The Melon DAO: Past, present and future

In February 2019, the Melon Protocol hit the main-net and became the first DeFi protocol in history to fully decentralise its governance through the Melon Council DAO.

The Melon Council DAO is intended to represent the users in the Melon ecosystem. Users are often the most neglected stakeholders in decentralised governance models. By designing a DAO that is made up of known technical experts and user representatives bound by certain fiduciary duties, we can ensure that upgrades, network parameter adjustments and grants are made with the user at the heart of it all.

But decentralised governance in DeFi is still new, experimental and far from perfect. So, looking back on the first year of the Melon DAO we’ll explore what lessons can we draw on to further improve, what measures we are taking to address these. We’ll also take a look at what we’ve got planned in the future and lay out ways you can get involved!

The Past: A Review of Year 1 On The Melon Council DAO

As a reminder, the Melon Council DAO has three main responsibilities; i) ecosystem grants ii) protocol upgrades and iii) adjusting network parameters. So how did we do on these fronts?

DAO grants

Members of our community often ask how the DAO funds were distributed in Year 1. Whilst all large grant applications and voting decisions were public, we haven’t published a summary of the year so we will do so here:

March 2019 — March 2020

• May 19th, 2019: a first installment of 50,345 MLN to Ash Finance (Milestone 1) — no lockup.
• August 13th, 2019 (7 * 7,515 MLN) paid to seven out of eight Melon Council DAO members totalling 52,605 MLN (two year vesting). One member was not paid and removed from Council due to non-attendance and non-participation.
• October 15th, 2019: a second instalment of 50,000 MLN to Ash Finance (Milestone 2) — no lockup.
• December 16th, 2019: 500 MLN granted to Gorilla Funds for winning Kyber’s DeFi Hackathon in the Melon category (no lockup). Gorilla Funds has continued work on Melon since the Hackathon and has its own discord channel within the Melon channel where you can catch up on the latest updates!
• December 16th, 2019: 500 MLN granted to Portle for winning Kyber’s DeFi Hackathon in the Melon category (no lockup).
• January 31st, 2020: 50,000 MLN a third instalment to Ash Finance (Milestone 3) — no lockup.
• March 9th, 2020: 1,000 MLN to Whitesmith Technologies to build the Melon Protocol website for Melon Council (no lockup).
• March 9th, 2020: 775 MLN for Github and other expenses
• March 10th, 2020: 80,000 MLN tokens granted to Avantgarde Finance (75% of these with long term lockup, 25% liquid). Note that since the payments were delayed, the amount in the vesting contract was adjusted to reflect this appropriately.

→ Total tokens awarded in year 1 = 293,240 MLN token
→ Remaining from year 1 = 7,360 MLN token (will be burnt)

It is also worth mentioning that before winding down and decentralising governance, Melonport AG burnt a total of 316,794 tokens which it was entitled to sell. Effectively this makes 2019–2020 a deflationary year.

In terms of ecosystem health, it was a challenging year with the price of the token being low. However, we’re happy to note that Avantgarde Finance and Gorilla Funds were able to continue development despite of this. Unslashed has started making key hires that will be announced soon and the project is on track with regards to the roadmap they presented during their first ecosystem call.

Ash Finance delivered on the majority of their roadmap but will be pausing further development until more funding is secured.

Protocol and interface upgrades

Over the course of the year, a major protocol upgrade was undertaken by the Melon Council DAO to Melon v1.10 and released on Feb 16th 2020. This upgrade was proposed by Avantgarde Finance and consisted of the following:

• It addressed many of the bugs which were causing user experience hiccups in the first months of the protocol
• Integration of Uniswap and 0x v3 (in addition to existing integrations with OasisDex, Kyber Network and 0x v2)
• Ability to add exchanges post fund creation
• Increased asset universe: WETH, MLN, MKR, WBTC, KNC, REP, ZRX, BAT, DAI, USDC, ANT, SAI, LINK, REN, MANA and RLC
• The ability for a fund setup process to be initiated by a DAO and continued by anyone else.

In parallel to the work on the protocol upgrade, Avantgarde Finance rebuilt the interface to the Melon network from scratch and launched the Melon Terminal. The Melon terminal is a new browser-based and open source interface to access the Melon protocol for Melon managers and investors. This is a major improvement in terms of experience, performance and stability to the initial Melon Manager Interface v1.0.

Ever since this release, the Melon network has enjoyed a surge in usage. A second protocol release by Avantgarde Finance is expected in Q4 2020. In the meantime, you can expect continuous releases and improvements to be made at an interface level.

Network parameters

Throughout the course of 2019–2020, network parameters were adjusted once to account for the extreme volatility in the ETH/MLN exchange rate. The AMGU price was adjusted from 0.0000001 to 0.0000005 to address this.

Generally speaking, there was no need to adjust rates again during this period. However, the network did face something of a dilemma with the deteriorating MLN price and low levels of usage in year 1. Since usage was low, there was little demand for MLN at the same time that the supply increased by ill-timed events which coincided with one another:

• Difficult market for many coins (rotation trade into BTC and ETH and out of alts)
• Vesting cliff ending in March 2019 (Melonport founders, employees, advisors etc)
• Large grant to Ash Finance which was dependent on sale of tokens for funding

The good news is that this selling pressure is now gone and we learnt some valuable lessons. In the early days of such a project (where usage is still very low), token grants should be vested over sufficiently long periods of time or coupled with some other form of funding so that the project is not solely dependent on liquidating the granted tokens for survival.

Present: lessons learnt and current work

Before thinking about the future, we decided to review the first year and reflect on what could have been done better. We identified a number of challenges and have decided to resolve these before growing the DAO any further. Here are the changes we are making now:

1. Decentralisation still needs leadership

One of the biggest lessons learnt in the last year is that even DAOs need leadership. In the absence of leadership, apathy sets in quickly and people become dependent on other people to drive things forward which results in… well… not very much. Fortunately, we realised this early on and introduced six month rotating Chairs and Vice-Chairs. This has improved internal processes significantly.

2. The decentralisation vs efficiency tradeoff

Decentralisation comes at a tradeoff to efficiency. It takes time to meet quorum and pass a vote and this can become a blocker. More importantly it means that we need to get better at voting, and voting fast. An internal suggestion made at a recent MTC meeting was to start tracking our “time to meet quorum” metrics and continuously work towards improving them.

3. Measuring participation

As always, there will be some members that are more active than others. Without having clear goals and accountability, it is hard to track progress. In a recent meeting, the DAO decided to start measuring active participation with quantifiable metrics throughout the course of Year 2 (eg. meeting attendance, on-chain voting etc).

4. Clear minimum thresholds are necessary before continuing to grow

Measuring participation alone is not enough. These metrics will be used to determine a minimum threshold for participation. That is, these thresholds will be imposed on DAO members as a requirement for staying in the DAO. Crucially, this will be important for next steps as we grow the DAO membership.

5. Specialisation is key

Feedback collected from a recent questionnaire to the DAO revealed that some people found it inefficient to conduct the bi-weekly meetings which often involve topics that are not relevant to everyone. To address this issue, we are forming three working groups within the DAO which are there to specialise on certain aspects and propose ideas (and defend them) to the rest of the committee on the bi-weekly calls.

Future — what’s next?

Growing the DAO

With all these governance improvements taking place and with usage numbers starting to show some nice growth, we think it’s time to consider growing the DAO. You might recall that the initial DAO members were appointed by Melonport AG but that the DAO can grow by consensus. We’ve recently seen some interest from a number of very exciting and highly qualified candidates. However, we want to make sure that clearer processes are in place (as per the previous section) so that all new DAO members have a clear understanding of what will be required of them in their new roles.

The next step would be to launch an ‘open call’ amongst all qualified Melon fund managers to see who would like to be nominated as a new DAO member.

As per the DAO rules, any known Melon users — i.e. Melon fund manager — can be voted onto the DAO if nominated by other users and as long as the fund they control has at least 1% of the Assets Under Management of the protocol.

We have recently, therefore, set up the Melon Cafe, a telegram channel which is exclusively for Melon fund managers. In order to join the channel, you can go to your fund’s “admin” page, scroll down to the Melon Cafe icon and join the chat by following the instructions. It will require signing a transaction with the private key that manages your fund.

A call for Melon Improvement Proposals

Users are at the heart of everything we do. So, we always welcome (and encourage!) improvement proposals on any aspect of the protocol, governance or tokenomics from our community via the MIP repository (Melon Improvement Proposals) on github. We’re very fortunate, and grateful, to have such an engaged community and we value all the time and energy spent on giving us feedback on the protocol, tokenomics and governance. We look forward to users using the Melon Cafe (and github repository) to engage in a healthy discussion around these proposals.

A call to developers!

We are always looking for developers to build on Melon. In particular, we are looking to offer bounties for the following work. These bounties are also available via Gitcoin.

• Building a Dune Analytics dashboard for Melon (2.2 ETH)
• Building a Melon adapter on Zerion SDK to track Melon fund tokens (4.4 ETH)

-The Melon Council DAO-