Metronome
Metronome is a DeFi protocol that enables users to deposit crypto assets as collateral and mint crypto synthetics through its dApp. These synthetics facilitate slippage-free trades and allow users to engage in yield farming. [10]
Overview
Metronome is a decentralized finance protocol that allows users to use their existing cryptocurrency holdings as collateral to create synthetic versions of their assets. This collateral can be in the form of productive assets like yield bearing assets or standard assets like ETH and USDC. By depositing collateral, users can mint synthetic assets, which can be traded on the Metronome Synth Marketplace without slippage, or used for yield farming. These assets can also be used for lending, farming, trading, or other purposes as desired. The protocol utilizes the MET token, which serves as a utility token on the dApp and as a governance token for the Metronome DAO. The protocol is deployed on the Ethereum network. [11]
Features
- Productive Collateral: Metronome allows users to utilize productive collateral, such as Vesper pool share tokens, to enhance capital efficiency. This enables users to earn yield on their collateral while utilizing the offerings of Metronome Synth. [12]
- Yield Farming: The protocol also offers an automated process for users to reinvest their deposits into additional productive collateral, potentially increasing APY through yield farming. [12]
- Zero Slippage Swaps: Metronome Synthetic Assets can be traded or swapped with zero slippage, though trading fees apply as outlined elsewhere. [12]
- Simplistic UI: The user interface of Metronome Synth is intentionally designed with a straightforward and elegant layout to ensure ease of use and a pleasant user experience. [12]
Metronome Dashboard
Users can deposit collateral, create their initial synthetic assets, and oversee their current collateral positions through the metronome dashboard. [13]
Liquidations and Collateral Factors
Synthetic positions require users to deposit more collateral than the amount of synthetics they generate. [14]
Collateral assets have varying collateral factors, which determine the maximum amount of synthetics that can be generated from a deposit. If the value of the synthetic assets falls below the required collateral ratio, a partial or full liquidation may occur. [14]
Asset Collateral Ratios
ETH:
- ETH: 83%
- vaETH: 80%
- sfrxETH: 80%
- vastETH: 78%
- varETH: 75%
- vacbETH: 67%
Others
- WBTC: 80%
Productive Collateral
Users of Metronome have the option to use yield-bearing assets as collateral for minting synthetic assets. This allows users to enhance capital efficiency, as their collateral becomes productive. Metronome accepts certain pool tokens from Vesper Finance. [15]
Supported collateral include ETH, BTC, DAI, and FRAX. [15]
Synth Marketplace
The Synth Marketplace in the Metronome Synth dApp facilitates the exchange of synthetic assets. [16]
To participate in swaps, users must first deposit collateral and mint a synthetic asset through the Metronome Dashboard. Alternatively, users may acquire synthetic assets from the open market (such as DEXes) before engaging in swaps on the Metronome marketplace. [16]
Swaps on the Synth Marketplace have zero slippage and incur a low trading fee of 0.25%. This feature enables users to effectively create both long and short positions. [16]
The liquidity of MET Synth is determined by mintage caps placed on individual synthetic assets. These caps are applicable to all users on the platform, preventing an excessive concentration in any specific synthetic or posted collateral. [16]
Collateral assets also adhere to a global cap shared by all depositors, with the same aim of maintaining system health. Individuals have their own liquidity limits based on their collateral factor. [16]
Users can exchange synths for other synthetics at prevailing market prices, as long as they stay within the global synth mintage limitation. These measures are in place to prevent unfavorable conditions for the synthetic assets, like an overwhelming number of traders swapping one synthetic for another, potentially disconnecting synthetic collateral from outstanding mintage. [16]
Synth Mintage and Deposit Caps
The mintage cap for each synthetic asset is determined by combining the maximum mintage of collaterals associated with the specific synthetic asset. During the initial ramp-up phase, the actual cap may be set lower at the discretion of the Metronome maintainers. The final cap is influenced by the liquidity available in the open market. [17]
Deposit caps establish a limit on the quantity of a specific collateral that can be deposited within the Metronome application. The following are the current caps: [17]
| Asset | Deposit Caps |
|---|---|
| USDC | 10,000,000 |
| DAI | 10,000,000 |
| FRAX | 9,000,000 |
| ETH | 4,286 |
| WBTC | 311 |
| vaFRAX | 7,000,000 |
| vaUSDC | 8,000,000 |
| sfrxETH | 3,333 |
| vaETH | 3,190 |
| vastETH | 2,857 |
| varETH | 2,381 |
| vacbETH | 2,381 |
Revenue Model
Metronome Synth generates revenue through various channels, including fees and liquidations. All generated revenue is allocated to the Metronome Treasury. [18]
- Synth Balance Fee: This fee is a mechanism to mitigate risk associated with generating synthetic assets on the Synth protocol. Each synthetic asset carries its own specific balance fee, determined by its risk profile. The fee is annualized and applied on a per-second basis, augmenting the user's outstanding synthetic position. It can be viewed on the Metronome Dashboard by hovering over each individual synthetic asset.
- Marketplace Trading Fee: Users incur a fee when conducting swaps on the Synth Marketplace. This fee amounts to 0.25% of the transaction.
- Liquidation Fee: Whenever liquidation takes place, user positions are subject to a premium fee. This fee is divided between the liquidator and the Synth Protocol. Presently, the liquidation fee stands at an additional 18%, with 10% allocated to the liquidator and 8% to Metronome.
Smart Farming
Smart Farming is an automated DeFi yield looping engine. It utilizes advanced yield automation technology to simplify complex strategies into a unified process, allowing users to attain looped yield. [19]
Users can deposit productive yield-bearing assets, specifically supported vTokens, to set their loop amount and generate synthetic assets that represent the same underlying assets as their collateral. These synthetics can then be swapped for the original underlying asset on a supported decentralized exchange, like Curve, and subsequently converted back into the yield-bearing productive instrument in Vesper. [19]
Loopage
The maximum "loopage" accessible to users when looping their positions is determined by the deposit token's collateral factor (CF). This value can be computed using the equation: maxLeverage = 1 / (1 - collateralFactor). As the collateral factor rises, the maximum loopage achievable also increases. [20]
Auto Repay
Auto repay is Metronome’s process for unlooping a position, providing users with a straightforward method to repay. If a user wishes to unloop their position, they can specify the number of collateral assets they intend to use for repayment (the corresponding dollar value will be displayed). Upon doing so, users will be presented with their expected collateral ratio after repayment, along with an estimate of how many synths will be repurchased during the process. [21]
If a user deposits naked collateral (for example, USDC) for use in Smart Farming, the contract will allocate the user's USDC into Vesper, creating vaUSDC. Upon unlooping, this can easily be converted back to the original USDC position through the Vesper pools on Metronome, or by visiting the Vesper app. [21]
Metronome 2.0
Metronome relaunched with Metronome 2.0 in 2022. With this version introducing new primitives, these are designed to generate value for the Metronome DAO and contribute in enabling the progression of the “Metronome 2.0 flywheel”. [22]
MET Token
Metronome's native token, MET, is an ERC-20 utility token on the Ethereum network. The MET token serves three primary purposes. Firstly, it can be locked to acquire esMET, the governance token for the Metronome DAO, enabling users to participate in governance proposals and voting. Additionally, users can "stake" their MET by depositing it into a smart contract with a specified lockup duration. Through a tiered system based on the amount of esMET held and the chosen lockup period, users will receive discounts on all synthetic trading fees. [23]
Supply Distribution
During the migration process, Metronome had a total supply of 14,377,915 MET. A snapshot of Metronome token holders was taken on August 23, 2022, to determine the supply distribution for the MET 2.0 governance token. [24]
- Community/MET 1.0 token holders (1,874,178 MET): MET 1.0 token holders can claim MET 2.0 tokens at a 1:1 ratio.
- **Uniswap Liquidity pool (2,000,000 MET): An initial allocation of 2,000,000 MET 2.0 tokens will be used to support a Uniswap V3 liquidity pair.
- Team and Strategic Advisors (2,000,000 MET): Similar to the MET 1.0 launch, 2,000,000 MET 2.0 tokens will be allotted (with an even release over a 24-month vesting period) for the Metronome 2.0 founding team and strategic advisors.
- Metronome DAO Treasury (8,203,669 MET): The entire amount of MET 1.0 in the Autonomous Converter Contract, minus the allocation to Uniswap at the snapshot time, has been designated for the Metronome DAO Treasury.
esMET
esMET follows the ve(3,3) model introduced by Andre Cronje. Users can lock their MET tokens for esMET in return. When a user chooses to lock their $MET for esMET, the amount received is calculated based on various factors. These factors include the maximum boost (set at a fixed value of 4), the duration of the lock-up, and the maximum allowable lock-up period (2 years or 730 days). Unlike other protocols, esMET does not undergo a decay over time. Therefore, there is no need for users to relock their tokens in order to maintain the maximum benefits. esMET is designed to be transferable (as an ERC-721 token), enabling users to directly send or receive it. [25]
Governance
In the Metronome ecosystem, users are required to lock their MET tokens to participate in proposal voting. esMET holders can participate in emission-related decisions. This includes voting on directions for the Smart Farming boost, setting liquidity and esMET requirements to qualify for the boost, deciding on what assets should be added to the application, and making choices on protocol-specific matters, such as increasing or decreasing collateral ratios. [26]
Trading Fee Discount
The Synth Marketplace within the Metronome dApp allows users to exchange synthetic assets. Transactions in this marketplace have zero slippage and a trading fee of 0.25%. Additionally, users holding esMET can enjoy reduced fees based on the following tiered structure: [27]
- 500 esMET = 0.20% fee (20% discount)
- 5,000 esMET = 0.15% fee (40% discount)
- 50,000 esMET = 0.10% fee (60% discount)
- 500,000 esMET = 0.05% fee (80% discount)
To qualify for the highest tier and receive the best discount rate, users would need to lock up 100,000 MET for a period of 2 years, resulting in a maximum value of 5 esMET for each locked MET. [27]
