Announcing the MTLX token
In recent months we have been building and testing the Mettalex platform, and now is the time to bring our community in to launch the system.
Mettalex is a decentralized crypto and commodities derivatives trading platform built using the Fetch.ai technology.
Mettalex is built on top of the Fetch.ai network and will use the network for efficient and intelligent market making and pricing oracles and interoperability with Ethereum. FET will be employed as network fees and a portion of MTLX fees will be used to buy back FET.
We are now ready to launch, with FET holders receiving the first pool of MTLX tokens via a staking pool mechanism which will earn MTLX tokens as a reward.
The FET holders will be the very first people to receive MTLX tokens — before any other participants.
The Mettalex staking pool, along with its UI, will be launching on or around 3rd September after the current Fetch.ai staking round ends to enable all existing supporters to benefit from this distribution. Fetch.ai staking will resume in late September, with a new, flexible easy-to-use system set to be announced.
As we discussed in our recent article “Decentralized Finance in Commodities Markets”, the opportunities of DeFi to revolutionize the financial system are great, but thus far these opportunities are limited to digital assets.
For a scale comparison, the total value locked in DeFi ventures today is around $6.5 billion. In contrast, the size of the global commodities market is hard to measure accurately, but could be up to $20 trillion annually.
The race to plug off-chain assets such as physical goods to on-chain finance is at the crux of what will enable the next generation of DeFi applications.
We are building a solution that can bridge that gap, to create real world DeFi, with physical assets on top of a trustless infrastructure, starting with the metals sector.
Mettalex high level overview
Mettalex, put simply, is a commodities platform to enable market participants to gain economic exposure to the price of commodities. This will allow hedging of risk for physical holders of the commodity or leveraged positions for speculators. Positions are taken using specially designed ‘position tokens’.
Position tokens are primarily used to track the difference in price of an asset. They do not require the entirety of collateral of an asset to be tied up in a smart contract, thereby allowing contracts of much larger sizes to be traded with lower collateral requirements.
The position tokens track the price change of an underlying asset (long tokens), or the negative of that change (short tokens). Leverage is achieved by the token price being a fraction of the asset price.
This leverage enables hedgers to manage their risk exposure at minimal cost. Hedging is a vital part of the metals trading process, as companies need to be certain of a future trade price when transporting or processing materials. This bedrock of real users getting real benefit from Mettalex, will deliver long-term growth.
We now have an effective system that enables the trading layer to work and we are providing the first opportunity to FET token holders to earn the MTLX governance token rewards.
The economic model
In this diagram we show the core components in the Mettalex system
- A decentralized exchange layer where traders can take long and short positions against a range of reference assets, commodities and crypto
- A tokenisation layer that provides tokens representing the long and short positions, together with autonomous market makers linked to the reference assets
- A liquidity provision layer where lenders can supply liquidity to the autonomous market makers in return for a proportion of the market making spreads
- A governance layer that rewards liquidity providers with governance tokens in proportion to the amount and duration of liquidity they supply to the system
The bespoke exchange integrates a reference price feed for settlement and pricing of commodity tokens. These tokens represent derivatives of those commodities. Traders in the commodity tokens will be able to open and close positions using stablecoin collateral by trading against other participants or autonomous market makers. They will also be able to provide liquidity by using the Mettalex contract to mint token pairs, or use it to redeem a paired position in long and short tokens to reclaim the backing collateral.
Autonomous Market Makers
Each commodity token pair has an associated autonomous market maker that allows market participants to exit a position at any point without having to find a counterparty on the exchange.
The autonomous market maker uses a liquidity sensitive algorithm with bounded loss to manage market risk. The AMM architecture also allows plugging in different AMM strategies. This is something MTLX holders can vote on (c.f. yearn). Autonomous market maker liquidity providers receive pool tokens that entitle them to a fraction of the fees and spread earned by the market maker.
The liquidity pool is a decoupled provider of collateral to the autonomous market makers. Liquidity providers receive an aggregated return from all commodity market maker fees and spreads in exchange for providing collateral that the market makers can use to mint position tokens. In addition liquidity providers receive a pro-rata distribution of MTLX governance tokens based on the amount and duration of their participation in the liquidity pool.
As a decentralized system, there must be a means of the participants agreeing to key decisions around the operations of the platform. With Mettalex, this is achieved by the stakeholders in the system, being rewarded with MTLX tokens. MTLX token holders will be able to vote on network maintenance and policies, such as admitting new participants, and setting network fees.
The utility of FET in Mettalex
FET plays an integral role in the Mettalex system, in a number of ways
- The decentralized exchange uses the Fetch.ai ledger for high transaction rates
- Fetch.ai agents and collective learning acting as index providers e.g. monitoring process metrics throughout supply chain to create spread tokens for supply chain optimization
- The Autonomous Market Maker (AMM) runs on the Fetch.ai ledger for increased mathematical processing capability
The MTLX governance tokens (MTLX) will be used as follows:
- to vote on system parameters such as choice of autonomous market makers to back with liquidity from the liquidity pool
- vote on the creation of new markets
- the usage of exchange fees
- the percentage of the spread going to the pool
- the buyback and borrowing rates from the liquidity pool
The Mettalex decentralized exchange will also use a fraction of the exchange fees earned on the platform, to algorithmically buy MTLX tokens back from the market.
Governance tokens are minted at a linear rate to incentivize early liquidity providers in the system. As the total liquidity in the pool increases, liquidity mining will become more difficult.
Mint and buyback model
Minted MTLX tokens will be distributed in proportion to the amount of liquidity supplied to the system at each block.
During network usage, a fraction of the exchange fees and autonomous market maker spreads are used to buy back a portion of the MTLX tokens.
MTLX token distribution and liquidity
To incentivize the earliest supporters, we are offering 1m MTLX tokens during September for FET holders who stake their FET tokens to earn the first batch of MTLX tokens. The staking will be open on or around the 3rd of September.
Key MTLX token statistics
- Initial distribution to FET stakers: 1M (2.5% of total) over 21 days, 1M reserve for further FET staking in intervals of 500k, 350k, then 150k tokens.
- Total blocks in first reward phase: 120,960
- MTLX token drip rate per block: ≈8.2
- Distribution rate: Linear
- Tokens accepted for staking: FET
- Restricted jurisdictions: US and OFAC
- Maximum supply (Hard Cap) for circulation: 40M MTLX Tokens
- Token supply to liquidity providers: 35M MTLX Tokens (87.5% of total) over 4 years (8,409,600 blocks) (≈4.1 drip rate per block)
- Token supply to stakeholders and partners: 2M MTLX Tokens (5% of total) released over 1 year
- Team: 1M (2.5%) released over 3 years
For the first year token distribution is limited to the following:
After 3 months: ≈3.08%
6 months: ≈7%
1 year: ≈13%
2 years: ≈25.15%
We will be releasing more information about the Mettalex economic model in the coming days with the release of the MTLX whitepaper. Watch this space!