Important Update: Launching the Mettalex DEX on Ethereum
After much deliberation, we have concluded that the Ethereum mainnet is unsuitable for the current design of the Mettalex DEX. Here is why.
In the days after we announced that Amplify will end on October 31, the Mettalex team performed a feasibility study on the launch of the Mettalex DEX on the Ethereum mainnet. The main conclusions are as follows:
Cost-Related
- New Market Deployment. The current design of the Mettalex DEX requires the execution of 15 smart contract functions for a single new market to be launched. At 200 Gwei and an ETH price of $4000, this will require around $20,000.
- On-chain Oracle Updates. To receive secure off-chain price data the Mettalex DEX needs to execute an oracle update. A single market requires about 140 such updates per month. At 200 Gwei and an ETH price of $4000, this will result in a monthly cost of about $17,000 (per market).
- Liquidity Migration. Once a market band is breached, that market is settled and a new market must be launched, featuring a new price band. To move liquidity from the settled market to the new one, several smart contract calls need to be executed. At 200 Gwei and an ETH price of $4000, this will require about $7000.
- Opening a Long/Short Position. Mettalex’s primary goal and unique value proposition is to enable users to speculate or hedge by opening long or short leveraged positions. At 200 Gwei and an ETH price of $4000, making a trade on the DEX will require $250 in gas fees.
- Depositing and Staking Funds. To incentivize liquidity providers (LPs) to deposit their liquidity on the DEX, Mettalex rewards them with MTLX governance tokens. LPs have to deposit their funds into the DEX and then stake them, to start generating rewards. At 200 Gwei and an ETH price of $4000, these two actions will cost each individual liquidity provider $470 and $330 respectively, for a total of $800.
- Withdrawing Liquidity. On the Mettalex DEX, LPs can withdraw their liquidity at any time. At 200 Gwei and an ETH price of $4000, a liquidity withdrawal will require $600 in gas fees.
NOTE: At the time of writing, the gas fee on Ethereum is 340 Gwei, while the price of ETH is $4300
UX-Related
- Launching LP Token Collateral-Based Markets. Enabling a market on the DEX that is backed by Uniswap LP tokens, will require all trading on that market to also be done in these same LP tokens. For example, if a user wants to trade on the FET market, backed by MTLX/ETH LP tokens, they will have to use MTLX/ETH LP tokens to open a long/short position. We anticipate this might be confusing to traders. That assumption will be tested on the anyMTLX/BUSD-backed market on Binance Smart Chain.
There are approaches that could enable opening/closing positions with a stablecoin on an LP token-backed market, but these will require several weeks of development and will further increase the cost of some of the aforementioned smart contract operations.
- Market Fragmentation Based on Collateral Type. Apart from creating three new LP token-based collateral types on the DEX — MTLX/ETH, MTLX/FET, and MTLX/USDT — each of them will be associated with its own unique set of markets. For example, if we want to launch a FET market, we need to launch it on one, two, or on all of these three collateral types. Combined with the expected infeasibility of trading FET with LP tokens, this will only further increase the complexity of the DEX’s UI.
Technical Effort-Related
- Launching the Collateral Types, Associating Markets, and Updating the UI. On top of all cost and UI-related considerations, launching Uniswap LP tokens as collateral on the DEX will require a significant amount of development work that could otherwise be spent on more effective product-related activities. A higher priority, and at the same time a high-intensity research and development task, is launching the single-collateral pool.
MTLX Token-Related
- Circulating Supply of Mettalex. Launching Uniswap LP tokens as collateral on the DEX and continuing to distribute MTLX rewards to LPs makes sense only if that liquidity could effectively be used by traders on the platform. Further inflating the MTLX token’s circulating supply at a competitive APY for three markets without achieving that goal is unadvisable.
Given these considerations, we have decided:
- Not to launch Uniswap LP tokens-backed collateral type on Ethereum.
- To launch a PancakeSwap LP tokens-backed collateral type (anyMTLX/BUSD) on the Binance Smart Chain DEX.
- To end Mettalex Amplify on both Ethereum and Binance Smart Chain and continue to give away MTLX tokens only for liquidity provision on the Binance Smart Chain DEX.
Ending Amplify
The goal of Amplify was threefold:
- To enable low slippage trading of the MTLX token on Uniswap and PancakeSwap.
- To generate initial liquidity that could be migrated to the DEX once markets there are launched.
- To perform an initial distribution of MTLX tokens to users who are supportive of the Mettalex DEX project.
As promised, Amplify ended on Oct 31, 2021 and the 5% withdrawing fee was removed on Nov 1, 2021 (today) on both Ethereum and Binance Smart Chain.
LPs on PancakeSwap can now withdraw their LP tokens from Amplify and deposit and stake them on the DEX to receive MTLX rewards at 40% APY (based on $1m of staked liquidity in the MTLXBUSD pool). Here is short walkthrough video on how to do that.
LPs on Ethereum will have the following options:
1. Remove their liquidity from Amplify, but keep it on Uniswap to continue to receive Uniswap trading fees.
2. Remove their liquidity from Amplify using the “Unstake” + “Exit” option and then swap the Uniswap tokens for ETH/FET/USDT and MTLX tokens on Uniswap.
3. Remove their liquidity from Amplify using the “Redeem” + “Exit” option which will perform a “market sell” on the entire MTLX position for ETH, FET, or USDT.
IMPORTANT: Using Option #3 could result in significant slippage. If you intend to sell your MTLX tokens, we strongly recommend using Option #2 to get MTLX tokens and then sell them on Uniswap, so you are at least aware of what the slippage is.
We strongly recommend using Option #2, since holding MTLX tokens will enable you to:
- Use the anyswap.exchange or multichain.xyz bridges to move MTLX tokens to Binance Smart Chain (receiving anyMTLX);
- Use anyMTLX to borrow/mint the USDO stablecoin on OCP Finance. Watch this short YouTube walkthrough;
- Deposit USDO in the Mettalex DEX on Binance Smart Chain to get *40% APY in anyMTLX. Here is how. Autocompounding is currently being developed in collaboration with Open DAO.
You can also:
- Transfer/exchange USDT to Binance Smart Chain using either the Binance Bridge or the Binance.com exchange;
- Exchange USDT for BUSD on PancakeSwap;
- Use anyMTLX and BUSD to deposit liquidity to the PancakeSwap pool;
- Deposit the LP tokens in the DEX and stake them to get a *40% APY. Here is a short video walkthrough on how to do that.
What is Next?
The team aims to build an improved Mettalex DEX on Binance Smart Chain. Launching a single-collateral pool and enabling various tokens to be used as collateral there are fundamentally important for making the DEX competitive.
We don’t intend to launch the DEX on other blockchains, side-chains, or rollups before we are confident that such a move will attract traders and liquidity providers.
While that development work is ongoing, we will finalize and announce a major partnership that will give Mettalex an edge in the DeFi space. Acquiring access to secure and reliable price data feeds is essential to our mission to bring commodities and other real-world assets to DeFi.
Once these feeds are available, we plan to launch several markets that will not be available anywhere else in the DeFi space.
Moreover, since we are showcasing the DEX to traders, you will notice an uptick in activity in the coming days and weeks. More trading will generate fees that should make Mettalex even more attractive to liquidity providers. The resulting total APY from trading fees and MTLX rewards is expected to be very competitive.
On the topic of APYs — we plan to introduce a single APY in the UI that will be composed of both trading fees and MTLX rewards. This will help LPs understand exactly how much they are earning by supporting the DEX.
Finally, more trading on the DEX will also kick-start the MTLX buy-back program, launching a deflationary mechanism that will further reduce MTLX token inflation.
We remain committed to making the Mettalex DEX the best place to trade commodity derivatives in DeFi.
Thank you for your continued support.
* Based on $1,000,000 of staked liquidity in the MTLXBUSD pool on the DEX. The APY rate will be reduced in the future.
