FAQs
What is a Strategy Token?
Adaptive ETH Leverage – the MegaStrategy Token (MGST) represents the protocol's treasury, providing leveraged exposure to ETH. By design, MGST avoids short-term liquidations typical in DeFi loans, relying instead on longer debt horizons and treasury-based risk management.
What is a Convertible Token?
Active Stable Strategy – Convertible Tokens (CVs) are stable-denominated debt issued by the protocol, featuring an embedded option to convert debt into MGST at a fixed rate. This allows CV holders to capture upside if MGST’s value appreciates.
Where does the leverage come from?
MegaStrategy's leverage comes from the balance between MGST and CV holders. MGST holders seek leveraged upside on ETH, while CV holders provide stablecoins in exchange for debt instruments. The treasury uses these stablecoins to purchase ETH, effectively amplifying MGST’s exposure.
Where does the yield come from?
The protocol executes market operations to grow its treasury, and may hold liquid staking tokens to earn yield on ETH. MegaStrategy’s debt typically has longer maturities, reducing the risk of forced liquidations and creating a more stable environment for compounding treasury growth.
Can I withdraw my funds?
MGST is not directly redeemable for a portion of the treasury. However, the protocol maintains adequate liquidity to allow MGST holders to buy or sell tokens at a market-driven price. If that price deviates significantly from the treasury’s implied value, governance may step in with market operations.
How are new tokens created?
MGST is minted primarly when convertible debt is issued or via market operations. Selling CV tokens for stablecoins injects capital into the treasury, while new MGST is minted for the embedded conversion option. If MGST trades at a premium, governance can approve minting additional MGST and selling it directly on the open market, raising more ETH or stablecoins for the treasury.
How do I buy MGST or CV tokens?
MGST – You can purchase MGST from onchain liquidity pools (ex: MGST/ETH DEX pools)
CV - New CV tokens are typically issued via auctions. If you miss an auction, you can find CVs onchain (ex: CV/ETH DEX pools).
Why doesn’t MegaStrategy face onchain liquidations?
Unlike typical lending protocols that instantly liquidate positions if collateral falls, MegaStrategy issues debt on longer time horizons via convertible debt. This approach avoids forced liquidations, though MGST holders still face leverage risk if ETH’s price collapses for a prolonged period on those time horizons.
What happens if ETH’s price collapses?
A major ETH drawdown can:
- Devalue the Treasury – Lower ETH prices shrink the treasury’s value
- Strain Debt Coverage – CV redemptions become more challenging to honor if the treasury’s collateral has lost value
- Trigger Governance Intervention – If certain leverage ratios or risk thresholds are breached, the community can vote on corrective actions like debt buybacks or halting new MGST issuance
What happens if ETH's price increases?
A major rally in ETH can:
- Expand the Treasury – Higher ETH prices boost the overall value of the treasury
- Strengthen Debt Coverage – With more capital available, it becomes easier to redeem debt, reducing the protocol’s leverage risk
- Enable Growth-Oriented Strategies – If certain leverage or coverage thresholds are exceeded, the community can vote on actions like repurchasing debt, authorizing MGST buybacks, or funding further strategic expansions
Who can submit governance proposals?
Any sufficiently large MGST holder (meeting the proposal threshold) can submit proposals. Smaller holders can join forces or delegate their MGST to a representative. Once submitted, proposals go through a voting period, and if they pass, they’re executed by the protocol’s smart contracts.
Have more questions?
Reach out on the official MegaStrategy channels or check our GitHub to propose your own FAQ additions.