While there are many use cases and benefits of cryptocurrencies to financial institutions — such as rapid settlement or portfolio diversification — these institutions have hesitated when given the opportunity to adopt cryptocurrency, either for reasons of basic unfamiliarity or lurid headlines. The stance has largely been similar to how financial institutions approached the internet in the 1990s: “This groundbreaking technology is great if it weren’t for all the people.”
The hesitation is understandable. Both the internet and cryptocurrency during their respective infancies can seem unreliable or different enough to be concerning. For a financial institution, volatility and unreliability seen in many cryptocurrencies can be worrying, and unappealing.
A cryptocurrency designed for mainstream financial use — while retaining many of the features that excite crypto-enthusiasts — was one of the challenges we explored when developing Metronome. Here is our case for Metronome as a crypto-instrument for financial institutions.
Adopting a New Asset Class
Both funds and financial institutions are beginning to diversify into cryptocurrencies, approaching it as a non-correlated asset class. Non-correlated assets are assets whose value generally moves independently of core financial markets. Since stocks and bonds (and others) usually move in value together, institutions tend to diversify into non-correlated assets as a means of mitigating risk. Cryptocurrencies have provided a fresh and exciting opportunity as a new, non-correlated asset to some institutions.
However, wider and more ubiquitous diversification into cryptocurrencies is still slow and –to many in the space– riddled with uncertainty. After all, the finance industry hasn’t seen a truly new asset class in decades. Companies and institutions find themselves in strange predicament: adapt and take on risk they are not comfortable with, or risk the chance of missing out on the birth of a new asset class. This could keep even the most conservative institution in a state of analysis-paralysis.
Tackling the Issuance Issue
Crypto-informed institutions are aware of –and worried by– many cryptocurrencies’ issuance models. Many cryptocurrencies are secured by Proof of Work and/or Proof of Stake. Both models are reliant upon fluctuations in hashpower on the network, meaning that, while able to be approximated, cannot be a known quantity with certainty.
Rather than tying the issuance model to these systems, Metronome’s issuance model is set by smart-contract logic. There will be 10 million MTN on day zero, with daily supply lots minting at the greater of i) 2,880 MTN daily or ii) 2.0000% of the then-outstanding supply annually. This can be mapped out months, years, decades, and centuries in advance with absolute certainty. No failure of or fluctuation in hashpower can influence the overall issuance and supply of MTN, since Metronome relies on time itself.
Further, some cryptocurrencies’ mintage (the rate new supply is introduced) is either static or goes to zero over time, which raises questions with some economists about their long term viability. Metronome attempts to fix this problem with daily auctions that provide an on-going token supply mintage, ad infinitum. An on-going token supply mintage aims to provide sustainability versus other cryptocurrencies whose mintage either approaches zero or stays there. This not only delivers an institution-compatible cryptoasset for conventional financial institutions, but we believe it can be a vital component in the new class of “crypto funds” that are emerging.
Combating Speculative “Pops” and Unfair Distributions
Other cryptocurrencies’ token supply is hand-stitched together in pre-launch deals that award certain parties a vast amount of supply, resulting in those parties controlling the majority of tokens. Some cryptocurrencies sell out to certain parties in a pre-sale, leaving very little to the general public. Conducting token generation events like this often result in a “pop” for short term buyers, followed by a slow decline in utility and use.
To combat this, Metronome does not have a pre-sale, a private sale, a whitelist, or bonuses before or during its initial supply auction. Further, the author’s retention is locked up and made available over a period of three years. Metronome also uses a descending price auction for price discovery. Descending price auctions discover market price by allowing purchasers to purchase at the price they see as fair. This also may discourage large purchasers — known as “whales” — from soaking up disproportionate amounts of supply. Contrary to popular characterization, not everyone in finance — crypto, institutional or otherwise — desires a high spike in currency value.
Essential Institutional Features, Realized in Crypto
Funds and institutions often require their assets to serve specific purposes — stores of value, easily liquidated assets, payment settlement assets, etc. Cryptocurrencies have generally found a hard time fitting in with some of these needs.
Then there are the features that institutions are accustomed to, but are unevenly available across the cryptocurrency landscape. Bitcoin, for example, is a fantastic mass-payment solution, but its fees and block times have become unmanageable. Ethereum has great smart contract features, fast block times and relatively cheap transactional costs, however it lacks mass payments to make it a viable payment solution. Ripple has fast block times, low fees, and mass pay, but is controlled entirely by one group — negating the entire point of a cryptocurrency. None of these have subscriptions on the blockchain feature, and all suffer from some form of governance issues.
As a multi-blockchain cryptocurrency, Metronome will use the fee structure of its underlying blockchain. This means that Metronome holders can choose specific blockchains based on fees or other needs –such as governance requirements–, should they care to. Metronome will also have fast block times, at 15 seconds for a block, mass pay as standard, and a unique subscriptions on the blockchain. Put simply: Metronome brings the best of cryptocurrencies and puts it into one package.
Metronome is a new cryptocurrency that is built for longevity. All of its aspects aim to serve that goal, and therefore it should be an extremely attractive cryptocurrency not only to general cryptocurrency users, but to financial institutions as well. Metronome does away with many of the concerns that cause hesitation when approaching cryptocurrencies.
More to come,
- The Metronome Team
UPDATE: For various reasons, the Metronome team has chosen to use the new symbol “MET.”