Mechanism Design

Rules of the game that people have to follow

Governance

1. Decision Making

Stage 1- Early Days

• The Meld core team will have complete control over the project, there will be no voting on decisions

Stage 2- Semi-Decentralization

• The team is still in control, but takes input from the community through a forum or Snapshot vote

Stage 3- Complete Decentralization

• • All voting is done on-chain
  • Anyone with at least 0.01% of the total MELD token supply can create a proposal

2. Implementation

Stage 1 and 2

• The MELD team implements all changes to the protocol

Stage 3

• • Proposals are executable code created by the proposer, which then becomes implemented following acceptance and a two-day timelock

3. Resolution mechanisms

• If someone withdraws their votes after creating a proposal, then anyone can cancel the proposal to prevent someone from making a malicious proposal then withdrawing their votes
• The MELD staking pool acts as an insurance pool to cover any undercollateralized loan liquidations and counteract impermanent loss in the MELD Vaults

Market Structure

1. Bargaining Protocol/Pricing Model 

Crypto-backed Loan

• Users deposit crypto into a MELD smart contract
• After an automated KYC/AML confirmation, fiat funds are wire-transferred
• Loans are issued with a LTV ratio of 50%
• If LTV reaches 65% or stays over 50% for 3 days the user gets a margin call
• If LTV reaches 85% the collateral is converted to stablecoins with a 5% fee

Genius Loan

• This is a crypto-backed loan where users only pay interest, not principle
• The loan is self-repaying through a portion of the yield the collateral earns
• Interest rate will be higher than normal loans

Crypto-Backed Line of Credit

• Users can get a MELD debit card connected to a crypto-backed credit line
• They can use the credit line as needed, up to 50% of the value of their collateral
• Margin call and liquidation rules are the same as normal crypto-backed loans

MELD Vaults

• Vaults are the liquidity pools that crypto deposits are stored in
• They are single sided MELD/Token pools so any token can be swapped with another by going through MELD
• Earns yield from external DEX aggregators/routers
• Has impermanent loss protection funded by MELD stakers

Fee Structure

• • 0.2% for wrapped assets in each transactional direction
  • 3% margin on loan interest rates
  • 0.2% fee on swaps (0.15% to LPs and 0.05% to protocol)

2. Community information

• • MELD will be creating its own oracles run by the MELD DAO to determine asset pricing for liquidation, bridging between blockchain and fiat accounts, and mTOKEN wrapping/unwrapping

3. Idiosyncratic Risks

• A 50% of all governance quorum is a high bar, so voters apathy may hinder the ability for the protocol to evolve as needed
• MELD tokens have a fixed supply, but the protocol must mint MELD tokens equivalent to the value of deposited funds. This could result in exceeding the supply cap as this minting is not accounted for in the token distribution

Incentives

1. Voting Protocol (after moving into complete decentralization phase)

• • There is a three-day voting period that requires a majority in favor and a 50% of all governance votes quorum
  • Governance is done through voting power (VP) determined by the number of MELD tokens staked (T) and a multiplier (M) determined by the duration they are staked for in weeks (D)
    • VP = T x M
    • M = 1 + 0.1 x D^(2/3)

2. Allocation mechanism

Initial Stake Pool Offering (ISPO)

• Users delegate ADA to MELD stake pools for any duration they choose and will earn MELD as a reward
• If the ISPO fills ten Cardano staking pools with 64 million ADA each then 200 million additional MELD tokens will be taken from the private sale and used as staking pool rewards
• The MELD token rewards will be airdropped within five minutes of the MELD token launch
• 100% pool- MELD receives 99% of ADA block rewards and participants get ~2 MELD per ADA staked for the full period
• 50/50 pool- MELD gets 50% of the ADA block rewards and participants get the other half, along with ~1 MELD per ADA staked for the full period

Usage Rewards

• Both fiat lenders and borrowers earn MELD as a reward for participating (800 million MELD tokens are allocated for this)

Profit Allocation

• 40% of Vault returns go to MELD stakers, 20% to the DAO treasury, and 40% to other functions (products/treasury/development/operations)
• 20% (not sure which section this comes from) go towards buying back MELD, depositing it in a AMM vault for liquidity, then burning the LP tokens