A look at the new tokenomics proposal for Metronome
- Metronome has accomplished a lot this year, and we’re just getting started.
- The tokenomics landscape has come a long way since 2020 with lots of new models to explore.
- Metronome will introduce esMET, a concept inspired by other popular vote-escrow models where holders unlock a range of additional benefits.
- Next steps.
Through the Rearview Mirror
The past year has been an exciting time, filled with milestones and challenges, all of which have helped us grow and evolve into the Metronome you see today. Some key highlights of our journey so far include the official launch of Metronome Synth, Smart Farming, rigorous security audits, and the integration with Optimism.
Now as we embark on the path to refining our tokenomics, we are committed to addressing the challenges and opportunities within our current framework, ensuring that the Metronome ecosystem remains sustainable and rewarding. Read on to find out the plan for the future of the MET token.
Currently, MET serves as the governance token for the Metronome ecosystem. However, the broader vision for MET introduces tokenomics that can also be used to enhance the overall user experience and address long-term limiting factors, such as liquidity.
A notable development in DeFi tokenomics was the adaptation of the vote-escrow model, first championed by Curve. Their integration of governance, staking, and liquidity pool rewards enabled the CRV token to revolutionize liquidity provision. Building on this, Andre Cronje’s approach of the ve(3,3) model — first proposed in Solidly which draws inspiration from Curve’s vote escrow and Olympus’ 3,3 model — has been implemented in projects like Velodrome with great success.
In earlier systems, users simply locked their tokens to gain benefits, which disappeared once the position was closed. The vote-escrow model, however, added an element of choice and predictability. Users selected how long they were willing to lock their tokens for, which, in turn, provided users certain privileges, as well as giving a clear view of how many tokens were locked up at any given moment. This level of transparency led to a more stable token amidst volatile market conditions. Due to its success, this has led to many protocols molding their treasuries, liquidity, and incentives around this model, with the goal of being more sustainable and future-proof.
Yet, while the advantages of vote-escrow are clear, it comes with its own set of challenges. A commitment of up to four years (within Curve) for locking tokens can be daunting for many. Not only that but the decay mechanism built-in means users need to continuously relock to retain maximum benefits. The ve design also restricts token transfers once locked, which ultimately led to workarounds like Convex, whose strategy is based off pooling and locking CRV tokens on a user’s behalf, then issuing a transferable wrapper token back to them. The demand for such solutions has been evident in their control of the current locked CRV weight.
Moving forward, Metronome has developed a more dynamic approach to decentralization with esMET being the next stage toward on-chain governance. This means users will be able to lock up their MET tokens in order to vote on proposals.
esMET holders will play a pivotal role in emission-related decisions, including voting on what assets should be added to the application, making choices on protocol-specific matters, such as increasing or decreasing collateral ratios, and much more. This move seeks to build a secure and reliable model, designed to ensure fair outcomes and establish a robust governance process.
Furthermore, as part of our commitment to rewarding active participation, there will be additional incentives for users who stake their MET for various durations, up to 2 years. These participants will gain exclusive access to features and benefits, such as fee discounts, voting boosts, and enticing Smart Farming incentives. In the future, they may also gain access to carefully curated products and pools within the ecosystem.
While the foundation of Metronome draws inspiration from what Curve does effectively, there are distinct differences in the approach, especially when addressing the ve model’s challenges.
Transferability: In Metronome, esMET positions are encapsulated as ERC-721 tokens. This design choice enables the transfer of positions on the open market, providing users with greater flexibility.
Early Exit: Users aren’t bound to their positions for the entire duration. esMET enables early exits, offering more control over token commitments. The ultimate objective is to create a system that discourages early withdrawals while continually providing a more lenient structure for those who hold positions over longer durations.
Multiple Positions: Unlike models where a single user is limited to one position, Metronome enables users to hold and manage multiple esMET positions simultaneously.
Currently, there is an MIP covering the new tokenomics, in addition to a new treasury budget allocation. In the event of a successful vote, it is expected that the initial phase will start to be rolled out in September with the launch of esMET and trading discount tiers, with the Smart Farming boost following shortly after.