Update on MLN tokenomics: MIP7 endorsed by user representatives

With the launch of Melon v2 getting closer, it is time to provide some clarity on Melon Improvement Proposal #7 (MIP7).

Background

Late June, Tom Shaughnessy (Delphi Digital), Ceteris Paribus and Chris Manessis (Moonchain Capital) submitted MIP7. This proposal aims to align the Melon token economics with the growth of the platform, by tweaking the existing Melon token (MLN) value accrual mechanisms. You can read more about the proposal here.

Last month, the Melon technical council (MTC) published its initial feedback on the proposal. Generally they were in agreement with the main talking points of MIP7, including:

• The removal of the set-up fee
• The removal of fees on investments
• Addition of a recurring and fixed fee on AUM (used to buy and burn MLN tokens)
• Reducing maximum inflation as the protocol matures

Current status

As communicated, the MTC was hesitant to decide on the future of MIP7 without consulting user representatives. In late September, two user representatives were elected into the Melon Council DAO and have been focused on assessing MIP7 with the MTC. There was overwhelming support to move forward with implementing MIP7, to benefit the Melon ecosystem as a whole.

The user representatives (Felix Hartmann and Giel Detienne) endorse the core goals of MIP7: “We believe the suggested features would help accelerate network growth and provide better incentives for MLN holders. It now comes down to the fine-tuning of the details.”

Next steps

The new token economic details are being fleshed out, based on all community input. In other words, this involves:

• Determining the exact AUM fee (e.g. a fixed 20 bps fee versus a tier-based system depending on fund size)
• Determining the most efficient way to increase MLN utility within the protocol (e.g. reducing the AUM fee for funds holding a certain percentage of MLN)
• Setting a reduced MLN inflation schedule based on milestones (e.g. MLN price and total number of users)

Expected delivery: Q4 2020

• Implementing these changes within the underlying protocol (after Melon v2 ships), preceded by a technical and security assessment.

Expected delivery: Q1-Q2 2021

Note that any parts of the proposal that pose technical or security limitations could be re-evaluated. Nevertheless, any changes that would deviate from the core goals of the original MIP7 proposal will be put up for community review and voted on again. We do not want to exclude the Melon community from providing — thus far very valuable — feedback.

Why not implement the proposed changes immediately in v2?

Carrying out MIP7 requires numerous changes to the underlying protocol smart contracts which would incur delays to the shipping of v2. The implementation of MIP7 needs some careful thought to avoid inefficiency and bad design choices. Currently, releasing Melon v2 is the developers top-priority (with v2 containing a plethora of new features as requested by users) which is still on track for a Q4 release. To be able to give it the attention it deserves, MIP-7 will be addressed afterwards.

The Melon team will do what it can to strike the right balance between making careful design choices for the long-term benefit of the protocol (eg. security), the user (eg. keeping gas costs low) and the token holder (eg. a quick implementation of MIP7).