How Melon provides a solution
Melon is an open-source protocol which enables anyone to set up and manage a pooled asset vehicle on-chain, at a fraction of the cost of traditional funds. Melon automates the cumbersome back office and intermediary functions required in traditional finance using smart contracts. So, what does this mean?
- Using Melon, the fund set-up cost is < $50 and takes a few minutes - no more barriers to entry.
- Melon requires fund managers to define the key rules and parameters of the fund which are in turn deployed to the blockchain and enforced by smart contracts - no more need for fund administrators.
- All transactions are recorded (transparently and immutably) on the blockchain - no more need for complex auditing.
- All assets remain either in the custody of investors themselves and can be redeemed at any time - no more need for custodians.
- All data about fund performance is on-chain thus transparent, enabling investors and managers alike to compare fund allocation and performance. Transactions on the blockchain are near instantaneous, and unlike transactions in the traditional world which can take several days, do not require clearing and settlement services.
- By enabling investors to retain custody of their assets and enforcing fund parameters on the blockchain via smart contracts, Melon dramatically reduces the ability of fund managers to act fraudulently or malevolently.
- By automating so many back office and intermediary functions, Melon drastically cuts the operating cost of managing a fund - thereby enabling managers to pass on these savings to investors.
In short, Melon provides a platform for fund managers and investors to operate in a way which is secure, transparent, efficient and dramatically less costly. Ultimately, this will benefit the end user - investors like you and me.
How does Melon do this?
Melon is a fully decentralized asset management protocol which allows anyone to set up, manage and/or invest in a fund of digital assets in a secure, robust and permissionless manner. It enables asset managers to create their own customisable investment vehicles on Ethereum in a matter of minutes and without the need for back office or financial intermediaries.
The Melon protocol is a set of smart contracts, that each perform a specific functionality of an investment fund: accounting, investment/redemption, assets custody, trading, fee distribution etc. Once bundled together through a Hub contract, the set of smart contracts are able to work together to implement the behavior of the fund and to enforce the rules of that fund. These smart contracts set the parameters for the fund, enabling fund managers to make decisions about the investable asset universe, risk management rule-sets, management and performance fees, data feeds, permitted investors and which exchanges to use etc. This is opposed to being written in a legal fund prospectus and operated and controlled by back office and financial intermediaries. Investors are thereby assured that the pooled digital assets will be managed and administered exactly as specified in the set-up of the on-chain investment vehicle. Melon also enables investors to have a direct relationship with the investment fund which is typically prohibited in the traditional asset management world.
The whole process of setting up a Melon fund currently costs less than $50 (in Ethereum and Melon gas costs). And, once it’s up and running, the Melon Monitoring Tool will make it possible to view on-chain data easily and eventually extract reports over any historical time period which are typically required for investor and regulatory reporting. Melon automates the vast majority of fund administration tasks by replacing them with smart contracts, making it inexpensive and relatively straightforward to set up a fully audited, transparent and compliant fund on the blockchain.
Melon isn’t a wallet. It’s a platform for decentralised asset management. It performs the functions across the entire value-chain of an investment fund; back office, financial intermediaries (eg. custodian, fund administrator & transfer agent), and so on. Other features in the Melon system (trading, price feed, derivatives) are enabled by protocol-level integrations with other decentralized finance protocols. These protocol-level integrations make Melon unique. Melon is a protocol that natively and multilaterally connects-links-integrates DeFi protocols at a smart contract level. In doing so, the Melon protocol paves the way for a new form of asset management.