Currently, regulatory frameworks make it extremely costly to set up and maintain an investment fund. Therefore, there are a lot of obstacles involved while starting a fund. You have to comply with all kinds of laws and rules, including compliance, auditing, administration, custody, and overseeing transactions.
In fact, you have to pay at least $100.000 to only set up a fund, which is followed by maintaining costs of $75.000 annually. It is also costly and time consuming to keep investors informed.
Melon is a protocol on the Ethereum blockchain that aims to solve this issue. This protocol allows users to easily set up an investment fund, which everyone can access without anyone’s permission. Every fund is settled fully on chain and can be customized in terms of the fee structure, whitelisted investors, assets that are included, and a lot more.
Because of the trustless nature, investors can easily verify the underlying assets that a fund holds, its previous performance and all other relevant indicators. Every transaction is executed through smart contracts, which is why investors can be sure to fully trust the protocol as a whole. Every fund will be managed exactly as the contract states. Today, there is a lot of uncertainty around fund manager’s activities. The lack of transparency of today will be completely forgotten in the future. Melon also completely removes the need of custodial services, provided by the fund managers, as every user fully controls their assets themselves.
Melon removes the above-mentioned barriers and therefore creates a lot more space for talented fund managers, who previously couldn’t set up a fund, as it was too expensive. This entails more competition in the fund industry, which is good for investors because it increases the variety of funds to choose from, funds better managed than before.
Above you can see the top four Melon funds, which have the most value invested. The most successful fund as of today is the “Rhino Fund”, which currently holds a total of $819.194.
The potential userbase for Melon today is different from the traditional investment fund industry. Melon mainly focuses on the long tail of the power distribution. That refers to managers who control rather less capital. These are the ones that got left behind in traditional finance. For the first time in history, small managers will be given a chance to prove themselves to compete with bigger ones. Thus, Melon will establish equal opportunities for every fund manager.
Of course, another target user base are crypto retail investors that love to explore new and exciting innovations that the crypto industry has to offer.
Usage of the platform
Today Melon is being used more and more by crypto investors. As of today (9th August 2020), there are over $1.6 million in assets invested in Melon funds. More than 360 funds have been deployed to the blockchain and a total of 903 investment have been made.
The Melon token (MLN) provides a way for investors to benefit from the growth of the Melon protocol, as usage of the protocol should be directly correlated with the price performance of the token.
The Melon token is natively used as “asset management gas” on the Melon protocol. Gas is collected with three functions:
1) Fund set up
2) Investment in a fund
3) Fees claimed
Every time a user calls one of these functions, fees are collected in the form of ETH, which is then used to buy MLN from the open market and burn it afterwards. As more and more users are joining the Melon protocol, it can be expected that an increasing amount of MLN is burnt, which gives the token value.
However, MLN is not a deflationary token. 300.600 MLN are created every year. The Melon Council DAO can decide to allocate them the active developers who are providing value to the Melon ecosystem. If some tokens are not used for funding the development, they are burnt at the end of the year.
MIP7 (Melon Improvement Proposal 7) will enhance tokenomics. From this point, the buy & burn mechanism will depend on the amount of assets that are invested in Melon funds. Once per year, a portion of the AUM will be used to burn MLN (0.2%). Also, every time a user invests in a fund, approximately 0.1% of the invested amount will be burnt.
The Melon Council DAO is fully in charge of the following decisions:
1) Protocol Upgrades
2) Adjusting network parameters
3) Allocating funds to developers who add value to the protocol
4) Deciding whether or not to burn inflated tokens
Melon aims to eliminate high entry barriers into the fund management industry. Because of the painful process and regulatory frameworks, there is a lot of innovation missing. Melon tries to solve this issue. It will give small fund managers a chance to successfully operate and compete in this industry, and thus will make it a lot fairer.
Each fund on the Melon protocol is completely transparent and investors are able to audit them autonomously. This feature will bring more transparency into how funds are operated, which has been a big problem ever since.
Crypto investors should also take a look at MLN, which will capture the value of the protocol as more users continue to join the platform.
All in all, we at DEFI WORLD believe that Melon fits perfectly into a fairer, more transparent and equal world, which can be established through new decentralized technologies.