Recently, another wave of attention is being paid towards this L2, with the native METIS token and many other tokens in its ecosystem seeing significant price gains. This is perhaps as a result of several Twitter threads written recently on projects found in Metis’ ecosystem, in addition to the resurging L2 narrative due to bullish developments on Optimism.
Source: CoinGecko
For a deep dive into Metis and its architecture, check out our earlier article here. TLDR on a few distinct features - it has a focus for organizational use via Decentralized Autonomous Companies (DACs), it has EVM-equivalency, and yes, Vitalik’s mom is on the founding team.
Metis Ecosystem Updates
Recent Developments
Narratives aside however, fundamentally there have been several important updates for Metis in the past few weeks. This includes an announcement in July of ‘Metis Marathon’, a $100M, 26-week long builder incentive campaign, as well as an integration with Chainlink’s price feeds, which enables several DeFi ‘majors’ to be built on Metis. So far, large protocols like Sushi have deployed on Metis, while Aave has announced their imminent deployment on the L2. QiDAO, another MakerDAO-like DeFi protocol, has also announced that it will be ported over to Metis. Since the last time we covered Metis several months ago, it has also implemented its native storage solution (instead of storing everything on L1 Ethereum) which has resulted in noticeably cheaper transaction fees. For now, this makes Metis the cheapest L2 to use.
Additionally, the Metis team also announced their updated H2 2022 roadmap, which focuses on new product launches and user acquisition. Notable plans include the introduction of a new a new governance system targeted for implementation in Q3 which complements its existing DAC framework - a reputation system via soulbound tokens (SBTs i.e. non-transferable NFTs), and novel ‘Commons’ and ‘Eco Nodes’ governance structures (which are somewhat reminiscent of Optimism’s dual-house governance).
Briefly put, Commons are any DAC formed by community sub-groups contributing towards a specific interest, and can be leveraged by smaller token holders to gather and combine voting power against whales. Voting power is determined by the amount of veMETIS held, which can be obtained and accumulated via staking METIS (which is required for forming DACs). Meanwhile, Eco Nodes are entities which can be evolved from any Commons given enough contribution to Metis ecosystem growth (e.g. increasing TVL, activity, technical development, marketing, etc.), and have their voting power determined by Reputation Power badges held, which are SBTs. The governance process starts with Commons proposing MIPs (Metis Improvement Proposals), and if an MIP passes the voting threshold, gets passed over to Eco Nodes which cast votes to make the final decision. While this novel governance experiment is scheduled for sometime Q3, Commons can already start contributing and accumulate RP badges.
TVL
Metis TVL. Source: Defillama
TVL on Metis is rather lackluster, ranking no.40 on Defillama at time of writing. At its peak, Metis had close to $500M in TVL, which has since dwindled by ~89% to sit at ~$52M. This is in line with the overall crypto scene, whereby TVL across other altchains fell between 79% to 95% from their peaks.
Breakdown of Top 7 protocols on Metis by TVL. Source: Defillama
According to Defillama, seven protocols possess a TVL >$1M (excluding yield aggregator Beefy Finance), making up 97% of TVL on Metis; these are Netswap ($16.1M), Hermes Protocol ($9.6M), Tethys Finance ($8.5M), Hummus ($6.3M), MaiaDAO ($5.1M), Synapse ($4.7M), and QiDao ($1.7M).
Top Protocols on Metis
When we first covered Metis, the dApps were just launching and we haven’t covered them in detail. Here we take a look at some of the DeFi protocols which have gained the most traction thus far on Metis.
Netswap
Netswap is the leading DEX and largest protocol by TVL on Metis. It launched offering similar features to Uniswap V2 and soon after also built a launchpad, but has not had much development in the recent weeks. However, it does have an ambitious 2022-2023 roadmap which includes a variety of functionalities including limit orders, leveraged trading, prediction markets, lottery markets, governance functions for the NETT token, and even an NFT marketplace.
Just a couple days ago, Netswap tweeted that they are looking to reward NETT stakers with boosted yields for providing liquidity on the platform, suggesting that some form of ve- mechanics will be implemented soon.
Hummus
Hummus is a Stableswap AMM DEX native to Metis. Users can deposit mUSDC, mUSDT, or mDAI into single-sided liquidity pools on the platform and receive the inflationary HUM token as a reward. HUM can then be staked in exchange for veHUM, initially for boosted yields for providing stablecoin liquidity. Protocol fees are distributed directly back to liquidity providers on the platform.
Recently, the protocol has announced a soon-to-be implemented fee sharing mechanism, which distributes the fees (paid in-kind by traders’ stablecoin swaps) to:
1) veHUM holders via a monthly METIS airdrop,
2) LP holders, and
3) the protocol’s treasury.
Tethys
Tethys is a multi-pronged DeFi protocol, having an AMM DEX, leveraged yield farming, and money market functionalities.
A recent update in mid-July allowed single-staking of METIS on the platform in exchange for xMETIS, which in turn can also be staked to boost METIS rewards. Similar to many other DeFi protocols, users can stake TETHYS for xTETHYS, and earn TETHYS tokens (11% APR) which are automatically compounded weekly.
A convenient, recent feature however is that by staking xTETHYS, users are able to choose whether to earn rewards in METIS or ETH, with a 21% and 29% APR respectively (including the 11% xTETHYS reward) at time of writing. A similar function is available for the METIS token as well - while xMETIS holders earn only a 1% APR, users can earn an additional 9% APR in return for staking xMETIS.
If you are interested in checking the protocol out but don’t have any funds on METIS for gas fees, head over to the Tethys Discord #faucet channel, where an automated bot will send you some METIS for free to cover gas upon request.
Hermes
Hermes is a modified Solidly fork, which was a project formerly spearheaded by Andre Cronje and Daniele Sestagalli on Fantom. Hermes is a product built by the same team behind MaiaDAO, which started off as an OlympusDAO fork.
The details of Solidly are rather complex, but in short, Solidly is an AMM DEX which borrows heavily from protocols such as Uniswap, Curve and OlympusDAO. It sought to fix the known problems of Curve’s incentive structure whose reward mechanism encouraged TVL growth but not trading activity, which is the thing that accrues value to the protocol via fees collected. Additionally, it also attempted to fix the issue of dilution for stakers participating in the veCRV model - that is, users who locked up their CRV tokens for extended periods of time (up to 4 years) would be disadvantaged by the inflation incurred by the ongoing reward emissions of CRV tokens to LPs.
Hermes V2 is set to be introduced by the Maia team, and with it they plan to bring an omnichain environment to the DEX. By being omnichain, there will not be a need for a bridge, and liquidity will be concentrated and unified à la Uniswap V3. On the topic of interoperability, Hermes intends to introduce an omnichain yield marketplace, allowing its users to access yield across chains on one platform.
The current ve(3,3) model will also be revamped to become a fungible ERC-4626 (also known as b(3,3) according to Hermes). The ve(3,3) model requires a lot of interaction from users such as increasing lock times, claiming, and re-voting. With b(3,3), it is assumed that a user increasing their locked amount of HERMES every week is akin to burning the underlying since it will never be unlocked. Instead, there will be no more locked token positions (ERC-721) and replaced with ERC-4626. Users will burn their HERMES, receive bHERMES, and collect fees in perpetuity. For a deeper dive into Hermes V2, check it out here.
Hera Aggregator
Hera is the first liquidity aggregator that’s native to Metis. It works by aggregating liquidity from DEXs across Metis in order to offer the best prices for swaps to users. Occasionally, in order to achieve the best price for a token, it may take multiple swaps between various tokens and may even involve splitting the transaction especially if liquidity is thin. However, it is not always possible for a user to figure out the optimal transaction path on their own. That’s where Hera comes in; automatically comparing prices and swap routes across Metis AMM’s, and quoting users with a price.
Currently, Hera has integrated all the major AMM’s on Metis, including Netswap, Tethys, and Hermes. Hera Aggregator v2 is set to launch in the third quarter of 2022, and with it plans to go multichain. It expects to port to Aurora, Cronos, Avalanche, and Fantom.
Maia DAO
Maia Dao is a reserve currency protocol, which is based on the infamous Olympus DAO. Similar to Olympus, it was launched via a bond sale to the community which allowed users to purchase MAIA at a discounted price in return for providing various tokens to its treasury. However, it has since pivoted to develop a fully fledged trading hub in Metis, beginning with Hermes Protocol.
The aforementioned Hermes Protocol is Maia’s first product outside of its reserve currency. Meanwhile, Maia V2 has been launched as well, with the purpose of slowing emissions of MAIA tokens, and providing more utility for it.
QiDao (non-native)
QiDao is the protocol behind the Mai Finance stablecoin, which is issued via Collateralized Debt Positions (CDP). This mechanism is similar to that of MakerDAO’s, whereby users will lock up their crypto assets as collateral, and in return mint a stablecoin which can be freely used.
Initially launched on Polygon, it has since expanded to various chains with the latest being Metis. While still relatively new to Metis, it has already accrued over $1 million in TVL, and broken into the top 10.
Through it, users are able to deposit their METIS tokens and mint the MAI stablecoin. In turn, it can be used for yield farming or trading. However, it should be noted that there is a minimum collateral ratio in place, and if it falls below that value, the vault may be liquidated. For example, if the price of METIS drops, the collateral ratio of the vault will drop. In order to avoid liquidation, extra collateral must be added, or the position can be reduced by paying back some of the minted MAI.
Beefy (non-native)
Initially launched on BNB Chain, Beefy Finance is a well-established yield aggregator which has since expanded to Metis among many other chains.
It works by allowing users to deposit their LP tokens, and these positions will be autocompouned to generate returns. For example, one can provide liquidity for the WETH - METIS pair on Netswap by depositing equal amounts of WETH and METIS. Once doing so, a token (LP token) to represent the position is given, and this can then be staked on Beefy. The position will earn NETT (the governance token of Netswap) as a reward for providing liquidity, and this will be swapped to acquire more of the LP token as part of the compounding cycle.
Sushiswap (non-native)
Sushiswap, one of the largest DEX by volume, recently ported over to Metis. Originally on Ethereum, it has expanded to various altchains over the past two years, with the latest being Metis.
It brings to the table its AMM for swaps, as well as its Onsen farming pools. Currently, you can farm up to 3-digit APRs on some of the newly-deployed Sushi farms. Since launching on Metis, it has managed to accrue over ~$2 million in TVL, though it is still far from being one of the largest on the chain.
Thoughts
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Initially built to facilitate governance for DAO’s, it seems to have fallen short of achieving anything significant in that space. Instead, it has turned into another L2. However, Metis focusses on enabling companies to participate in Web3 via DACs - which most likely have not started realizing their full potential. Perhaps in the future if/when DACs gain more traction, that would be a more relevant measure of Metis’ success.
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Metis might be the cheapest L2 due to its implementation of a native storage solution, but this matters less if there are few attractive dApps / protocols for users.
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Many protocols have either shut down after suffering exploits, or stopped active development when the bear market hit, and this could be due to the fact that TVL and volume has dropped drastically over the past few months. Even then, most protocols built on Metis haven’t broken the boundaries of innovation. Doing so might not be worth the effort due to the lack of activity on it.
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While the chain has stayed rather silent for the past couple of months, activity has picked up a fair bit. Native tokens on Metis have experienced a rally, though this could have been driven by large Twitter accounts, or the L2 narrative from recent Optimism developments. Seeing that the majority of native tokens have small market caps with low liquidity, not a lot of buying pressure was needed to send them rising.
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One could argue that recent developments on Metis (e.g. Chainlink price feed integration, ecosystem incentives, etc.) are important, but have been pretty par for the course thus far for many other L1s/L2s. Hodlers will enjoy their moment in the sun, but a pump triggered by good news may only last for the short term.
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However in the medium - longer term, in order to stand out from the rest and attract more users / TVL to the network, Metis needs to find its own niche or risk being quickly forgotten after this temporary pump ends.
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All hope is not lost though, as there are ways to still attract the masses. The chain recently announced the $100 million Genesi DAC Ecosystem Fund, which will be used to invest in various upcoming projects on Metis. With such a sizable fund, Metis has a fair bit of firepower to attract projects and talent to build on the chain.
This article was written in collaboration with Shaun Paul Lee. You can follow him on twitter at @ShaunPaulLee.
Wendy is a research intern at CoinGecko. Follow the author on Twitter @alfalfawm
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