hello everyone my name is Jenna and I
work with melon port and I'm here today
to tell you that melon port will not
exist by defcon5
so I would like to start with a quick
question to the audience who knew
already before that melon port would not
stick around for a couple more years one
two three this is the melon for it
seemed okay so not so many that's normal
because melon port is actually one of
the first Deb protocol which is going to
wind down the company that built it
after two years of development and
completely let go of the control of the
protocol
so really melon port is a swiss-based
company that was mandated in February
2017 for the development of the melon
protocol and melon port took the
commitment to wind down the company
once the protocol would be ready to
deploy it on the main net so in February
2019 which is two years later in a
couple of months from now we are going
to deploy to the main net went down the
company and decentralize the the
governance and shittier maintenance of
the protocol so really what this
presentation is about is how can we get
rid of melon ports or in other words how
do we make it so that the melon protocol
can be self sustainable and succeed
without the existence of the company
that initially built it so this is
threefold the first part we're going to
talk about how can we create a healthy
ground for network effects then we're
gonna see how do we provide the proper
economic incentives for the participants
in the network and the third part is the
governance and maintenance framework
that we put in place to support the
future of the Imagine protocol so first
what is melon I'm gonna give a quick
melon 101 for the people not familiar
with the melon protocol so melon is an
open source protocol for untain asset
management it allows anyone to
and manager fund on the ECM blockchain
so technically what it is it is a set of
rules implementing the behavior of an
investment fund as a set of smart
contracts so another way to understand
what Mellon is is to see how you would
actually create a fund on our platform
so it's very simple it takes a few
seconds you go on the platform
give your fund a name select the
exchanges that you want your phone to be
allowed to trade with then you're going
to be able to define your fee structure
so that is the management and
performance fee are your actual funds so
just as in the traditional world except
that here the this is encoded and the
smart contracts then you will also have
the possibility to configure your risk
management profile so those are pre
trade clearance rules that are going to
be included in the smart contracts and
enforced by the blockchain so it can be
you know maximum number of position it
could be price tolerance maximum
concentration you could have you could
whitelist assets you could blacklist
assets if you want to give the guarantee
to your investors that you're not going
to trade anything dodgy and then really
you're gonna have the overview of your
the rule set that you defined and as
soon as you hit create fund you're
actually going to be deploying a fund to
the theorem blockchain so really on the
blockchain how does it look like you get
what we call a technology regulated and
operated fund so it is a set of smart
contracts and each contract is a
component of the phone so you have a
component that takes care of the
internal accounting and nav calculation
you have a component that takes care of
the fee calculation and distribution you
have a components that take care of the
trading etc etc so you as a fund manager
on top you control your fund and can
make various interactions such as
trading on behalf of your investors so
we can have external investors on the
left
that can come in and directly invest in
your phone by calling a function in the
participation components and your fund
the valuation of your phone is going to
be calculated unchain using untrained
prices that we get from the cable
network and then the other external
interaction that you have are
decentralized exchanges that you can
trade with so right now we have
integrated oasis texts it's your ex and
caper and we have the s phonetics
integration coming up soon so that's how
a fund looks like on the blockchain and
what I think is really nice is that in
the past few years we have seen an
explosion of open source finance
protocols and mellon comes nicely on top
of that and nicely integrates and
connects those different protocols so
men and allows you to manage crypto
assets trade on decentralized exchanges
in the future we envision integration
with credit lending Unchained merging
derivatives all those type of new
protocols that we've seen and we have
also people working on blockchain based
identity systems which is really
important if you want to be able to
identify the investors in your fund so
that's for the Mellon 101 so now we can
actually get into the subject of today
so when we design a system that needs to
be self sustainable and decentralized
what you really want to do is identify
the different stakeholders that you have
in your network and make sure that your
model
you know catters to the needs of each of
your stakeholders so for in our case we
have a couple of stakeholders and they
are the token holders the project and
developers who build on top of Mellon we
have the users and we have the
maintainer the people who are going to
make decisions in the future for the
protocol so throughout this presentation
we're going to see how we make sure that
we that we cater to the needs of all
those stakeholders so first of all we
want to be able to maximize the network
effect in the past couple of months we
have seen more and more projects
reaching out to us projects and team
wanting to build new things on top of
melon and that is really cool it doesn't
really come as a surprise to us because
asset management has a lot of shoes
cases we are focusing on the headphone
use case but you can have VC funds
pension funds insurance funds we also
have people working on the gamification
of Asset Management's and it's it's
really nice but the problem is that each
of this project needs to get funding and
what they plan to do rightfully so is to
run another ICO to get funding and what
you get with that is that you get
different projects sharing the same
underlying infrastructure but each of
that project has a token a token
economic a different governance system a
different maintenance system so you have
one infrastructure but isolated isolated
sub ecosystems and that we believe is
not great because we think isolation
brings in efficiencies so if we have if
we find a way to to actually have
synergies between those projects and to
make it so that they can share more than
just the infrastructure we believe that
all of our ecosystem could benefit from
economies of scale so earlier this year
we decided to open up the melon token to
other teams and other projects in order
to to to benefit from synergies so
basically the melon token has a yearly
inflation pool which is a fixed amount
of token that gets minted each year and
this inflation pool is going to be used
to to fund different things so the first
thing is compensating developers who
complete ma peas which are melon
improvement proposal inspired by the
theorem ifvs so if you're a developer
and you see
that there is this future like yeah I
think this is cool I want to solve that
problem or I want to make this
integration you can do it and get
compensated in melon for that the second
thing is for a project who want to build
on melon and who need to get funding
instead of doing an SEO what they could
do is make a funding request to the
melon governance system and if the
government system agrees that they could
get their funding through the melon
inflation pool and the third thing is a
little bit more exotic I would say and
maybe a little bit more forward-thinking
those are token swaps and token mergers
inspired by what happened very often in
the traditional investment banking world
so in the case of a token swap it would
be the case where you have a project
that already has a token and we identify
potential synergies between melon and
that other project if that other project
has a smaller smaller market cap than
melon what we could do provided that
both governance systems pre agree to it
this project could burn all of their
token and in exchange they could get
melon token and we kind of like join
forces between the two project and
creates the stronger and bigger
ecosystem and the last thing is the
token the token merger request so that
is the case that you have another
project that has another token but it's
like the project of a similar size
similar market cap and in that case this
would not require anything from the
inflation actually it would just require
both projects to actually just burn
their tokens in order to create a new
token that encompasses both economies
and both communities so opening up the
melon token allows us to benefit from
synergies but also to to align the
interest of the participants across the
networks so this part caters to the
needs of the project and developers that
build on top of melon so now that we
have seen
to maximize Network effects we actually
compensate people with melon tokens we
need to make sure that we build in the
right the right economic mechanism in
the tokens that the token is actually
something that is desirable back from
those developers today is providing
proper economic incentives so this
relates to the token economic design so
when we were working on that we really
had three goals in mind that we wanted
to fulfill the first one was ensuring
that the melon token would be desirable
and we'd have integrity in order to be
able to provide proper economic
incentives to the user and developer
needs of the network and last but not
least we also wanted to avoid the
pitfalls of the high velocity token
model which is a problem that has been
written a lot about by different people
such as vitalik or Chris furnace key or
others we published a very long and
detailed blog on that if you are
interested on that part so with these
goals in mind our solution to the token
economics is called the melon engine so
let's take just a step back when you use
when you interact with a smart contract
on aetherium you pay if you pay gas to
the Ethier network and that gas is
calculated as the number of gas units
that are consumed by the function that
you're calling and that is multiplied by
the etherium gas price right so we came
up with the idea that when you interact
with melon smart contracts in addition
to paying gas to the Ethier network
you're also gonna pay what we call the
asset management gas and you're gonna
pay that to the melon network so the way
it's calculated is very similar to how
it's done on aetherium
so we take the same number of gas units
that are consumed by the function on the
EVM and instead of multiplying that by
the etherium gas price we multiply it by
the melon gas price or the asset
management guessed
so how does it look in more detail so
your user and you're about to use some
melon smart contracts and etherium so we
impose that asset management gas on
certain functions not all of them
because we want to stay cheap affordable
and competitive compared to other
alternatives so on a few functions
you're gonna pay your gas to the
ethereal network as usual and in
addition to that you're also gonna pay
your asset management gas to the melon
Network and instead of paying that gas
and this is really important here
instead of paying that gas in melon
you're gonna pay that gas the asset
management gas in ether that ether is
sent to the men and engine smart
contract and that contract is very
simple it only does two things the first
thing is that when it receives ether
from the user interaction it's gonna
sell this ether and by melon at the
premium on the market so it's basically
a contract that is a unidirectional
liquidity contract it's a contract that
is a market itself so it's gonna sell
the eat by melon at a premium and once
once it has melon in the contract it's
just gonna burn those melons so sending
them to a provably unaccessible address
you know how how that works
so what we have here is that when the
network is used absent inflation the
melon total supply is gonna be
decreasing so this mechanism gives us
two very nice thing the first thing is
we managed to reduce friction in
convenience and cost on the user because
instead of having to own melon and ether
when you when you use melanin a theorem
you only need as a user to have ether
just as if you were using any smart
contract any theorem and the second
thing and arguably much more important
is that we managed to align the token
value with the usage of the network and
we do that without having
a high-velocity token model so that's
really really important we think that
we're the first dab protocol to have
managed to do something like that so we
are very proud of our work there and I
encourage anyone who is interested to
read the Mellon that makes two PS that
we wrote about that
so that part as you might have
understood by now takes care of the
token holders so it seems like the token
holders are interested by the research
return on investment on the token and if
the network is successful this mechanism
should Katter
and scatter to the needs of the token
holders and please them so now that
we've seen how to maximize network
effect and to provide proper economic
incentives the last part that we need to
go through is the governance and
maintenance system of Mellon so when
Mellon part is going to disappear in
February 2019 we need to have a way to
make decisions for the future of the
protocol so that's what we're gonna see
now so first of all when when designing
the system we really ask ourselves okay
why are we doing that like what are the
goals that we want this governance model
to to complete basically so those are
threefold as well so the first one is
that we want to preserve the integrity
and security of the network this is
extremely important when you're speaking
about asset Metatron's the second thing
is that we want to maximize user
adoption and protect protect the user as
much as possible and the third thing is
that we want to foster innovation in
order to make the network more
attractive so how do we do that so when
I talked about our different
stakeholders in in the space we're gonna
talk about this again now so when you're
building a governance model I think
that's really what you want to do is
identify what is the most vulnerable
stakeholder group in your eco
system and so that's how we worked our
most vulnerable group are the users here
so the users are the people who manage
Mellon funds so asset managers and also
the investors who are invested in those
Mellon funds so from this assumption
that the users are the most vulnerable
we worked out a model that is user
centric so really focused on protecting
the user but also making sure that their
voices are heard and sorry and will be
heard in the future and we also wanted
to make sure that the users would be
supported by technically skilled people
so so we come up with a user centric and
skill based governance model so how does
that look so I introduced you to net the
Mellon Council now so the man encounter
is a buddy that is going to be
responsible for the future development
and maintenance of the Mellon protocol
it is composed of two subgroups the
first one is the Mellon technical
council so this is a group of
technically skilled people or people who
have expertise and the Mellon protocol
or other finance related protocols on
ethereum
or people who have contributed to the
Mellon codebase in the past so the this
subgroup is going to be responsible for
the technical parts of the decisions
that we're gonna have to make in the
future
the second subgroup is what we call the
MEP representatives so those are the
Mellon exposed businesses so this is the
self organized entity that where you
will have all of the users who can you
know prove that there are users of the
network either by proving that they have
assets under management subsequent asset
under management on menin or proving
that they have used this amount of asset
management gas over the past year so
this group is going to be able to elect
among themselves
they're representatives for to sit on
the melon council together with the
melon technical council members so with
this with this melon council what we
hope to achieve is that by combining the
user representation and people who are
technically skilled and informed we hope
that we are able to make the best
decisions possible for for the protocol
and for the users of melon so how does
that work how does how do we form the
council so I told you how the melon
exposed businesses is formed for the men
and technical council it's a little bit
different so in February 29th in melon
port is gonna the same five to set five
to seven seats for the melon technical
council to external people to people
that we believe have the the skills or
expertise to do that and also the
ethical standards that that go with it
so we're going to assign the initial
seeds and then from there on the counter
is going to be able to self expand so to
grow by itself based on the consensus of
its members following a five to two
ratio so for five men and technical
council members will be able to have two
MIB
representatives it's worth noting here
that the melon technical cancer are
going to be compensated with melon token
from the inflation pool that are going
to be invested over a couple of years
and that those people are are known so
we know who they are their identities
are revealed so now what is what are the
responsibilities of that council you
might be wondering so those are three
also the first one our protocol upgrades
the melon codebase will need to evolve
from February onwards so the men in
council is going to be responsible for
deploying new contracts and most
importantly managing ENS sub domain
names that
- the official melon contracts important
to note here all upgrades are obtained
only which means that the user will
never be forced into an upgrade and it
will require explicit and voluntary
action from the user - to upgrade to new
contracts so the site the second thing
are resource allocation
so as I mentioned in the beginning of
the presentation we have the inflation
pool which can be used for various
things and the melon council is going to
be responsible for making decisions as
to work to fund or not which project to
accept as a funding request or token
swap or merger etc so that's gonna be a
melon council responsibility and the
last one are network parameters so I
when when I presented the melon engine I
mentioned the asset management gas price
and what I didn't say is that this is
actually a variable that we can change
and that we can adjust so based on our
financial modelling it is not expected
that this asset management gas price
would need to change very often actually
it I think it would be quite rare
because it's expected that market
dynamics will adjust will make you know
natural adjustments but we can't predict
there are some scenarios that we can't
really predict so you want to have the
option to adjust the gas price basically
to reduce it in two cases the first one
is if there is a network usage spiked
overnight you might want to reduce the
gas price and the second one is market
volatility so here we're exposed to the
melon eat the price but also the East
USD price so the melon USD prize and if
there is extreme market conditions or
volatility you might want to reduce the
asset management gas price in order to
stay before the goal for the user and
competitive compared to other
alternatives so that part under
governance caters to the maintainer of
the network and to the users as
you might have understood by now so to
wrap up our model both token economic
and governance addresses the needs of
all of the stakeholders we maximize
network effect by opening up the melon
token so that we can align interest
participant interest across the network
and we managed to have a token model
that is aligning the token value with
the usage of the network and finally we
recognize that the users are the most
important the really the key player in
our ecosystem without users at the end
of the day we fail so we designed a
system that makes sure that the users
are valued properly and supported by
technical skills so with that I would
like to announce that the melon
technical council applications start
today so so really the technical council
is it's supposed to be inclusive and
open so if there are external developers
who have the skills or feel like
competence for that role we would be
really happy to receive applications so
you can reach out to MCC at melon 4.com
but all of the men interpret the main
port team is here everyone is wearing
leather jackets so if you want to reach
out in person use DEFCON for that we
would be very happy as well
so this was the last melon port
presentation it's it was another for me
to do that
melon port will not exist by defcon5 but
that doesn't mean that it's the end of
melon it's actually just the beginning I
believe so thank you and I think we can
upload the melon theme for the
incredible work to make this a reality
thank you
you