Metis — The future of decentralized human organizations?
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Recall a time you last went to a restaurant.
A waitress approaches you to take you to your table to return moments later to take your order. The waitress hustles back to a kitchen full of chefs that are partially visible through a partition from the dining area.
It might be about 20 or 30 minutes, but in the meantime, you approach the bar where the bartender serves you a whiskey. They have already prepared the ingredients for your meal hours before your arrival. They cook and assemble the relevant parts to present your order. But sure enough, the waitress approaches with your meals and tends to your refreshments throughout the evening.
Hours go by as you’re having a good time with your significant others(s). Before the night ends, you call for dessert to sweeten the tooth before finally settling your balance and calling it a night.
When only 8–15 people arrive during the waitress’s shift, this might be doable, albeit lacking quality service. But what if the restaurant remained at maximum capacity and the waitress alone was to perform all these tasks. One person can only do so much alone.
The waitress needs a layer-2 (L2) solution.
Typically for our CCI Fundamental Analyses, we tend to cover ‘mainstream cryptos’ inner workings and lend unique insights that escape the reckonings of the most well-versed investors.
The idea is to give you a one-stop-shop to expand your thinking on the possibilities of the blockchain. By doing so, you can recognize the mechanics at play throughout your curious journey into the crypto-verse.
The goal has always been to empower you to take control of your investments by recognizing investment opportunities for yourself.
This time around, we have identified a project that we believe is one of the best-kept secrets in crypto up until this point.
Why do we believe this to be so?
Many corporations operate from an ivory tower with procedures and processes that don’t align with what is best practice for workers on the frontline.
The support staff in the restaurant all operate on different protocols. The chefs are busy with their tasks while the waitress is piling orders up for them. If one person comes in and tells them all to be doing the same thing, then such a decision is not made in the interest of fairness or efficiency.
Seeing as each workplace is different, there is no one-size-fits-all approach. Each entity needs to organize itself. Only the boots on the ground can determine what is most efficient for them, and they need a way to organize themselves. They also need to ensure there is never a situation where the waitress is left to perform everyone’s job by themselves.
The waitress needs support. Not only that, but it also requires organization. Enter Metis DAO.
Metis outperforms popular L2 optimistic rollouts, such as Arbitrum and Optimism, on just about every metric. The leader among L2’s, Polygon, has built an impressive ecosystem of Dapps, but they cannot deliver the ease of development and range of functionalities akin to Metis.
Libertarian dreams have leapt into reality through the implementation of decentralized autonomous companies (DAC). It takes the concept of decentralized autonomous organizations (DAO) to the next level. Empowering operations at every level of human organization, both public and private.
It gives access to anyone wishing to utilize the blockchain in their day-to-day, automate administrative processes and empower organizational activities. Communities form their own rules and parameters for decision making. The concept is highly inclusive toward giving everyone a say in a permissionless or controlled setting. Anyone can start a DAC.
In this piece, we will touch on the ongoing challenge of scalability. There are scores of different functions to explore. Still, in the interest of touching on what sets Metis apart, we will focus on L2 optimistic rollups and how they work, Ethereum Virtual Machine (EVM) equivalence, Interplanetary File Systems (IPFS), Polis Middleware, and DACs.
Given Metis is under the radar, we will briefly consider marketing, partnerships, capital backers, and team members. One of which will undoubtedly make you think that crypto is a ‘small world after all.’
MetisDAO Key Summary
For the people, by the people.
Ethereum, or the waitress assuming all operational roles, can be a bit of an awkward experience. You are excited to have a pleasant evening out on the town with your significant other(s), only to arrive at the restaurant to find the waitress swept off their feet. All thoughts toward customer experience go out the window. In these circumstances, it becomes a matter of survival for the waitress.
Ethereum needs a kitchen of chefs and many support staff to wait on and serve drinks to guests.
These operational demands are what prompt L2 solutions into play.
L2’s remove the burden of computation from the first layer. Typically, layer-1 would need to take all the orders, prepare the meal and serve drinks in between. With a second layer, we delegate time-intensive tasks to an off-chain computation layer.
If the waitress is layer 1 (L1), the kitchen full of chefs would be L2. They tirelessly prepare ingredients to anticipate customer demand to scale their output and efficiency. Once they have prepared a meal, they often hand it to the waitress to serve directly to the customer.
Once L2 has performed computations, transactions are aggregated and sent back to layer-1 as signatures.
Now, things may start to get complicated as we explore the different schools of L2 architecture. Many are looking toward adopting what is known as called ZK Snark rollups, another modality of rollups. They send proofs directly to L1 to validate the transaction in a much shorter time frame and remove the need for a challenge period with the provision of proofs. However, they are immensely complex and struggle to ‘play ball’ within Ethereum Virtual Machine (EVM) compatible environments.
Optimistic Rollouts, as the name suggests, are an “innocent until proven guilty” L2 architecture. Proofs are not sent directly to the first layer unless a validator on the second layer has identified a transaction out of sync with the ledger. Optimistic rollouts operate on an “honest watchtower assumption”. For this reason, validation time for the likes of Optimism can take one week. Arbitrum three days. Metis, however, can validate transactions in 3 hours as the validator network grows. We can expect orders of magnitude greater validation times, some say within minutes. As we see greater participation in Ranger nodes, once fully deployed and correct, we can expect withdrawal times from the network to drop to minutes. Within known capabilities of L2 rollup withdrawals, this is a big deal.
Once transactions are validated within the challenge period, they are sent to the first layer in batches as transaction data. This method enables L2s to leverage the security and immutability of the Ethereum chain.
Rangers on the Metis network can challenge the validity of transactions. If a challenge fails, the staker loses their bond. If bad actors get caught, they lose their bond as payment to the validators who identified the bad behaviour.
More Rangers validating transactions and mining rewards from the network leads to a higher volume of transactions per second and greater decentralization. The latter is a feature that should not be overlooked, L2s in general struggle with maximizing decentralization.
Now it all sounds well and good having multiple ventures all racing toward infinite scalability. But what sets Metis apart from the competition?
There are storage requirements for data utilized on the network as well as computation requirements. But what would happen if you separated the two?
You end up utilizing the likes of an interplanetary file system (IPFS). This enables the separation of data to be stored off-chain and transactional data sent back to L1 where it is immutable — it cannot be changed. What this facilitates are decentralized storage capabilities that add orders of magnitude of efficiency toward transaction computations. Storing data off-chain that are only accessible with a unique content identifier (CID) enables Decentralized Autonomous Companies (DACs) to add optional permissioned layers to limit access to sensitive information.
Not only do DACs have total control over their data, but they can pursue more complex formats as a result. If you have made it this far in the newsletter, you would have breezed through our Theta analysis that highlighted a core value proposition of their network involving the use of IPFS to store complex data sets. Given that Theta’s minimally viable product centres are solutions for decentralized storage and content delivery capabilities, we can see that Metis have pursued alternative IPFS mechanics to meet the same end. On Metis, users can create and safely store their NFTs, whether they be simple 2D or 3D images or data-intensive applications and videos.
A key feature of Metis is the implementation of Polis Middleware. To conduct business on-chain, it needs to be accessible and not allow complexity to be a barrier to adoption.
If we think back to the restaurant, Polis middleware could set regulations and processes for specific roles. It can integrate payment processors into applications, inventory management to ensure enough ingredients in the kitchen, payroll and invoicing functions. Payroll management through Polis could facilitate remuneration with each checkpoint complete for however long they remain on shift. Instead of being paid by the week, you could be paid with each confirmation.
Middleware is attractive to developers too. Not everyone knows Solidity. A front-end web designer with no blockchain experience could jump onto Polis and access smart contract templates to build the backend to their ecosystems with next to no code required.
We can tear apart many nuts and bolts on Metis, but the final one that deserves mention is EVM Equivalence. To understand this concept, we must first understand what the Ethereum Virtual Machine (EVM) is. Consider the device you are using to read this right now. You either had to boot up your Android, IOS, Mac, Windows, or Linux operating system. The EVM is like an operating system running on a global computer powered by individual nodes in the network. Applications that you load in a runtime environment are L1 and L2 blockchains that are EVM compatible. They offer different functions and utilities, but all conform to the operating system’s rules or EVM standards. At the time, this was a stroke of genius and changed how we interact and utilize smart contracts.
Virtual machines gave us the gift of DeFi and NFTs. However, it also demanded a particular coding language to deploy a Dapp into the virtual machine, most likely Solidity. These bottlenecks of developer capabilities present issues for non-EVM compatible blockchains that utilize alternative languages such as Rust for Solana or modified C/C++ for Terra. Interoperability, or the ability to transact between blockchains, is a significant problem that is a key focus of development in cryptocurrencies.
EVM Equivalence works by aggregating blocks from the L1 target chain. Rather than developing a cross-chain capability that is compatible with the rules of the target virtual machine, it makes copies of blocks from the target chain and aggregates those transactions to settle on the target chain. At this point, L2 generates blocks that have the exact format of the L1 block. Once computations are complete on Metis L2, they are aggregated and sent back to the original L1 blockchain to store on-chain. Metis achieves this by running multiple sequencers to adapt to the states of other networks and trigger changes in a target EVM.
As of 24/11/2021:
Market Cap $140,332,503
24 Hour Trading Vol $6,837,804
Circulating Supply 1,446,393
Total Supply 4,930,000
Max Supply 10,000,000
“Founding Team: 7%, MetisLab Foundation: 4%, Advisors: 1.5%, Angel Investors: 1%, Seed Investors: 6%, Private Investors: 7%, Strategic Investors: 1.5%, Community Star: 3%, Gate.io IEO: 0.1%, Paid Network IDO: 0.2%, Airdrop: 6%, Liquidity Reserve: 6%, Community Development: 9% (6% over the first year post Token Generation Event)
The remaining 47.7 % will be minted over ten years following Metis’ mainnet launch.” — Messari
“The remaining 47.7% of the supply will be minted over ten years to support the protocol’s transaction mining program. About 31% of this total (1,486,400) will be released in the first year following Metis’ mainnet launch. The remaining 69% will be emitted over the course of the following nine years.” — Messari
A logical progression of scalability and governance — Discussion
Through EVM compatibility, L1 and L2 blockchains have capitalized on the untenable costs and transaction speeds that weigh down the average user. But having so many different blockchains to stake on often leads to fragmented liquidity. Ethereum, by and large, has not been threatened by the TVL of other chains. Primarily wealthy investors can absorb $100 fees for a simple token swap. It gives them exclusive access over regular users that cannot afford to participate on the network. As investors have picked up their balls to play somewhere that’s more efficient and cheaper, it is not always the case that new liquidity enters the ecosystem.
Originality is rarely spontaneous. Metis is inspired. By forking Optimism’s L2 architecture and EVM equivalents, Metis has made some significant modifications that address the shortcomings of Optimism, specifically decentralization. L2s are known for their excessive centralization, meaning that developers can pause the network and make upgrades. L1s are no different, Solana appears to be capturing a lot of TVL in their ecosystem, but since CCI covered them in our previous newsletter, there has been another outage. The team had to intervene to fix the bug.
At the risk of oversimplifying Metis’s unique selling proposition, we have only peeled off several layers to its inherent complexity. But one sure thing is that there are unique elements to Metis’s design that can potentially create the infrastructure for businesses and organizations to adopt blockchain technology. Not strictly as an investment vehicle (although DACs can very much be utilized as an investment fund) but as a means of streamlining business processes leading to more efficient real-world outcomes.
The idea goes much further than that. The cryptocurrency space moves so quickly that you don’t have to look far to find inspiration once you understand it. Recently, a DAO crowdfunded to place a $43M bid for a copy of the US Constitution.
Billionaire CEO of Citadel, Ken Griffin, decided it prudent to outbid the sum of 17,000 peoples donations by a small relative margin of $200,000 to deprive the people of an opportunity to unite behind shared ownership of a universally admired set of inalienable rights. While I would be in the camp that would view such an act as calculated, the dream has ignited and raised the bar of what is possible for decentralized communities of people.
When you ponder these events in the context of DACs, you may have the passing thought that if sovereign governance could go decentralized, Metis could either provide the foundations for self-governance or at the very least a proof of concept that such things are possible.
Let’s touch on the trends in TVL for Optimistic Rollup L2s. For the most part, Optimistic Rollups have not received a great deal of attention. Optimism’s integration with Uniswap certainly provided an edge, but these propositions have largely gone unnoticed..
“As of January 1, only $48.2 million was locked in all Ethereum L2 solutions. However, as of November 21, the cumulative value locked in L2 solutions now stands at $6.13 billion — its highest ever.” — DailyCoin.
According to this analysis, TVL in L2 solutions has grown by 127x. From relative obscurity to a parabolic rise of TVL, it appears that Metis has chosen the right time to enter the fray. At this stage of Metis’s life cycle, it seems that the marketing machine has yet to be fully engaged. Social metrics from Lunarcrush indicates the bulk of campaigning is centred around Twitter and maintaining a presence, but we have yet to see Metis gain traction in the crypto mainstream.
While this may concern some, the team appear to recognize the importance of laying the groundwork for an organic network effect. Token price is one thing, but it is nothing short of speculation without utility or incentive to hold it. Hype is challenging to sustain from a marketing perspective if you lack products to back it.
The idea is to develop DApps in their ecosystem to attract existing communities to conduct their business and provide that organic exposure. If it sounds apologetic for making that assertion, we need to recognize that an ecosystem investment fund of $100M is not a small sum of money to fund development. It is a signal of intent. Metis hack-a-thon is still ongoing until December 30th. It may be wishful thinking, but we can look forward to what the Metis ecosystem will look like at the start of 2022.
In the meantime, the team continue to hone their skills. It is not often you enter a telegram group to be greeted by highly knowledgeable mods and admins hungry to answer questions related to their product. They appear very proud of it. Even the CMO makes regular appearances and has shown a depth of knowledge about the product that many who transition from traditional marketing into crypto fail to grasp.
Metis also continues to form partnerships. Today alone, there have been three new partnerships announced on their Twitter channels with Eigen (end-to-end privacy securing smart contracts), NFTReborn (NFT Platform built with decentralized AI) and Stobox (Enabling business to utilize blockchain tech). The partnerships are coming in thick and fast.
But before we depart the subject of the team, I will place my speculative cap by taking a moment to talk about the 27-year-old billionaire genius, Vitalik Buterin, co-founder of the 2nd largest crypto by market cap Ethereum. Vitalik was raised by two incredibly tech-savvy individuals, of which you would struggle to argue that Ethereum would not have realized the success it has today had the apple not fallen far from the tree. His father, Dmitry Buterin, studied software development at a young age when he met Vitalik’s mother, Natalia Ameline, who began her career following completion of a master’s in computer science. Both parents have forged their paths in the blockchain community and broader tech world. It appears Vitalik gets along famously with the pair of them.
So, when it comes to Metis, it is of particular interest that Vitalik’s mother would be the lead researcher on a project that isn’t simply a run-of-the-mill layer 2. Natalia, by all indications, has a wealth of experience and passion. Being passionately immersed in tech development for over 20 years is an achievement in itself. You could be a cynic and presume mum is simply cleaning up her son’s scalability mess or that mum wants to make his dream of a decentralized and inclusive infrastructure a reality. While the speculative cap is still on, it is worth noting that his parents grew up in the Soviet Union. They understand the horrors of utopian ideologies of self-determination and governance twisted to the benefit of a ruling oligarchy. Indeed there is a better way to bring power to the people, which is an idea that would not be foreign to those living under such a regime. DACs are the logical next step to achieve just that.
As you can see above (for whatever reason, this is not readily accessible footage), in a Zoom call to celebrate the commencement of the third day of the CryptoChicks hackathon in 2020, Vitalik has made an appearance on a call with the team. Whether it was simply to join in on a brief dance session, it seems, at the very least, Vitalik is keeping an eye on Metis. Also on this call is Dr Ben Goertzel, CEO of Singularity Net, a decentralized AI-based platform, who is also a notable figure on this call. He is no small fish in the crypto space and is potentially one of the most intelligent and forward-thinking futurists you’ll have the pleasure of listening to.
While you may feel waves of “bullishness” from Vitalik’s potential involvement. Remember what drives him. Decentralization. Whether or not Vitalik is involved will only be a notion in speculation — and that’s the point.
When performing fundamental analysis, or making any kind of investment decision, if something seems too good to be true — you pick it apart ruthlessly and dissect it until you find a bearish scenario.
I understand the following is a big statement to compare Metis to a fundamentally strong project with a huge presence and following. But to simply imply that Metis is undervalued does not do it justice. Metis enables the blockchain to meet the real-world seamlessly, and participants are none the wiser. But Metis has more significant real-world implications than Polygon.
Yes, they have a larger ecosystem of DApps and are attractive to Solidity developers.
Yes, they have the highest TVL for any layer-2 blockchain with twice the activity as the nearest competitor Arbitrum.
By design, Polygon struggles to align with the fundamental essence of blockchain — helping users realize freedom through decentralization. Metis is the most efficient approximation of this mantra to date and goes a step further by giving people the tools to break away from centralization not only on the blockchain but in the way humans organize and collaborate in the real world.
Factoring in all discussed so far. It is difficult to see the downside of Metis. It is difficult to make such lucrative assertions and remain balanced — but it is more difficult not to be bullish on the prospects of this tech and the minds behind it. Metis has a market cap of only $150M. If we were to be brazen and look toward the best performing L2, Polygon, they reached an all-time high market cap just shy of $15B. If Metis were to gain traction to rival Polygon’s current market cap, a $97 token would be worth more than $8000. Nearly 100x. If Metis reached Polygon’s all-time-high market cap, that is over $10,500 per token, more than 100x.
What might prevent Metis from getting there?
The psychological deterrent for new investors is using the price to indicate how much gas is in the tank rather than the market cap.
It is safe to say most investors don’t know or care about the implications of running multiple sequencers to distribute workflow and ease computational burdens. For the most part, they just want to know where everyone is putting their money so they can experience the dopamine high that comes with seeing your investment double the next day — even if you’ve invested in something as fundamentally useless as Dogecoin.
That Metis cannot break into the mainstream psyche, which seems unlikely as they continue to create awareness in new communities they partner with daily at the current pace.
Whether Metis fails or experiences a critical error — no one can ever exclude the possibility of this outcome in the Crypto wild west.
If L2s, particularly Optimistic Rollouts, has reached a pinnacle of adoption — the TVL is up trending and does not currently indicate this to be the case. In less than a week since Andromeda mainnet launched, nearly $31M of Metis is locked on the mainnet. That is not a staggering sum, but remember, the marketing machine has yet to be fully engaged.
Arbitrum has $2.36B in assets locked onto their protocol. The most likely achievement in the short-term and assuming all goes well is that Metis can capture as much liquidity in their token as Arbitrum has locked in their entire ecosystem. That would be around $1600 per token, or 16x.
Apart from early seed investors taking profits, it is difficult to argue a downside scenario for Metis.
As always, I encourage you to be vigilant. The upside potential of Metis cannot and should not be dismissed, but in life, there are no certainties — only probabilities. That said, you would likely get a return on investment, but not only that — you could be a part of an ecosystem that has set the stage to reshape human organization and challenge organizational mechanics at a foundational level.
Medium EVM Equivalence vs. EVM Compatibility — https://metisdao.medium.com/evm-equivalence-vs-evm-compatibility-199bd66f455d
Metis Blockchain Layer 2 Solutions — https://www.metis.io/2019-blockchain-layer-2-solution-review/
Metis DAO: The operating system of communities — https://www.metis.io/daos-the-operating-system-of-communities/
Metis Learning Hub (several learning resources) — https://www.metis.io/learning-hub/
Metis Website — https://www.metis.io/
Messari Fundamental Analysis- https://messari.io/article/optimistic-about-metis
Youtube, Vitalik Buterin: Ethereum 2.0 | Lex Fridman Podcast #188, From 1:11:00 Scaling: Rollups — https://youtu.be/XW0QZmtbjvs?t=4267
Youtube, Ethereum Layer 2 Solutions Compared! Metis vs Arbitrum vs Optimism! — https://www.youtube.com/watch?v=0rpHNK3KxnE
The Total Value Locked (TVL) Locked in Ethereum Layer 2 Solutions Hits New All-Time High: https://allcryptoin.com/2021/11/the-total-value-locked-tvl-locked-in-ethereum-layer-2-solutions-hits-new-all-time-high-by-dailycoin/