Written by: FRANCESCO

Compiled by: TechFlow TechFlow

MetisDAO is ushering in major developments for its ecosystem. With the establishment of the Metis Ecosystem Development Fund (Metis Ecological Development Fund), a fund of up to 4.6 million METIS will be used to promote project deployment, product development and builder rewards in the ecosystem. This article takes an in-depth look at how this fund affects MetisDAO’s token value and analyzes the development potential of several key protocols in its ecosystem, indicating the active development of the Metis ecosystem in early 2024.

On December 18, MetisDAO announced the establishment of the Metis Ecosystem Development Fund (Metis EDF).

EDF is a fund with 4.6 million METIS designed to promote development, attract liquidity, activity and adoption in the Metis ecosystem.

The main objectives of EDF will be:

• Provide funding for new project deployment

• Product development for existing dApps: Support builders through grants

• Builder Mining Rewards: Based on the generated transaction volume, builders can be supported with up to $4,000 METIS per month

• Sequencer Mining: Lock tokens in Metis POS to aid block production and bootstrap sequencers.

• Liquidity for New Products: Navigating Liquidity and Ecosystem Composability

• Supports auditing to maximize security

• Liquidity Mining: For dApps with upcoming campaigns or deployments

As part of the 2024 roadmap, Metis will be the first Optimistic Rollup to launch a decentralized orderer starting on January 3rd.

The creation of EDF also enhances the value proposition of the Metis token, with $METIS holders having governance rights over fund management and the decentralized sorter. 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 approach is not the first time, many Layer 1s use ecosystem funds to promote development and gain market share. As expected, the fund spurred new interest in Metis, with many switching from saturated investments in Solana to new paths. Of the fund usage, 65% of funds will be used for sequencer mining, incentivizing depth of liquidity and network participation, thereby 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 announcement, 4.6 million $METIS EDF funds were valued at $125 million. Thanks to the "EDF effect," the fund is now worth over $420 million.

The price increase is reflected in some key on-chain metrics, indicating that interest in Metis is increasing significantly:

1. Transaction quantity

2. Daily active addresses

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 additional wishes:

Hermes

Hermes is one of the most famous protocols on Metis. I have introduced Hermes in detail before, so please refer to my article: Introducing the Hermes Protocol: Metis’ Leading AMM DEX The Hermes protocol is Metis’ main AMM DEX, based on Solidly Fork. Launched in March 2022, it allows Metis users to provide liquidity, add new indicators, increase indicator yields, vote on token issuances, and accept bribes. Hermes is based on Andre Cronje's "fee incentive mechanism": every time a trade occurs, LPs receive HERMES from emissions, while fees are passed on to Stakers and Lockers who vote for the pool, thus explaining the high annual interest rate. The protocol will benefit from EDF funds as well as the upcoming V2 version, which introduces several improvements: specifically full-chain liquidity, leasing liquidity and yield markets. These expectations are reflected in recent price increases. However, with a market cap of $10 million, Hermes is still a relatively small market cap.

Hummus

Hummus is an efficient one-sided AMM that also features pooling utilizing Balancer’s weighted pooling mechanism

What's so special about Hummus? Hummus’ flexible one-sided staking mechanism allows for maximum capital efficiency and minimal slippage. Their novel approach to LP tokens follows a more flexible architecture. Rather than being part of total liquidity, LPs are recorded in exact token amounts, making it easier to process withdrawals. Like Hermes, Hummus benefits from EDF news. As the Metis ecosystem will attract a new wave of capital, DEXs are already well-positioned to capture this volume 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 even stronger in 2024, Neswap is expected to be one of its main beneficiaries. While this has been widely reflected in the token price, future upside 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 to leverage up to 50x. Tethys is based on the GMX model and adopts a dual-token model, allowing users to open positions against other traders. The TLP index follows the GLP blueprint, but does not have many stablecoins in its index:

Driven by EDF, Tethys's daily trading volume has grown rapidly.

Tethys is expected to become the perpetual protocol at the head of Metis. This is fully reflected in the form of price increases; nonetheless, Tethys remains an interesting protocol to watch closely.

Revenant

Particularly worth mentioning is the GameFi project: Revenant. Revenant is developing a decentralized gaming ecosystem powered by $GAMEFI to launch a series of play-to-earn games.

The Revenant team is currently building a blockchain fighting game with a player-driven economy where users can buy and sell items in the game.

Here are screenshots taken from their demo:

It seems that the EDF effect has also affected GAMEFI. This is not a decentralized finance (DeFi) project. As more gaming platforms launch their products in 2024, Revenant is taking the lead on Metis.

What happens next?

What to expect from Metis? What's the conclusion?

Of course, it probably won't be vertical, and the price may not look that attractive now after last week's big rally. However, previous examples of Layer 1 deploying development funds have shown that they are an effective tool (at least in the short term) to promote on-chain liquidity and activity.

Whether Metis can maintain this stimulating effect is another matter.

Still, the EDF (Ecological Development Fund) narrative, coupled with Metis being one of the first L2s to have a decentralized orderer, may mean that attention will be focused on Metis for at least the first few months of 2024 superior.