MetisDAO is ushering in a major development of its ecosystem. With the establishment of the Metis Ecosystem Development Fund, a funding of up to 4.6 million METIS will be used to drive project deployment, product development, and builder rewards in the ecosystem. This article delves into how this fund affects the value of MetisDAO's token, and analyzes the development potential of several key protocols in its ecosystem, heralding the active development of the Metis ecosystem in early 2024.
On December 18, MetisDAO announced the launch of the Metis Ecosystem Development Fund (Metis EDF).
EDF is a 4.6 million METIS fund designed to facilitate development and attract liquidity, activity and adoption in the Metis ecosystem.
The main objectives of the EDF will be:
- Funding for new project deployments
- Product development of existing dApps: Supporting builders with grants
- Builder Mining Rewards: Based on the volume of transactions generated, up to $4,000 METIS per month will be supported for builders
- Sorter Mining: Tokens are locked in Metis POS to help with block production and bootstrap sequencers.
- Liquidity of new products: Bootstrap liquidity and composability of the ecosystem
- Support audits to maximize security
- Liquidity Mining: For dApps with upcoming events or deployments
As part of the 2024 roadmap, Metis will be the first Optimistic Rollup to launch a decentralized sequencer starting January 3rd.
The creation of EDF also elevates the value proposition of the Metis token, $METIS holders have governance rights over fund management and decentralized sequencers. EDF aims to be a funding mechanism for the development of public goods in the ecosystem, ensuring the future of Metis in the long run. This is not the first time this has been done, and many Layer 1s use ecosystem funds to boost growth and gain market share. As expected, the fund sparked renewed interest in Metis, with many moving away from Solana's saturated investments to new paths. In fund usage, 65% of the funds will be used for sequencer mining, incentivizing liquidity depth and network participation, thus making the sequencer self-sustainable through transaction fees. Only 35% of EDF, or $1.6 million $METIS, will be allocated to fund the ecosystem.
At the time of the announcement, the $4.6 million $METIS EDF fund was worth $125 million. As a result of the "EDF effect", the fund is now worth more than $420 million.
The price increase is reflected in a number of key on-chain metrics, suggesting that interest in Metis is increasing considerably:
1. Number of transactions
2. Daily active address
With the launch of the Metis project, let's take a look at the top five protocols that could benefit from EDF. But first, some extra hope:
Hermes
Hermes is one of the most well-known protocols on Metis. I've covered Hermes in detail before, so please refer to my article: Introducing the Hermes Protocol: Metis' leading AMM DEXHermes protocol is Metis' main AMM DEX, based on Solidly Fork. Launched in March 2022, it allows Metis users to provide liquidity, add new metrics, increase indicator yields, vote on token offerings, and accept bribes. Hermes is based on Andre Cronje's "fee incentive mechanism": each time a transaction occurs, the LP receives HERMES from the emissions, and the fees are passed on to the Stakers and Lockers who voted for the pool, thus explaining the high APR. The protocol will benefit from the EDF Fund as well as the upcoming V2 release, which introduces several improvements: specifically Omnichain Liquidity, Leasing Liquidity, and Yield Market. These expectations are reflected in the recent price increases. However, Hermes, with a market cap of $10 million, is still a relatively small market cap.
Hummus
Hummus is an efficient one-sided AMM that also has pools that take advantage of Balancer's weighted pooling mechanism
What is so special about Hummus?Hummus' flexible single-sided staking mechanism allows for maximum capital efficiency and minimal slippage. Their novel approach to LP tokens follows a more flexible architecture. Instead of being part of the total liquidity, LPs are recorded with an accurate token amount, making withdrawals easier to process. Just like Hermes, Hummus has benefited from EDF's news. As the Metis ecosystem will attract a new wave of capital, DEXs are already well-positioned to capture these volumes and benefit from increased activity and fees.
Netswap
Netswap is a DEX with a constant product liquidity pool, launchpad, and an integrated staking mechanism for its governance token, $NETT.
Netswap Supports:
- Low transaction fees
- High-speed trading to optimize trading
- Scalability by design
- Extensive token support
- Governance token $NETT
As the Metis narrative becomes stronger in 2024, Neswap is poised to become one of its main beneficiaries. While this has been widely reflected in the token price, the upside in the future should not be ruled out, given the early stages of the Metis ecosystem.
Tethys Finance
Tethys is a perpetual DEX on Metis that allows users up to 50x leverage. Tethys is based on the GMX model and uses a dual-token model, allowing users to open positions against other traders themselves. The TLP index follows the GLP blueprint, but there aren't many stablecoins in its index:
Driven by EDF, Tethys' daily trading volume has grown rapidly.
Tethys is expected to be the head of Metis on perpetual terms. This is fully reflected in the form of price increases, and despite this, Tethys remains an interesting agreement to watch closely.
Ghost
Special mention should be made of the GameFi project: Revenant. Revenant is developing a decentralized gaming ecosystem powered by $GAMEFI to launch a range of play-to-earn games.
The Revenant team is currently building a blockchain fighting game with a player-driven economic model where users can buy and sell items in the game.
Here's a screenshot taken from their demo:
It seems that the EDF effect has also affected GAMEFI. This is not a decentralized finance (DeFi) project. As more and more gaming platforms launch their products in 2024, Revenant is leading the way with Metis.
What happens next?
What to expect from Metis and what are the conclusions?
Of course, it probably won't be vertical, and the price may not look as attractive now after last week's big rally. However, previous examples of Layer 1 deployment development funds have shown that they are an effective tool (at least in the short term) to boost on-chain liquidity and activity.
Whether Metis can maintain this stimulating effect is another matter.
Still, the EDF (Ecological Development Fund) narrative, coupled with the fact that Metis was one of the first L2s to have a decentralized sequencer, could mean that attention will be focused on Metis for at least the first few months of 2024.