From the Community: Metronome and Digital Central Banking
One of the members of the Metronome community, John Marks, recently posted an article about Metronome. The piece, which shows he’s spent more than just a little time with the Owner’s Manual, discusses one of the team’s favorite topics: Metronome as an autonomous, reliable central bank for DeFi.
A few points that we felt were worth reiterating here, particularly as the team continues to evangelize Metronome’s role in DeFi.
First is an interesting formulation of the Autonomous Converter Contract concept:
Just as modern central banks act as “lenders of last resort” in times of economic turmoil, the Metronome Autonomous Converter Contract acts as MET’s “buyer of last resort.” … It is a guarantee that your MET can be liquidated at some price, no matter what. In central bank jargon, you can think of this as Metronome performing open market operations.
The notion that the Metronome system gives purchasers an on-chain method of exchange serves as a demonstration of the certainty in the system. This might even underscore that certainty to a greater degree than the hard-coded policies that govern the founders’ retention or even the Proceeds Contract that ensures all MET stays in the ecosystem. There will always be a market for MET, that’s one of the reasons why it’s there.
Then, there are two points made in the John’s post that deserve to be taken together:
Unlike other cryptocurrencies, MET are never given away or earned by mining — they can only be purchased in the daily descending price auction. Bitcoin’s mintage, in contrast, is not similarly predictable just due to the nature of proof-of-work. Ethereum’s long-term mintage is, frankly, anyone’s guess.
Metronome provides assurances programmatically, that is, through an autonomous and unchangeable set of smart contracts, designed to operate in perpetuity without a single upgrade to the code.
The Metronome Auction Contract is designed to eventually achieve a 2%/year inflation rate for MET. The necessity or desirability of a hard cap is a matter of intense debate, to be certain, but we believed it was more desirable to be able to predict the supply of Metronome at any given time. Proof-of-work approaches, for all of their advantages, don’t necessarily admit of this.
The important distinction here is that Metronome’s key contracts are of the set-and-forget variety — the “programmatic” approach that John describes. Whereas the protocol for, say, Bitcoin or Ethereum can (and does) change due to hard forks and the like, Metronome will always behave according to the rules set out in its Owner’s Manual.
In summary, after two years since launch, we look forward to reading further insights from the likes of John and others as the DeFi landscape continues to unfold.
[Note: John Marks (a pseudonym) is a Europe-based crypto hedge fund manager exploring decentralized finance and more. John reached out to the Metronome team some time ago with interest in publishing an article.]