatically.

Claim and stake MSIC. As MSIC rewards accrue, you can claim them periodically. Once claimed, navigate to the staking section and stake your MSIC. From that point on, you'll earn a proportional share of all protocol fees — borrowing fees in MEUR and redemption fees in REEF.

Experiment. Try adjusting your Trove — add more collateral, withdraw some, borrow more, repay some debt. See what happens to your collateral ratio. Try pushing it close to the limits (it's testnet — that's what it's for). Try redeeming MEUR for REEF. Get a feel for how every piece of the system responds.

REEF Price will Change. We have the ability to manually set the price of REEF on testnet. This is by design, allowing us to test out liquidations, higher loan-to-values, and so on. Remember these are just testnet tokens and are not usable anywhere besides Reef Pelagia testnet.

Important: This Is Testnet

Everything on testnet uses test tokens with no real-world value. The REEF is testnet REEF. The MEUR is testnet MEUR. The MSIC is testnet MSIC. None of this activity, none of these balances, and none of these tokens will carry over to mainnet.

Testnet exists for two reasons: for you to learn how the protocol works hands-on, and for us to catch bugs, improve the user experience, and refine the app before real assets are involved. Think of it as a dress rehearsal.

We Want Your Feedback

This is a testnet, which means things will change. We're actively testing the app internally and will be making updates and improvements as we go. But we can't catch everything ourselves — and the things that confuse or frustrate real users are often invisible to the team that built it.

If you encounter a bug, if something doesn't work as expected, if the flow is confusing, or if you have suggestions for how we can make the experience better — we want to hear about it.

Share your feedback in either of these channels:

• Discord: Join us at discord.gg/KJ89PuzvkJ and post in the 📥┊suggestions channel

• Telegram: t.me/mosaicprotocol

Every piece of feedback helps us ship a better product on mainnet. Don't hold back.

What Comes Next

Testnet will remain live until the Reef Deep Current upgrade occurs and Mosaic launches on Reef Chain mainnet. Between now and then, we'll be iterating on the app, incorporating community feedback, and preparing for a mainnet launch that benefits from every lesson learned during this testnet period.

If you've been following along since our first blog post, this is the moment everything becomes real — or at least, real enough to touch. Get in there, open a Trove, break things (politely), and help us build the best possible version of Mosaic for mainnet.

👉 testnet.mosaic.markets

Stay connected:

• Website: mosaic.markets

• Documentation: docs.mosaic.markets

• Discord: Join the community

• X (Twitter): @MosaicProtocol

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

As of March 2026, the total stablecoin market capitalization sits above $310 billion. Euro-pegged stablecoins account for roughly $900 million of that. Less than one-third of one percent. The euro — the official currency of 20 countries, used daily by approximately 350 million people, and the second most traded currency on the planet — barely registers on-chain.

This isn't a minor gap in the market. It's a structural imbalance. And it's one that Mosaic Protocol was built to address.

This post isn't about Mosaic's mechanics (we've covered those in our borrowing and Stability Pool posts). This is about the bigger picture: why the world needs more Euro stablecoins, why the timing is now, and why MEUR — a decentralized, Euro-pegged stablecoin minted against REEF collateral on Reef Chain — is positioned to serve a demand that almost nobody else is building for.

The Dollar Dominance Problem

DeFi was born on Ethereum, and Ethereum's earliest stablecoin infrastructure was built by American teams for American users thinking in American dollars. USDT launched in 2014. USDC in 2018. DAI in 2017, pegged to the dollar. When DeFi summer hit in 2020, every major protocol — Aave, Compound, Uniswap, Curve — was denominated in USD. The habit stuck.

Today, USDT alone commands a market cap above $140 billion. USDC exceeds $75 billion. Dozens of other dollar-pegged tokens — DAI, FDUSD, PYUSD, USDe, USDS — compete for the rest of the space. Dollar stablecoins have deep liquidity, broad exchange listings, and integrations with virtually every DeFi protocol in existence.

None of that is a problem in isolation. Dollar stablecoins are useful, battle-tested, and here to stay. The problem is that almost nothing else exists.

If you're a European business that wants to settle invoices on-chain in euros, your options are thin. If you're a trader in Lagos or Jakarta who wants to hold euros instead of dollars, you have almost nowhere to go on-chain. If you're a DeFi protocol that wants to offer Euro-denominated lending or yield, the infrastructure barely exists. If you're a European citizen trying to avoid dollar-denominated exchange rate risk on your stablecoin holdings, you're largely out of luck.

The on-chain financial system has replicated one of the offline financial system's worst tendencies: over-reliance on a single currency. Except in traditional finance, at least the euro has a massive, liquid, and well-regulated market behind it. On-chain, it's almost a rounding error.

What Changed: MiCA and the Regulatory Catalyst

For years, the euro stablecoin market was stagnant. Projects launched, struggled to gain traction, and either shut down or remained niche. The market lacked the regulatory clarity that institutional players needed to get involved, and without institutions, liquidity never reached critical mass.

That changed in June 2024 when the European Union's Markets in Crypto-Assets Regulation — MiCA — went into effect for stablecoins. MiCA created the first comprehensive regulatory framework for stablecoins in a major economic zone. It mandated full reserve backing with liquid assets, enforceable redemption rights at par value, standardized disclosure requirements, and supervision by national authorities. It also effectively banned non-compliant and algorithmic stablecoins from EU-regulated exchanges.

The effect was immediate and dramatic. In the twelve months following MiCA's implementation, the euro stablecoin market capitalization doubled — reversing a 48% decline from the prior year. Monthly transaction volumes surged nearly ninefold, rising to $3.8 billion. Consumer search interest for euro stablecoins spiked across the EU, with increases of 400% in Finland, over 300% in Italy and Romania, and 250%+ across Germany, the Netherlands, Austria, and Belgium.

MiCA didn't just clarify the rules. It separated the market into compliant and non-compliant, and forced capital toward the compliant side. Projects like Circle's EURC — which had secured authorization as an Electronic Money Institution in France ahead of MiCA — captured enormous market share, surging from 17% to roughly 41% of total euro stablecoin supply in twelve months. Other MiCA-aligned issuers followed.

But here's the thing: the market that doubled is still only $900 million. It doubled from almost nothing to slightly more than almost nothing. The growth rate matters because it signals demand. The absolute size matters because it shows how early we still are.

The Growth Projections Are Staggering

In February 2026, S&P Global Ratings published a report projecting that euro stablecoin market capitalization could reach €570 billion in a baseline scenario — and up to €1.1 trillion in an upper-bound case — by 2030. That upper-bound figure would represent roughly 4.2% of total eurozone bank overnight deposits, and it would constitute a roughly 1,600x increase from the €650 million base at the end of 2025.

S&P's baseline case assumes €500 billion in demand from tokenized investments and approximately €100 billion from tokenized payments. The report noted that 11 European banks across nine countries are planning a jointly issued euro stablecoin through a Dutch entity called Qivalis, targeting launch in the second half of 2026. Separately, 10 global systemically important banks announced plans to issue G7-currency stablecoins on public blockchains.

The ECB has also taken notice. In its November 2025 Financial Stability Review, the central bank devoted an entire analysis to stablecoin risks and growth trajectories. In a July 2025 blog post, ECB officials openly called for more support for properly regulated euro-denominated stablecoins, warning that a strategic blind spot in the space could prove costly for Europe's monetary sovereignty.

Even the most conservative projections from major financial institutions envision the euro stablecoin market growing by orders of magnitude within the next few years. The institutions are coming. The regulatory framework is in place. The infrastructure to serve this demand, however, is not — especially outside of Ethereum.

Why On-Chain Euro Exposure Matters Beyond Europe

It's tempting to think of Euro stablecoins as a European product for European users. That framing is too narrow.

The euro is the second most held reserve currency globally, representing roughly 20% of allocated foreign exchange reserves worldwide. It's the second most traded currency in FX markets, involved in approximately 30% of all foreign exchange transactions. Demand for euro exposure is not limited to the eurozone — it extends to every individual, business, and institution that trades with, invests in, or hedges against Europe.

On-chain euro stablecoins unlock several use cases that go well beyond European payments.

On-chain forex. When MEUR trades alongside USDC, USDT, or other dollar-pegged stablecoins on decentralized exchanges, it creates a native EUR/USD trading pair entirely on-chain. Anyone with a wallet can take a euro position, hedge dollar exposure, or speculate on currency movements — without a forex broker, without KYC, and without minimum account sizes. This is meaningful for traders globally, not just in Europe.

Portfolio diversification. Holding 100% of your stablecoin position in dollars is itself a bet — a bet that the dollar will hold its value relative to other currencies. For users who want to diversify that exposure, Euro stablecoins offer a straightforward hedge. This is particularly relevant during periods of dollar volatility or when U.S. monetary policy is uncertain.

Euro-denominated DeFi. As Euro stablecoins gain adoption, we expect to see Euro-denominated lending, borrowing, and yield across DeFi. MEUR is designed to be the native Euro stablecoin on Reef Chain, and eventually on other ecosystems — creating the building blocks for Euro-native DeFi infrastructure on chains where nothing like it currently exists.

Remittances and cross-border payments. Stablecoins are already disrupting cross-border payments globally. But the vast majority of stablecoin remittance infrastructure is dollar-denominated. For corridors where the euro is the more relevant currency — think EU-to-Africa, EU-to-Southeast Asia, or intra-European payments — an on-chain Euro stablecoin reduces the number of currency conversions required and lowers costs for end users.

Why Reef Chain, and Why Now

The dominant euro stablecoins — EURC, EURS, EURCV — live primarily on Ethereum, with limited expansion to Polygon, Solana, and a few other large chains. This means that the vast majority of smaller blockchain ecosystems have zero Euro stablecoin infrastructure. No native supply, no liquidity pairs, no on-chain forex.

Reef Chain is an EVM-compatible Layer 1 with low fees, fast finality, and an active community — but it has no native, decentralized stablecoin. Mosaic Protocol changes that by bringing MEUR to Reef Chain as its first Euro-pegged stablecoin, minted against REEF collateral through a proven, battle-tested lending architecture.

This isn't about competing with EURC on Ethereum. It's about building essential financial infrastructure where none exists. When you're a user on Reef Chain and you want a stablecoin, your options today are limited to bridged assets with thin liquidity. MEUR gives Reef users a stablecoin that's native to their chain, collateralized by their chain's native token, and pegged to a currency that represents one-fifth of the world's reserves.

After Reef Chain, the same approach scales to other underserved ecosystems. The playbook is repeatable: find chains with active communities, liquid native tokens, and no native stablecoin supply — then deploy Mosaic to fill the gap.

The EURS Depeg: A Reminder of Why Architecture Matters

As recently as this week, STASIS EURO (EURS) — one of the largest euro-pegged stablecoins by market cap — experienced a severe depegging event, crashing roughly 25% below its intended peg before recovering. The episode was accompanied by minimal trading volume, suggesting deep liquidity constraints.

Events like this underscore a point that gets lost in market projections and growth charts: how a stablecoin maintains its peg matters as much as which currency it's pegged to. Centralized stablecoins rely on the issuer's reserve management, redemption infrastructure, and operational integrity. When any of those fail, the peg breaks.

MEUR takes a different approach. Its peg is maintained algorithmically through the same mechanisms proven by Liquity v1 on Ethereum: overcollateralization, instant liquidations via the Stability Pool, and direct redeemability of MEUR for underlying REEF collateral at face value. There is no issuer holding reserves in a bank account. There is no single point of failure. The system is governed by code, not by a company's treasury operations.

This isn't to say that decentralized stablecoins are without risk — they carry collateral risk, oracle risk, and smart contract risk. But the risk profile is transparent, auditable, and distributed. For users who watched centralized stablecoins stumble — from UST to EURS — that distinction matters.

The Opportunity in Front of Us

Let's put the pieces together.

The euro stablecoin market is worth roughly $900 million today. Conservative projections from S&P put it at hundreds of billions by 2030. MiCA has cleared the regulatory path for institutions to enter. Banks, fintechs, and payment providers across Europe are actively building stablecoin strategies. Consumer interest is surging across the EU. And yet, almost none of this infrastructure has reached beyond Ethereum and a handful of large chains.

Mosaic doesn't need to capture a meaningful percentage of the Ethereum euro stablecoin market to succeed. It needs to be first — and best — on the chains where no one else is building. Reef Chain is the starting point. The roadmap extends to every underserved ecosystem with a community that needs a stablecoin and doesn't have one.

The Euro stablecoin wave is coming. It's not a question of if, but when. Mosaic is building the infrastructure to catch it — on the chains the big players aren't looking at yet.

What's Next

Mosaic Protocol is preparing for testnet deployment on Reef Chain before the end of Q1 2026. When testnet goes live, MEUR will be mintable for the first time, and the Reef Chain community will be the first to experience Euro-pegged, zero-interest borrowing powered by a Liquity v1 fork.

In our next post, we'll break down the full MSIC tokenomics — how the protocol's native token captures revenue, how early participants benefit, and how the entire economic loop fits together.

Stay connected:

• Website: mosaic.markets

• Documentation: docs.mosaic.markets

• Discord: Join the community

• Telegram: Chat with us

• X (Twitter): @MosaicProtocol

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

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.

What is the Stability Pool?

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.

How Do Stability Providers Earn?

There are two ways you earn as a Stability Provider.

1. Liquidation gains (REEF)

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.

2. MSIC rewards

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.

What Happens to Your Deposit Over Time?

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 Risks

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.

Why the Stability Pool Matters for the Whole System

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.

Who Should Use the Stability Pool?

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.

How to Deposit: Step by Step

• 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.

Quick Reference

What's Next

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.

If you've never used a lending protocol before, don't worry. We'll explain everything from the ground up.

The Core Concept

Borrowing on Mosaic works like a collateralized loan. You lock up an asset you already own (REEF) and borrow a stablecoin (MEUR) against it. As long as your collateral maintains enough value relative to your debt, your position stays open and you owe no interest. When you want your REEF back, you repay the MEUR and close the position. That's it.

The key difference between Mosaic and a traditional loan is that there are no banks, no credit checks, no applications, and no ongoing interest charges. Everything is handled by smart contracts on Reef Chain. You interact directly with the protocol.

What is a Trove?

A Trove is your individual borrowing position on Mosaic. Think of it as a personal vault. It holds two balances: your REEF collateral on one side, and your MEUR debt on the other. Every borrower has their own Trove, and you can adjust both sides of the balance at any time — adding more collateral, withdrawing some, borrowing more MEUR, or repaying what you owe.

You can only have one Trove per wallet address. If you want multiple positions, you'd need to use separate wallets.

Opening a Trove: Step by Step

Here's what happens when you borrow MEUR on Mosaic.

Step 1: Connect your wallet. Navigate to the Mosaic frontend at mosaic.markets and connect your Reef Chain wallet. You'll need REEF tokens in your wallet to proceed.

Step 2: Choose how much REEF to deposit. This is your collateral. The more REEF you deposit, the higher your collateral ratio and the safer your position. You can always add more later.

Step 3: Choose how much MEUR to borrow. The protocol enforces a minimum collateral ratio of 110%, meaning the euro value of your REEF must be at least 1.1x the value of the MEUR you borrow. There is also a minimum debt of 200 MEUR — you can't open a Trove for less than that.

Step 4: Review the fees. Mosaic charges a one-time borrowing fee that ranges from 0.5% to 5%, depending on recent system activity. In most conditions, this fee sits at or near 0.5%. The fee is added to your debt, not deducted from your wallet. Additionally, a 2 MEUR Liquidation Reserve is set aside from your debt — think of it as a refundable deposit that covers the gas cost of a potential liquidation. You get it back when you close your Trove.

Step 5: Confirm the transaction. Once you approve the transaction in your wallet, your Trove is open. You'll see your MEUR balance in your wallet and your Trove's collateral ratio displayed on the dashboard.

A Worked Example

Let's say REEF is trading at €0.01 and you deposit 500,000 REEF into a Trove. That's €5,000 worth of collateral.

You decide to borrow 2,500 MEUR. Your collateral ratio is 200% (€5,000 / €2,500) — well above the 110% minimum and comfortably above the 150% Recovery Mode threshold.

Assuming the borrowing fee is at its minimum of 0.5%, the protocol adds 12.50 MEUR to your debt (0.5% of 2,500). The 2 MEUR Liquidation Reserve is also set aside. Your total debt becomes 2,514.50 MEUR, and you receive 2,500 MEUR in your wallet.

No further fees or interest will accrue on this debt. Whether you keep your Trove open for a day or a year, 2,514.50 MEUR is what you owe — and that number doesn't change.

Understanding Your Collateral Ratio

Your collateral ratio is the single most important number to watch as a borrower. It's calculated as:

Collateral Ratio = (Value of your REEF in EUR) / (Your MEUR Debt) × 100%

This ratio changes over time as the price of REEF fluctuates. If REEF's price goes up, your ratio improves. If it drops, your ratio falls — and if it falls below 110%, your Trove becomes eligible for liquidation.

Using the example above: you have 500,000 REEF and a debt of 2,514.50 MEUR. At €0.01 per REEF, your ratio is 200%. But if REEF drops to €0.006, your collateral is now worth €3,000, and your ratio falls to about 119%. Still above the minimum, but getting close. If it drops further to €0.0055, your ratio hits roughly 109% — below the threshold — and your Trove can be liquidated.

This is why choosing a comfortable collateral ratio when you open your Trove matters more than squeezing out maximum capital efficiency.

What Happens If You Get Liquidated?

Liquidation means your Trove is closed by the protocol because your collateral ratio dropped below 110%. When this happens, the Stability Pool absorbs your debt and receives your REEF collateral. Your Trove is closed, and you keep the MEUR you borrowed — but you lose the REEF you deposited.

The net loss in a liquidation is roughly 9.1% of your collateral's value. That's because the system only needs to seize enough collateral to cover 110% of the debt. The small surplus, if any, is sent to a pool you can claim from later.

Liquidation is the primary risk of borrowing on Mosaic. The good news is that it's entirely avoidable — you just need to maintain a healthy collateral ratio by either depositing more REEF or repaying some of your debt when prices decline.

Recovery Mode: The Safety Net You Need to Know About

Recovery Mode is a system-wide mechanism that activates when the Total Collateral Ratio (TCR) of the entire Mosaic system falls below 150%. The TCR is the aggregate collateral ratio of all Troves combined.

During Recovery Mode, the liquidation rules change. Instead of just Troves below 110%, any Trove below 150% can be liquidated. This is the protocol's way of protecting overall system health during sharp market downturns.

The practical takeaway: if you want to be safe under all conditions, maintaining a collateral ratio above 150% — ideally 200% or higher — gives you a significant buffer against both normal liquidations and Recovery Mode.

Managing an Open Trove

Once your Trove is open, you have full flexibility to adjust it. You can:

• Add collateral if you want to increase your safety margin. Depositing more REEF raises your collateral ratio without changing your debt.

• Withdraw collateral if REEF's price has risen and your ratio is comfortably high. You can pull out some REEF as long as your ratio stays above 110% (or 150% during Recovery Mode).

• Borrow more MEUR if you need additional liquidity. This increases your debt and lowers your collateral ratio, so do this carefully.

• Repay some or all of your debt at any time. Partial repayment improves your ratio. Full repayment closes your Trove and returns all your REEF collateral plus the 2 MEUR Liquidation Reserve. Note that you can't reduce your debt below the 200 MEUR minimum — if you want to go lower than that, you'll need to close the Trove entirely.

There is no time limit on any of this. Your Trove stays open as long as you want it to, with no expiry date and no ongoing costs.

What Happens If Your Trove Gets Redeemed Against?

Redemptions are a separate mechanism from liquidations, and they can affect your Trove even if it's perfectly healthy.

Any MEUR holder can redeem their stablecoins for REEF collateral at face value through the protocol. When a redemption happens, it targets the Troves with the lowest collateral ratios first. If your Trove is selected, a portion of your debt is paid off and an equivalent euro value of your REEF is transferred to the redeemer.

Here's the key point: a redemption is not a penalty. Your debt decreases and your collateral decreases by roughly the same euro value, so your collateral ratio actually improves after a redemption. You don't lose money in net terms — but you do end up with less REEF in your Trove and less debt.

The best way to minimize your chance of being redeemed against is to maintain a higher collateral ratio. Redemptions work through Troves from the lowest ratio upward, so the higher your ratio, the more debt from other Troves sits in front of yours as a buffer.

Choosing Your Collateral Ratio: Practical Guidance

There's no single right answer for what collateral ratio to use. It depends on your risk tolerance, how actively you plan to manage your Trove, and your outlook on REEF's price. Here's a general framework:

Conservative (200%+): You want peace of mind. You don't plan to check your Trove daily. You're comfortable with lower capital efficiency in exchange for a large safety buffer against both liquidation and Recovery Mode. This is a good starting point for most users.

Moderate (150%–200%): You're comfortable monitoring your position regularly and are willing to add collateral or repay debt if the market turns. You're protected against Recovery Mode at the top of this range but should be ready to act if the ratio dips toward 150%.

Aggressive (110%–150%): You're maximizing capital efficiency and are prepared to actively manage your position. You understand that even a moderate REEF price drop could push you into liquidation territory, and you're comfortable with that risk. This approach is better suited for experienced DeFi users.

Whichever approach you choose, remember: you can always adjust. Start conservative and optimize later once you're familiar with how the system behaves.

What Can You Do With Your Borrowed MEUR?

Once MEUR is in your wallet, it's yours to use however you'd like. Some possibilities:

Deposit into the Stability Pool to earn MSIC rewards and liquidation gains. This is the simplest use case and it directly supports the protocol's health.

Provide liquidity on decentralized exchanges that support MEUR trading pairs, earning swap fees in the process.

Trade MEUR against USDC or other stablecoins for on-chain forex exposure. If you believe the euro will strengthen against the dollar, holding MEUR gives you that position.

Use it as stable-value savings denominated in euros, without needing to sell your REEF.

Leverage your REEF position by borrowing MEUR, selling it for more REEF, depositing that REEF into your Trove, and borrowing again. This amplifies your exposure to REEF price movements — but it also amplifies your liquidation risk. Only do this if you fully understand the mechanics.

Quick Reference

What's Next

Mosaic is preparing for testnet on Reef Chain before the end of Q1 2026. Once testnet is live, you'll be able to open a Trove, borrow MEUR, and experience the full borrowing flow firsthand with test tokens.

In our next post, we'll cover the other side of the protocol: the Stability Pool — how it works, how it earns, and why it's the engine that keeps Mosaic running.

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.

Mosaic Protocol exists to close both gaps at once.

What is Mosaic?

Mosaic is a decentralized borrowing protocol. Users deposit REEF tokens as collateral into individual positions called Troves, and borrow MEUR — a Euro-pegged stablecoin — against that collateral. There are no variable interest rates. No governance votes. No human intervention required. The protocol is fully algorithmic, immutable, and designed to run exactly as deployed.

Mosaic launches first on Reef Chain, with plans to expand to other ecosystems that are similarly underserved by existing stablecoin and lending infrastructure.

Why a Fork of Liquity?

Mosaic is built on the Liquity v1 codebase, one of the most respected and battle-tested lending protocols in all of DeFi. Since launching on Ethereum in April 2021, Liquity has weathered multiple market crashes, including a 41% intraday ETH price drop, without incident. Its smart contracts are immutable and have been audited extensively. Liquity is among the most forked protocols in the industry, with roughly 45 different versions deployed across various chains — a testament to the soundness of its design.

By forking Liquity v1, Mosaic inherits a proven architecture rather than building from scratch. This means borrowers on Reef Chain benefit from the same mechanisms that have secured billions of dollars on Ethereum, adapted for a new ecosystem and a new currency peg.

How Does Mosaic Work?

Mosaic's mechanics will be familiar to anyone who has used Liquity or a similar CDP-based (Collateralized Debt Position) protocol. For those who haven't, here's a straightforward breakdown.

Borrowing. You deposit REEF into a Trove as collateral and mint MEUR against it. Your Trove must maintain a minimum collateral ratio of 110%, meaning for every €100 of MEUR you borrow, you need at least €110 worth of REEF locked up. Instead of paying ongoing interest, you pay a one-time borrowing fee that ranges from 0.5% to 5%, depending on market conditions. Once that fee is paid, there are no further borrowing costs whether your loan stays open for a week or a year.

Stability Pool. MEUR holders can deposit their stablecoins into the Stability Pool. This pool serves as the first line of defense for liquidations. When an undercollateralized Trove is liquidated, the Stability Pool absorbs the debt, and depositors receive the liquidated REEF collateral in return — typically at a discount. Stability Pool depositors also earn MSIC token rewards over time.

Liquidations. When the value of a borrower's REEF collateral drops and their Trove falls below the 110% minimum collateral ratio, the Trove becomes eligible for liquidation. The Stability Pool absorbs the debt first. If the Stability Pool is depleted, the system redistributes the undercollateralized debt and collateral to other active borrowers. This two-step mechanism keeps the system solvent without requiring manual intervention or governance decisions.

Redemptions. MEUR holders can redeem their stablecoins for the underlying REEF collateral at face value at any time, minus a small redemption fee (minimum 0.5%). This mechanism creates a hard price floor for MEUR by ensuring it is always backed by redeemable collateral. If MEUR ever trades below its peg, arbitrageurs can redeem it for a profit, naturally pushing the price back toward €1.

Recovery Mode. If the total collateral ratio of the entire system falls below 150%, Recovery Mode activates. During Recovery Mode, liquidation conditions are relaxed to protect the system's overall health, and borrowing activity that would further decrease the system's collateral ratio is temporarily blocked.

The MSIC Token

MSIC is Mosaic's secondary token, with a maximum supply of 100,000,000. It serves two functions within the protocol.

First, MSIC is distributed to Stability Pool depositors as a reward for securing the system. This issuance follows a decaying schedule over time, meaning early participants earn a larger share.

Second, MSIC holders can stake their tokens to earn a portion of the protocol's revenue. Stakers receive both the REEF collected from redemption fees and the MEUR collected from borrowing fees. The more the protocol is used, the more revenue flows to MSIC stakers.

Why Euro?

The stablecoin market is overwhelmingly denominated in U.S. dollars. Tether's USDT and Circle's USDC together account for the vast majority of stablecoin market capitalization, and dozens of other USD-pegged tokens compete for the remaining share. Euro-pegged stablecoins, by contrast, represent a fraction of a percent of total stablecoin supply despite the Euro being the second most traded currency in the world.

That imbalance is starting to shift. The Euro stablecoin market has more than doubled over the past year following the implementation of the EU's MiCA regulations, and projections from S&P Global suggest it could grow to hundreds of billions of Euros by the end of the decade. The demand is there. The infrastructure to meet it is not, especially outside of Ethereum.

Mosaic is positioned to serve this demand in ecosystems where it doesn't exist yet. MEUR gives Reef Chain users access to a Euro-denominated stablecoin for the first time, opening up possibilities for on-chain forex trading (pairing MEUR against existing USD stablecoins like USDC), hedging, savings, and payments — all without leaving the chain.

Why Reef Chain First?

Reef Chain is an EVM-compatible Layer 1 blockchain with low transaction fees and fast finality. Despite having an active community and a liquid native token in REEF, the chain lacks a native, decentralized stablecoin. That's exactly the kind of ecosystem where Mosaic can have the greatest impact, not competing against entrenched protocols on Ethereum, but serving as essential infrastructure where none currently exists.

After establishing Mosaic on Reef Chain, the protocol will expand to other blockchains that face the same gap: active ecosystems with demand for stablecoins but no native supply.

The Team

Mosaic Protocol was founded by Derek E. Silva and is being built by a small, focused team of contributors: Salvatore, Luis, bfa, Diego, Dũng, Joe, and Hitesh. The team brings experience across smart contract development, frontend engineering, community building, and DeFi protocol design.

Protocol Parameters at a Glance

Current Status and What's Next

Mosaic Protocol is currently in active development and preparing for its testnet launch on Reef Chain before the end of Q1 2026. The team is focused on completing smart contract deployment, frontend development, and community education ahead of mainnet.

Following the launch on Reef Chain, the roadmap includes expansion to additional blockchains targeting ecosystems that, like Reef Chain today, have active communities and liquid native tokens but lack decentralized stablecoin infrastructure.

Get Involved

Mosaic is building in public and welcomes community participation from day one.

• Website: mosaic.markets

• Documentation: docs.mosaic.markets

• Discord: Join the community

• X (Twitter): @MosaicProtocol

Whether you're a Reef Chain holder looking for new utility, a DeFi user interested in Euro-denominated stablecoins, or a builder exp

loring partnerships, we'd love to hear from you.

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

The blockchain landscape is evolving rapidly. While Ethereum remains the dominant force in DeFi, a new generation of Layer 1 blockchains is emerging—chains like Reef, Monad, Celo, and others that offer unique value propositions but lack the mature DeFi infrastructure that users have come to expect.

For these emerging ecosystems, the question isn't whether they need lending protocols—it's which ones they should deploy first.

At Mosaic Protocol, we believe the answer is clear: Liquity v1 is the ideal lending primitive for nascent blockchain ecosystems. Here's why.

The Foundation of DeFi is Lending

Every healthy DeFi ecosystem needs a few core primitives to function:

• Decentralized exchanges for token swaps

• Lending protocols for capital efficiency

• Stablecoins for price stability and unit of account

Without lending infrastructure, users can't leverage their assets. They can't access liquidity without selling. They can't participate in sophisticated DeFi strategies. The ecosystem stagnates.

But not all lending protocols are created equal—especially for chains still finding their footing.

Why Liquity v1? Simplicity is a Feature, Not a Bug

Liquity v1's design is elegantly simple: users deposit ETH (or the native chain token) as collateral and borrow a stablecoin against it. That's it.

No multi-collateral complexity. No governance tokens deciding risk parameters. No oracle dependencies beyond price feeds. Just a proven, battle-tested mechanism that works.

For emerging chains, this simplicity is transformative:

1. Lower Technical Risk

Liquity v1 has been live on Ethereum since April 2021, processing billions in volume without a single security incident. The codebase is thoroughly audited, well-documented, and has survived the ultimate stress test: production use during multiple market crashes.

When you're building on a chain with limited developer resources and auditing capacity, starting with proven, minimalist architecture dramatically reduces your attack surface.

2. Minimal Infrastructure Requirements

Multi-collateral lending protocols require:

• Sophisticated oracle networks for every supported asset

• Governance mechanisms to manage risk parameters

• Complex liquidation systems that can handle diverse collateral types

• Significant computational overhead

Liquity v1 requires:

• A price feed for the native asset

• Smart contracts that have already been tested extensively

For chains still developing their infrastructure, this difference is critical. You don't need a mature oracle ecosystem. You don't need active governance participation. You need something that works, reliably, from day one.

3. Capital Efficiency from the Start

Liquity v1's 110% minimum collateral ratio is the most capital-efficient design in DeFi lending. Users can access up to 90.9% of their collateral's value—far higher than the typical 50-75% offered by other protocols.

For emerging chains trying to bootstrap liquidity, capital efficiency matters. Every dollar of TVL counts. Liquity v1 makes those dollars work harder.

4. Zero Interest Rates = Zero Friction

Liquity v1 charges no ongoing interest. Users pay a one-time borrowing fee (typically 0.5%) and that's it. No accruing debt. No surprise liquidations from rate changes. No complex interest rate models to manage.

This creates a frictionless user experience that's easy to understand and easy to adopt—crucial for onboarding users to a new chain.

5. Decentralized Liquidation System

Liquity's stability pool mechanism for liquidations is genuinely decentralized. There's no reliance on external liquidators or keeper bots that might not exist yet on your chain. The protocol handles liquidations internally, ensuring system stability regardless of ecosystem maturity.

The Stablecoin Question: Why MEUR for Mosaic?

While Liquity v1 originally launched with LUSD (a USD-pegged stablecoin), the architecture is flexible. At Mosaic, we're launching with MEUR—a Euro-pegged stablecoin.

Why?

Because stablecoin markets are dominated by USD, leaving massive opportunities in other currencies. The European market is underserved, yet represents one of the world's largest economic zones. Emerging chains are the perfect place to experiment with non-USD stablecoins because they aren't yet locked into USD-centric DeFi infrastructure.

MEUR gives European users, businesses, and institutions a decentralized way to access EUR-denominated credit without traditional banking intermediaries. It's a natural fit for chains like Reef that are building compliance-ready infrastructure for alternative investments.

What About Liquity v2?

Liquity v2 brings exciting innovations: multi-collateral support, interest-bearing assets as collateral, dynamic stability fees, and enhanced liquidation mechanisms.

These are powerful features—for mature ecosystems.

But for emerging chains, v2's complexity creates more problems than it solves:

• Multi-collateral requires diverse, liquid markets that don't exist yet

• Dynamic interest rates add complexity users may not understand

• Additional governance demands active community participation

• Higher computational requirements may strain network capacity

You can always upgrade to v2 features later. But you can't undo a failed launch because you chose complexity over reliability.

The Path Forward: Start Simple, Scale Smart

Here's our recommendation for emerging chains:

Phase 1: Deploy Liquity v1

• Launch with native token collateral (e.g., REEF → MEUR)

• Establish the lending primitive users need

• Build TVL and user base with proven mechanics

Phase 2: Optimize

• Add staking derivatives (stREEF, etc.) as collateral

• Integrate with other DeFi protocols

• Explore chain-specific optimizations

Phase 3: Expand

• Selectively adopt Liquity v2 features that make sense

• Add multi-collateral support as markets mature

• Evolve based on actual user needs, not theoretical ones

This is exactly the path Mosaic Protocol is taking on Reef Chain.

Why This Matters Now

The next 12-24 months will be critical for emerging L1s. Chains that build robust, reliable DeFi infrastructure will attract users and capital. Chains that over-complicate or launch broken protocols will struggle.

Liquity v1 gives you the foundation to succeed. It's proven, secure, capital-efficient, and simple enough to deploy quickly.

For Mosaic, it's the perfect starting point as we build towards becoming the Alternative Investment L1—bringing tokenized real estate, sports club equity, and other real-world assets on-chain with the compliance and infrastructure these markets demand.

And it all starts with getting the basics right.

Join Us for Testnet

Mosaic Protocol is launching on Reef Chain testnet in late February 2026. We'll be the first Euro-pegged stablecoin built on Liquity's battle-tested architecture, deployed on one of the most promising emerging L1s.

Want to be part of it? Follow us on X, join our Discord or Telegram, and get ready for testnet rewards, exclusive NFTs, and MSIC token allocations.

The future of DeFi isn't just on Ethereum. It's on every chain that gets the fundamentals right.

Mosaic Protocol is building the lending infrastructure for Reef, the Alternative Investment L1. Starting with MEUR on Reef Chain, we're creating the foundation for compliant, tokenized access to real-world assets.