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Understanding MELD's Token Dynamics.
This guide aims to explain the functions, revenue structures, and novel concepts like the Stability Pool introduced by the MELD protocol.
The MELD token serves as the backbone of the MELD protocol, offering core functions such as transaction fee payments on the MELD blockchain (through gMELD), protocol governance, incentivization, and protocol insurance. The token holders are incentivized to hold a minimum balance to maximize their future earnings under the protocol.
With a fixed supply of 4 billion $MELD tokens and deflationary mechanisms, MELD also enables long-term value appreciation and robust lending utility. Staking provides an annual percentage yield (APY), and fee reductions further add to the token's allure.
The MELD protocol collects fees from various economic activities within the MELD ecosystem. The collected fees contribute to the MELD DAO treasury which get then distributed as seen below:
The revenue sources include:
- 0.9% of borrowing rate
- 0.10% of yield generated in yield boosting
- 70% of gas subscriptions
- 100% of block rewards for validator node run by MELD DAO MEV were possible
- 0.06% swapping fees 50% fiat liquidity fees for instant settlements
- 0.09% Flash loans origination fee
- 0.05% Onramp/Offramp fees
- 0.05% Minting of MELD Units
- % of NFT sales
- % of staking rewards from 3rd party staking
A unique feature of the MELD protocol is the Stability Pool. Designed to protect lenders and borrowers from unforeseen events like cascading liquidations, it provides an added layer of security to the protocol. Users deposit bonded assets paired with a percentage amount of MELD tokens into the Stability Pool. As a reward for the added risk, they receive a share of all fees collected on the protocol. The share ratio depends on the contribution made.
- 1.A user deposits 100k USD worth of BTC and 100k USD worth of MELD – they become entitled to 30% of protocol revenue.
- 2.A user deposits 100k USD worth of BTC and 50k USD worth of MELD – they become entitled to 15% of protocol revenue.
- 3.A user deposits 100k USD worth of BTC and 10k USD worth of MELD – they become entitled to 3% of protocol revenue.
Staking bonded assets into the Stability Pool has a 14-day withdrawal lockup time.