Strategy Mechanics

What powers the largest ETH accumulation engine ever built? (Simple.) Three mechanisms, two tokens, and one unshakeable conviction about Ethereum's future. Strategy Bootstrapping ignites the spark, Convertible Debt provides the fuel, and Market Operations keep the engine running hot. At its core, MegaStrategy transforms these mechanisms into pure digital energy — MGST for strategic control, CVs for adaptive leverage. Let's see how the machine works.

[ saylor ]

The year is 2020, Michael Saylor has been orange-pilled on Bitcoin as the ultimate store-of-value. Now he wants to acquire as much BTC as possible and needs to take stock of his resources. What's a CEO to do with $420M of rapidly-deteriorating fiat on his balance sheet? Two buying sprees later, MicroStrategy holds 38,250 BTC — but is it enough? (It's never enough.)

And what happens to assets that cannot be printed? Through November, Bitcoin’s price nearly doubles. Now Saylor reveals his ace in the hole — a massive convertible debt raise to the tune of $650M. After using the proceeds to purchase more BTC, MicroStrategy is now effectively 2.5x leveraged. With a maturity date of December 2025, this is long-term leverage (oh baby).

The December 2020 offering — patient zero of the great convertible experiment. What were the terms?

By February 2021, something remarkable had happened — MicroStrategy's treasury held 71,079 BTC, acquired for a mere $1.145B (do the math: $16,109 per BTC). Then Bitcoin did what Bitcoin does - rocketing to $40k, and dragging MSTR shares to $600 along with it. What's a strategist to do with that kind of momentum? (Raise more convertibles, of course.)

And raise they did. Each new convertible round followed a familiar pattern:

[ strategy ]

Before discussing convertibles, we need to address the cold-start problem for MegaStrategy — how do we start the engine and get this bad boy running?

First we need to bootstrap the strategy with an initial amount of ETH. This will be the base from which we will build the largest onchain Ethereum treasury. Enter MGST — your ticket to the greatest ETH accumulation strategy ever devised.

Let's be clear: MGST is no governance token. (Haven't we seen enough of those?) MGST is a strategy token, tracking the treasury’s assets and protocol-owned liquidity. The entire initial supply will be offered during the Bootstrapping Event, but here's where it gets interesting: MGST supply is elastic. When market conditions are right, new tokens can be strategically minted. When they're not? The treasury sits patient, collecting its yield.

Think of MGST as the strategy's control panel — it measures our treasury, guides our operations, and unlocks the power of adaptive leverage through convertibles. (Speaking of convertibles...)

[ convertibles ]

What can we learn from Saylor's convertible structure? (Watch closely.) Let's dissect the strategy.

The timing tells a story - maturity dates carefully staggered, each convertible positioned to capture an entire Bitcoin halving cycle. (Yes, that means surviving the depths of crypto winter.) But look closer at the raise timeline. Notice that gap between June 2021 and March 2024? It's no accident - Saylor raises in bull markets, exclusively. But there's more to the story than timing.

Interest rates flex with market conditions (why pay more than necessary?), while modest conversion premiums keep the strategy balanced. Drawing on these insights, MegaStrategy brings the convertible bond onchain through its CV tokens.

Each CV is a fungible ERC20 token representing the strategy's debt, issued through auctions that would make sovereign treasury departments proud. (Yes, we're stealing plays from the government's playbook.) CV holders face two paths — wait for maturity to redeem in USD, or convert to MGST at a predetermined rate. This conversion price? Set at issuance with a premium that makes converts think twice. And while MegaStrategy doesn't implement callable debt (yet), we can achieve similar effects through strategic repurchasing of CVs when conditions are right.

Want to see how it all comes together?
Here's a glimpse of a completely hypothetical CV:

Holding a CV unlocks advanced strategies for savvy traders, but that’s a topic for another day. For now, interested readers can search for “convertible arbitrage” - you’re welcome. (Some gifts must be unwrapped yourself.)

[ scaling ]

MegaStrategy uses the proceeds from its convertible auctions to purchase ETH, which is where the system gains leverage. But that’s just the beginning - Market Operations provide the key to scaling. When MGST trades at a premium to treasury backing, the protocol can mint new tokens to capture additional ETH. (Timing is everything.)

This is MegaStrategy’s MO - watch, wait, then strike when conditions are right. Each successful operation increases our ETH holdings, which in turn enables larger convertible issuance. The cycle repeats, but with growing amplitude each time. (A feedback loop of the finest variety. Some might say a flywheel, even.)

The initial implementation relies on a committee to execute Market Operations (yes, we know - committees). While future versions may automate this process, for now we trust in the wisdom of careful human oversight. After all, some of the most successful treasury operations in history were guided by skilled hands.

[ conclusion ]

And there you have it - the machinery behind MegaStrategy, laid bare. (Perhaps a bit too bare for some tastes, but we believe in transparency.) Three mechanisms, two tokens, one audacious goal - to become the largest ETH accumulator in history.

Will it work? Only time will tell. But let's consider the implications if it does. (And we believe it will.)

Picture this: a decentralized, autonomous protocol vacuuming up ETH at an accelerating pace. Like a digital black hole, its gravitational pull growing stronger with each ETH that crosses the event horizon, fueled by the fusion reaction of convertible debt and adaptive leverage. (A beautiful sight, is it not?)

And what happens when MegaStrategy reaches escape velocity? When its ETH holdings dwarf those of mere mortals, even institutions? (It's hard to imagine, but we must try.)

But let's not get ahead of ourselves. For now, we're running an experiment - a bold wager on Ethereum's future and the power of decentralized applications. An attempt to create something unique - a self-sustaining, ETH-capturing feedback loop, entirely onchain.

Will you join us on this journey? Will you be a part of history? (We hope so.)