Imagine a coin offering, and subsequent soundly-governed token, where its authors do not take the proceeds from the initial or any other sale of the new asset. What would that look like? It would have to be autonomous — so that no one controlled the funds — and secure — so that the new ecosystem did not lose those funds.
When it comes to coin offerings, the community pays a lot of attention–and rightly so–to the topic of what the sponsors or leaders of that offering will retain for themselves. In more conventional scenarios, this is achieved primarily through community norms.
In this very new space, terminology is important and people often confuse the retention of “proceeds” (the funds earned from the sale of a new digital asset, usually as Ethereum) with the retention of “tokens” (the new digital asset itself). This is an important distinction and, for many reasons, the Metronome team felt that the latter was preferable. Primarily, compensation in tokens rather than proceeds helps assure auction participants of the Metronome team’s confidence in the system and dedication to be a long term participant in the ecosystem. To be clear: Metronome authors do not receive any of the proceeds from any of the auctions.
If Metronome authors do not receive any of the auction proceeds, where do they go?
Now that we’ve established that the auction proceeds do not go to the MTN authors, the question remains: “Where do those proceeds go and what is done with them?” This requires some additional explanation.
MTN comprises four smart contracts:
1) Metronome Ledger — Acts as the ledger and dictates how MTN behaves
2) Auctions — Sets the auction mechanics and mints new MTN
3) Proceeds — Stores the proceeds from all auctions to provide supply to Autonomous Converter
4) Autonomous Converter — Allows users to sell MTN for ETH or ETH for MTN
100% of all auction proceeds go to the Proceeds contract. No one has access to these proceeds.
The Proceeds contract then sends 0.25% of its contents to the Autonomous Converter contract each day, which provides long-term supply and support. All proceeds stay in the ecosystem and are never distributed to the authors. This way, users can interact with the Autonomous Converter Contract.
We expect that the majority of the proceeds from the Proceeds contract will dissipate into the Autonomous Converter Contract over the span of 2–4 years — depending on the performance of daily auctions.
To understand how this works in practice, consider this illustration (the numbers used in this example are for illustration only and are not based on any actual performance):
Suppose that the Proceeds Contract currently has 1,000 ETH. The Proceeds contract sends 0.25% of that 1,000 ETH (or 2.5 ETH) to the Autonomous Converter Contract. The new balance of the Proceeds Contract is 997.5 ETH.
The next day comes, and the daily auction ends. Let’s suppose that the auction that just ended only had 1 ETH in proceeds. 1 ETH is then added to the Proceeds Contract, making the new balance 998.5 ETH. The Proceeds Contract then sends 0.25% of its balance to the Autonomous Converter Contract. The new Proceeds Contract balance is 996.00375.
The day after arrives, and for the sake of example let’s imagine a situation where auction proceeds only equal 0.00001 ETH. That 0.00001 ETH is added to the Proceeds Contract, its new balance is 996.00376 ETH. The Proceeds Contract then sends 0.25% of its balance to the Autonomous Converter Contract. The new Proceeds Contract balance is 993.5137506 ETH.
This continues on in a similar fashion daily, ad infinitum. Metronome lead architect, Jeff Garzik, best described the Proceeds Contract as a sort of very slowly deflating balloon, which is partially blown back up daily.
Why do it this way? The intent is to build an enduring ecosystem for Metronome and its users. By ensuring all proceeds from the auctions stay on-chain in contracts — and outside of the control of any group — Metronome may enjoy greater and more autonomous longevity.
What is the author retention?
As previously announced, the Metronome (MTN) authors will retain 20% of the tokens created from the initial distribution–not the proceeds but the tokens themselves. The author retention and the auction proceeds are completely separate. This does not give Bloq or its partners any control over the MTN ecosystem. The power of choice over which contracts and chains any user wishes to use to hold their MTN will reside solely with the users.
To further ensure that Metronome authors do not have undue influence over the network–especially in its early days–there will be a lock-up on the author retention as well. Of the 2 million MTN authors retention, only 25% of that will be become usable by authors at the end of the auction. The remaining 75% will become usable in 12 equal installments released quarterly over the course of the next 12 quarters (3 years).
Since the Auctions contract will release 2,880 MTN each day for public auction, the MTN authors’ percentage of outstanding MTN will diminish over time as well. This means that, in just the first three years, the authors’ share decreases from 20% to 15.2% (assuming that the authors purchase no additional MTN on the open market). Further, the authors do not retain any tokens from the daily auctions.
Metronome authors have chosen to receive a one time retention in the form of their creation: Metronome. It is a one-time retention because the team believes that it is up to the community following launch to define Metronome. Its authors will also receive none of the proceeds from any of the auctions. Doing it this way provides long term support for the Metronome ecosystem itself.
More to come,
- The Metronome Team
UPDATE: For various reasons, the Metronome team has chosen to use the new symbol “MET.”