J3 FA 09 Jenna Zenk Melonport

hello my name is Jenna and I am a developer at melon part man part is the private company based in Switzerland that develops the melon protocol which is an open-source project so the goal for today is for me to give you an update of where we are it's a project that is already two years old so yeah we wanted to give an update or on where we are and where we're going for the next 12 months so I'm just going to start by presenting melon briefly for those who are not familiar with it so before I starting just maybe setting up the scene of which problem we're trying to solve what what is it that we're trying to do so the asset management industry is an 84 trillion dollars industry that has yet to be transformed it is extremely inefficient expensive time and energy consuming if you want to set up a fund today or to run your own hedge fund investment fund whatever it can cost you tremendous amount of money it's extremely cumbersome because the processes are cumbersome and the reason for that is that this industry runs on extremely outdated technology so it's one of the very few industry that hasn't been really digitized so that's one thing and the second thing is that we have two very important beliefs the first one is that crypto is a new asset class that means that we think that institutional fund managers will want in a very near future to include crypto and their portfolio and the second belief is a little bit more long term but we strongly believe that all the assets that we know today stocks bonds whatever will be tokenized so we'll be proud to the blockchain under a digital form so knowing this we thought the current infrastructure of asset management is not ready and is not able to handle this kind of new asset management so we don't have the tools to properly and efficiently run investment funds enter melon soo melon is a decentralized asset management system it's the melon protocol is a set of smart contracts that allows anyone to set up a fund and to manage a fun to have investors etc etc another way to put it is that the melon protocol is a set of rules that are coded into smart contracts and those rules determine how digital assets can be spent once they are held in to a melon fund and those rules are meant to protect the investor and the fund manager from each other's potential malicious behavior so we like to call our our funds technology regulated funds technology regulated investment funds basically you can see it as what Bitcoin did for accounting Mellon is doing for asset management so I'm not sure if we can see properly I can't from here but this is just to show you a little bit how the melon protocol looks in a somewhat simplified version so if I can yeah so in the center you have the melon fund which is like the core it's a standardized smart contract that that contains all the rules and internal accounting of your fund and to that you plug in a suite of modules and can you read what is written here or not at all no okay I'm just gonna say it because I don't know what why it's like that it shouldn't be so so you have three modules that you plug into your phone and that basically allows you to create your fund in a tailored way to your needs so you have the compliance module which which basically determines who can and cannot invest in your fund you can have an open-ended fun you can have a closed-ended fund you can whitelist addresses etc etc then you have in the middle the price feed modules so the pricing module is it's basically you have a price with provider it it gives prices that are put on the blockchain and then those prices are used to calculate the value of your fund the value after after assets of your share price and the last module is the risk management module so basically that's the module that you know restrict the behavior of the fund manager and kind of stays where the manager can do or cannot do when example is for instance there is something very common in traditional asset management you can't have more than 5% of your AUM invested in the same asset so that's a rule that's a very simple rule what we do is that we code it into a smart contracts there are many rules that can be coded into a risk management so that's why it's a module so that we can build it in a modular way and then finally your fund obviously is integrated with some exchanges that you can trade your assets so it can be integrated with decentralized exchanges right now in the future we want to be able to interact with centralized exchanges but still keeping the whole protocol decentralized so that's a challenge for for the next few months right now we're using the the exchange as decks that was developed by to make her make her Dowell team okay so that that's our stack so on the top you have our smart contract which is our back-end that runs on the etherium virtual machine then the middle you have a JavaScript interface JavaScript library kind of basic it's just like a more intuitive and friendly way for developers to interact with our smart contracts and then at the bottom you have our front-end which is the user interface from which most of the people would access Mellon it is deployed on ipfs and also as a parity tab so you can find it in the parity browser so this stack as you can see is completely decentralized so I really want to emphasize the fact that everything that we do we aim for the maximum amount of decentralization that allows us to you know offer an open-source software that is reliable permissionless and ownerless so we don't really own it it's it's kind of like it intended to be more of a public goods so we have been running on the test net on the covent test net for a few months and last week we launched and deploy our smart contracts to the main net so we wanted to kind of like share our experience with you like we learned some lessons it's a try so we're gonna we're gonna do that now so before till I can't see properly before launching to the main that we wanted to do a last kind of stress test kind of battle battle test the back end and the front end in in a realistic environment so we we ran a competition of fund managers and that was extremely an extremely valuable experience because we had over 700 people creating funds so for us it was a good way to you know to see what was wrong what needed to be fixed or changed and yeah the top hundred of the best fund managers have shared the pool price of five hundred fifty melons so so it was a funny way to you know engage people and have users etc the funny thing is that some some students um like it's eight years old from school in Ireland participated in the competition and actually two of them managed to be in the top hundred so that's to say it's not that hard to use a decentralized application it's possible yes so after that literally one week after this competition we launched to the main net so the full set of smart contracts is deployed the front end is deployed so that means that anyone can right now create a decentralized fund on the theorem duct chain but what I want to show here is that we deployed our own fund run by melon port and you can't see it here but you would see in the AUM so the assets under management we put 500 melon and the the gopher is that for that is that we want people to try to hack our smart contracts and to try to extract those 500 melon out of the contract we made the public claim that if anyone can is able to extract those 500 melon using exclusively technical means they will rightfully be entitled to keeping them so again there are some savvy people in this room so please try to hike us that would be great I mean to try so so yeah a couple of lessons learned what what went right went when less right on the backhand side on the smart contract so we had like three intense independent audits prior to knowledge so we were very well prepared we made many changes design changes architectural changes etc so the the deployment on the main net was fairly smooth from from this side although one silly thing that we really didn't consider and it was like kind of last minute one of our contract is super long so just as an advice check that your contract size will be will be deployable on the mainland because there is actually a limit to the size so that's something that happened to us we had to kind of like remove some things so it's not ideal but that's what happened that was a detail but one thing that was actually more important in terms of lessons that we learned the price with module so first of all it's extremely inefficient and expensive to run a price feed and the main nets we operate we update the price feed meaning that we put new prices onto the blockchain every hour and for two weeks of doing that it costs us about three thousand dollars so it is not it's not sustainable it's not something that can be even just like having new prices once per hour it's not acceptable for fund managers so we realized that I mean we already kind of knew that but it was really you really care after the main that deployment and the price feed is is actually a very security critical part of what we're doing actually we had an experience that the price provider so we had we have several price module we have our clothes we have Thomson Reuters who built a price with module also for us and if one of our price providers provided like wrong prices for a Dutch coin at some point it was like her price almost I mean very close to zero and that that had some implications because we were making markets and we're taking the price from this price provider so we actually ended up sending some assets for almost zero which allowed people to it was on test net so it was still okay but still so that allowed people to like go up in the ranking by far so it was a mistake from that we didn't see coming but now we we learned we learned this lesson so price feed is it is a big subject Orica is I mean Oracle's and the blockchain etc so on the front-end side the challenge was to build something an application that is fully decentralized so that no server no database to you know to like kind of help the front-end needs to be secure because we're gonna potentially people are gonna manage high values assets in to mellon funds and to be usable also as you know the UX in the blockchain world is not it's not great we can do much better so so it was very very challenging for us what was good is that we found super easy deploying a decentralized application it can sound counterintuitive but it takes a lot of a lot of time to put together its centralized application but once it's done the deployment is so easy because you're not responsible for anything you just push your code to ipfs and then that's it you don't have a server to maintain you don't have a database you don't have to fear server downtime any nothing like that so for front-end developers it's really convenient and also we we managed to get to a point where we have what we like to call a truly adaptive dab so basically you access our protocol from the same address Mellon that fund and the the application knows in which context it's being accessed and therefore serves you the what we consider as best so if you're trying to access from your phone or from your computer but you don't have any theorem node running you will be directly served the covent test net version because we don't want people to be able to you know play with value without a secure environment but if you're on your computer and you actually run a main net node then you will be able to access the main net version and create an actual fund and invest in it with real real value and on the downside yeah from a user perspective it requires a highly secure environment if you want to be on the main net so it kind of requires like an extra effort from the user part to spin up a parity node sync it on the main net it can take it can take some time so that's a downside but we we can't sacrifice security for that otherwise yeah because the front-end is fully decentralized we make like an enormous amount of RPC calls to node and it's really crazy but that's the only way so far that we have to kind of like bring all the information and there is a lot of information to bring to a fund manager but still I mean we're trying to improve that kind of like try to reduce the number of calls made but it's still not not optimal and of course being fully decentralized the experience it can be slow sometimes but if you have your own your local node it's usually it's it's fairly decent yeah this Android application will always be slower than then something that were used in like the web 2.0 so in light of the those lessons that we've learned these are some changes that we're bringing to our smart contracts right I mean we're in the process of doing that right now so we are deprecating the idea of having the price field as a module because it's too much of a security critical parts so melon part will implement the price feed the standardized price field and it will be operated by by the community so that's one important change then we are opening up the invest regime to any ERC 20 tokens so so far you could invest in a fund using the melon token or ether and right now I mean from the next iteration on you will be able to invest in a fund in any ERC 20 tokens so that's really interesting you could denominator fund with day for instance if you want to be you know to have like your performance calculated against something that is more stable and lastly we're introducing a governance fee which I'll I'll talk a little bit more a little bit later so what's next now that we are on the main nets many things there are many iterations to come improvements etc but I just want to come back and again I don't think we can see very much but that was our roadmap a little bit over a year ago so the melon project was actually meant to be completed in three phases the first phase was everything that happened between before the token sales would be for February of last year and the second phase was actually moving from a proof of concept to deploying the old the protocol to the to the main net being audited launching a bug bounty program and having a UI so we can now say that we've successfully completed the phase two of the project and we're now starting the phase three so phase three is it's gonna be the main focus for 2018 and it's about designing a governance system and at the end deploying the final version by melon ports and then just handing over the you know the maintenance of the protocol and everything to the community so to the token holders so the goal is to make it self sustainable and autonomous so that melon port as a private company can step down from the control of of the project so that's what we're gonna be doing one thing that has changed also since since this format one year ago so the melon token was supposed to have some inflation around 10% reward for module building and module development but the fact is that a year ago we had like maybe I think it was five or six different modules that developers could build and after a year of development we actually come down now to to compliance and risk management we just removed also the price fees so now there are only two modules so the compliance we found is actually going to be very straightforward and there are not too many you know different implementations to do there there are new standards as such as the USC 7:25 talking to managers identity these kind of things so we don't think that it's necessary to really incentivize development there and risk management is is it still a magical category where we can do many things so man part will develop implement a full suite of risk management modules but we won't incentivize development from third party which doesn't mean that people can't build their own module they can but they just won't be rewarded by melon parts because we deem that we're going to be shipping something that is complete enough that it doesn't need to to incentivize like much more development around so so we started thinking about governance a little bit I mean that's gonna be a long a long 12 months ahead to kind of sort out a governance and something that is fully autonomous but these are our first thoughts I would say so obviously the token holders can submit proposals improving proposals for for the protocol the token holders can elect a technical council who is going to be responsible for operating the price feed which is a security feature since the price feed is secretly critical we think that it should be operated by the people who have a high stake in in the ecosystem and obviously the technical council will be maintaining the protocol upgrading the contracts when an accesory etc in return for electing this technical council the token holders will be rewarded for their governance efforts and they will share all the governance fees that are going to be paid by the funds by all the funds existing so the reward is gonna be for active token holders meaning we haven't defined actually what an active talk and holder means but it really means someone who is involved in at least devoting that happen there so yeah right now can what can you do really with melon on a theorem at the moment there are things that you can do there are things that would be a little bit more complicated but for instance you can you could right now run a fund managed by a trading but so there is the JavaScript library for anyone to build but we actually build one you can plug it into the fun and just run it so you can just actually run a fund without doing anything that's really cool you can manage your crypto fund already with an e rc 20 long strategy you can there are like new stable coins like diet where you could where you can maybe not hedge but at least you know some stability also and you could manage a pension fund a mutual fund just any fund that does not require to do high-frequency trading because as you know if your MS not ready for that yet but it's it's on the way so as soon as if the arms is able to handle more traffic you can really run any fund on on melon and on our side we're also looking into optimization path one of them is the development or at least the research around the melon chain which would be a domain-specific chain for asset management where things would be extremely cheaper and also extremely I mean much faster and that would be integrated within the polka dot environment so yes we're coming to the end for the people who would like to get involved there are many way if you're a dev we are always hiring you can try to hack the backgrounds you found we organized a hackathon in May and for everyone I mean anyone can try to set up a fun on the test net on the main net or participate in competitors will be running many competitors there'll be like many prices to to win thank you [Applause] I can take questions if there are any thank you and I presume the French the Miller defend both phones are considered by regulators as security it is unclear so far how what would be the classification I mean there has not been any any official claim about that but yes I would expect that a fund itself would be a security just too too precise we are building the software we're really not dealing with the whole regulation thing we have a separate entity which is called meme' it's a trade association for asset management on blockchain where we it's not only as it's many people from the ecosystem we're trying to you know convey a unified message to the regulator to kind of like push forward for favorable environments okay because if if it's security your investors will be subject to kyc and standard email processing would you would you give support to that for two asset manager so what we do is that we have this compliance module and it's exactly made intended to be used this way so it's a module that you can the fund manager will be able to do the KYC if you can picks and you can wisely provider that can whitelist the addresses that have been KY seeds so yes we design it in a way where it's possible to do the KYC but also in a way where it's possible to be completely open thank you thank you any more question thank you [Applause]