What is Melon?
The Melon protocol brings together a collection of open-source blockchain rules and smart contracts, which are collectively referred to as Melon. This protocol is built on Ethereum, and it is designed in such a way that it can, later on, be deployed on other blockchain platforms in the foreseeable future.
The Melon protocol is comprised of two types of smart contracts:
- Melon Core
The Melon Core refers to the part of the fund or portfolio which allows the portfolio managers the tools with which they can create and interact with all the functions they need to perform with respect to the funds, while at the same time following the laid down rules and regulations as stipulated in the Melon Protocol.
- Melon Modules
These are all the functions that portfolio managers need in their portfolio to allow them to go about their job accordingly. Most of these are optional features and include things like volatility calculations, price feeds, daily profit and loss calculations and NAV calculations.
The Melon protocol is an open-source platform, which means that each time an improvement is made to the platform, they can be accessed by anyone.
Therefore, individual users and fund managers are able to engage, audit and upgrade their platform to the latest version of the Melon protocol as and when they are made available.
One of the benefits of adopting changes to the Melon protocol when they are made available is that they eventually help users to reduce their dependency on fund managers, and reduce the costs associated with human errors that might be experienced in the course of traditional asset management.
Through the Melon protocol, it is also easier to create and manage operations, thereby making work easier. By design, Melon is an inclusive, transparent and reliable blockchain platform. Any user does not need special permission for them to set up a fund management account on Melon.
Melon operates like the internet. While Melonport AG is behind the development, they do not own Melon. Melon does not also take fees, making it a public good/service, and a matter of public interest. This is an open-source project, completely decentralized, and safe from feedback loops.
What is the problem that Melon Solves?
Statistically, according to Hedge Fund Research, more than half of the hedge funds currently have a book value of less than $100 million. However, this population is a representation of only 1.4% of the hedge fund industry, worth more than $84.9 trillion in asset value.
There are a lot of barriers that are making work and life difficult for fund managers. Almost all fund managers are constantly worried about counterparty risk and custody when making arrangements of how to transfer assets or where to hold their assets. A lot of fund managers have been declared bankrupt, leading to massive losses across the board.
Traditionally, audibility of fund management portfolios in an accurate manner has always been one of the main challenges facing this industry. Another challenge that fund managers experience is the lengthy settlement process. This will in most cases end up in delays in information sharing and transfer. As a result of these delays, inaccurate information might be passed on from one level to the next, and by the time such errors are discovered, it might be too late to take corrective measures without dire repercussions.
Risk managers in the industry at the moment end up working with inaccurate and imperfect information. Considering that these managers owe their compensation to the same people whose risks they are trying to manage, the conflict of interest often ends up in unprofessional conduct when managing certain accounts.
There is also the challenge of human interaction. The fund management process depends on a very long chain of human interaction, from booking to the settlement of trades and reconciliation. As a result, the conventional fund management system ends up creating a lot of room for error.
In light of all these challenges, how do some fund managers succeed? Success in this industry comes down to a very high working capital, the solvency of the custodians, and the accuracy of the people who work for the fund managers.
Looking at the cost of setting up a hedge fund, it might take close to a year to set up. There are other costs involved, such as the initial start-up cost, and the running costs. These coupled with internal ineptness and external forces eventually conspire and we end up with a massive rate of failed funds all over the place.
How does Melon Solve the problem?
The solution to most of the problems that fund managers experience as mentioned above lie in smart contracts. Smart contracts automate most of the concerns that are costly and require timely attention in fund management.
As a result, there are several barriers to entry that are mitigated by the blockchain. Smart contracts enforce simple rules and parameters, and through this, they automatically honor those as and when the rules are met.
The blockchain ecosystem is created in such a way that it primarily reduces the custody risk that has been inherent to many fund managers over the years. The blockchain accounting system is a trustless system. Therefore, it is visible, transparent, and always open for auditing. This is exactly what the Melon protocol is about.
The Melon protocol significantly reduces the barriers to entry that are experienced by fund managers.
One of the promises behind this project is to increase audibility and visibility by providing a decentralized system upon which coded rules are enforced, moving trust from counterparties and central authorities, and enforcing all operations on the blockchain.
By providing these services, the Melon protocol creates a large pool of portfolio management talent from which investors can make a selection. While Melon is built on Ethereum, the long-term plan is to make Melon interact with as many blockchains as possible, creating a platform where users can manage all their assets.
What makes Melon better than the competitors?
The Melon protocol addresses a lot of the concerns that are associated with traditional fund managers, making this one of the best alternatives in the market at the moment. The following are some of the reasons why Melon trumps the competition:
Investment Size
With Melon, users are able to manage their own wealth. There is no need to hire an investment manager or have to worry about the costs involved with hiring one. There is no limit to your investment size. You can invest with as little as you can, and the maximum is an endless pit. To start investing in a portfolio that is listed on the blockchain, all you need is 0.65 Ether.
Cost of Transaction
Trading on the Melon protocol attracts very low and highly competitive fees compared to what conventional fund managers currently charge. In fact, these fees are only applied when you are trading.
Decentralized Platform
The Melon protocol is a completely decentralized and trustless platform. This does away with some of the challenges that are often associated with centralized server management of funds, and the dependability on human interaction.
This is a platform that is secure, visible to all users, hence freedom to audit on the blockchain. All the portfolios that are created on the Melon protocol are established on the Ethereum blockchain.
Any assets that are available in these portfolios are held on the blockchain, hence establishing transparency in the management of the said portfolios.
Regulation
Digital asset management on the blockchain is still relatively new, hence the regulations governing the same are relatively unclear. However, through smart contracts, there is so much that you can do to automate your portfolio and make it respond to certain triggers.
You can also create smart contracts that alert you whenever risk breaches or loss triggers are identified. Given the transparency on the blockchain, both regulators and investors have access to clean data on the Melon protocol, hence real-time data on performance and risk exposure.
Administration
The blockchain platform allows fund managers the best experience for administrative tasks, operational support, and technological upgrades and updates. This is possible because of smart contracts, which are built to handle specific instructions either periodically, or based on event triggers. These instructions are coded in the smart contracts and a chronology is available in the Melon protocol library.
Visibility
One of the perks of using the Melon protocol is ease of access to performance records. Because of high visibility, fund managers can look forward to a significant reduction in the cost of marketing and advertising.
Account performance is standardized, and as a result, users are able to compare fund managers based on their performance and track records. This is reliable information that automatically pitches a fund manager’s talent to prospective employers and investors. Data on the blockchain speaks volumes about your performance.
Logistical Concerns
You do not need to worry about some logistical challenges like furniture space. Using the Melon protocol endears you to a more cost-efficient, affordable, accurate and faster platform for fund management than any conventional platform you might have access to.
Ease of Access
Melon is built in such a way that anyone can simply audit, interact with and experiment with the software. It is simple, easy to use, and even beginners are able to try their hands at fund management, building a good track record and harnessing the best of blockchain technology while at it. The costs of establishment and operation are minimal. Users can take advantage of this and create a profile, building their visibility and reputation while at it.
On the other hand, developers have a good platform upon which they can create modules and earn tokens for the code they contribute to the Melon protocol depending on how these modules are used. This, therefore, is a good way to establish an incentive process where developers get rewards for contributing to the development of the Melon protocol.
How can Melon be categorized?
Melon is an autonomous system built for cryptographic asset management. The frontend and backend are both executed and hosted on decentralized platforms. While the backend is leveraged off Ethereum smart contracts, the frontend runs on IPFS.
What’s Melon’s vision on Security?
One of the biggest challenges facing centralized management systems is their design. A central unit is a prime target for any kind of attack. Melon is built fully decentralized, which does away with this challenge. For governance purposes, there are incentives that are built into the Melon protocol that help the entire community participate in the development of the blockchain platform. Instead of a central authority, those who hold MLN tokens elect a technical council. The role of this council is to cast their votes on matters concerning Melon updates and upgrades.
Melon Protocol Bug Bounty Program
This is a program that is run for developers on Melon. Any developer in the world is welcome to test the security features of Melon, especially the smart contracts and the frontend. This is important so that the developers can raise concerns as and when they notice them, and this can be addressed immediately.
This way, individual developers are constantly working round the clock to keep the Melon protocol secure. In exchange for this, the developers get rewarded in MLN tokens. The bounty program aims to make security testing an incentivized program, and by involving the developers who actively use the Melon protocol on a daily basis, this bestows confidence from developers and users alike.
Examples of Melon use cases/applications
Midas
Midas Technologies AG is one of the partners who is currently using Melon for their retail investing app, together with an airdrop service. As an investment app, Midas offers their users a value proposition that each user has a fund on the Melon blockchain, and as a result, they use it to hold their cryptographic assets in the same way a digital wallet would.
Midas aims to make investing in portfolios and buying cryptographic assets very easy for all the users. Through the Melon blockchain, Midas is able to combine digital security and financial innovation.
Resources
https://coincheckup.com/coins/Melon
https://ipfs.io/ipns/melon.fund/#/ranking
https://medium.com/melonport-blog
https://medium.com/melonport-blog/melon-token-launch-858e341e050
https://bravenewcoin.com/assets/Whitepapers/melonprotocol.pdf