A Problem with DeFi and a Primer on MESX
MESX officially began trading on MESE.io at 11:00 a.m.(Eastern Standard Time) on Tuesday, November 17th.
We should start out by stating the problem we are trying to solve here:
The beautiful thing about DeFi is that growth and value come from the process of participation in revenue sharing — this is at the heart of the decentralized network model. But sharing in revenue without actually creating revenue is problematic as many DeFi projects are solely dependent on secondary market speculative appreciation for a basis of value.
We wanted to set up an effective exchange token model that was able to share in 50% of the net revenue, but was also able to give long term as well as short term value. If you look at BNB, really the only value they are creating is by burning coins based on 50% profit, but the model creates value by creating buying price pressure on the secondary market and token economy value by reducing the number of BNB in circulation. But is this really revenue share and value creation? Actually, maybe not. It is good for price appreciation, but is there any actual value being created here?
The key to sharing revenue through the process of participation is in the mechanism of staking. In the case of a DEX AMM, the staking rewards are provided on the basis of providing liquidity to ensure trades can happen, but for our model, we have based staking rewards on our overall net transactional revenue on the exchange.
So, what the MESX model does is it takes 50% of the transactional revenue of MESE.io exchange and goes to buy real US equities and ARCC with it. This is the first part of the exchange token model. Part two is that since MESX is an index ETF token and has real assets backing it, that index ETF becomes the ‘buyer of last resort’ and can always buy MESX from the market to increase the price of MESX on the secondary market. And lastly, as a DeFi token model, there is some new supply created whenever we buy new US equity to create a never ending staking pool for MESX and to be sold to increase the overall liquidity of MESX.
So, unlike the current exchange token model, we are not burning exchange tokens with profit, but are investing those net revenues into the underlying index ETF pool so that we can mint more supply resulting in more staking. Our hope is that this will become a sustainable DeFi model of value where MESX can also act as a long term microasset for emerging market participants.
And lastly, MESX is a series of ETF’s, so it is capped at about 9m USD. After that, MESX gets 5% of revenue share in perpetuity, and uses that 5% to buy MESX from the market forever. And then, MESX 2 is started with 45% revenue share, and then MESX 3, MESX 4, etc., until MESX 8.
It may seem complicated, but really, if you think about the problem we are solving, we are using an index ETF model and DeFi token model to make a more fair, long term exchange token model!
It’s really that simple.
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