What is Enzyme Finance? (MLN)
The Beginner’s Guide
Enzyme Finance, previously named Melon Protocol, is a protocol built on Ethereum (ETH) that allows users to create, manage and invest in custom crypto asset management vehicles.
Enzyme aims to decentralize traditional asset management, a field that has historically been the domain of professional financial advisors and firms. The idea is the MLN cryptocurrency can lower the barriers to entry for asset management, opening access to more global consumers.
For example, managed funds typically require a minimum investment amount and management fees, which can put these wealth tools out of reach of average consumers. Further out of reach is their ability to create asset management funds, which today requires substantial capital and legal consultation. On top of this, it can take years to even file documents for a fund.
Enzyme aims to create an alternative system. Using the project’s web portal, users can invest in funds and portfolios launched by other users, and other users can invest in their creations. The Enzyme Finance protocol uses the MLN cryptocurrency to execute various operations on the platform.
Who created Enzyme Finance?
Enzyme Finance, formerly Melon, was built by Melonport, a private company founded in 2016 by Mona El Isa, a former Goldman Sachs vice president, and mathematician Rito Trinkler.
Between 2017 and 2018, 1,250,000 MLN coins were created and distributed by the company, based in Switzerland. Melonport raised $2.9 million through an initial coin offering (ICO) in 2017.
In 2019, after delivering the first version of the Enzyme Finance protocol, Melonport dissolved and passed its management to the Melon Council, a decentralized autonomous organization (DAO).
The Melon Council is now operated using a system of smart contracts that enable MLN users to invite new members, upgrade the protocol and change its parameters. It’s mission is to preserve the integrity of the network, maximize adoption and foster innovation within its ecosystem.
How does Enzyme Finance work?
Enzyme Finance is a collection of smart contracts whose computation is performed by the Ethereum blockchain.
Because of this design, fees for transactions are paid in ether. These fees cover the cost of using Ethereum’s computing power and Enzyme's software.
The Fund Layer
The Fund Layer is where users launch and control the funds other users can invest in.
Each fund contains two parts:
The Hub – The hub is considered the core part of the fund layer, as it provides all the necessary tools to set up a fund and tracks the components that make up the funds.
The Spokes – The Spokes use smart contracts to define the funds, which are created by each fund manager, and contribute specific services to the fund. Examples include the Vault, a component used for storing tokens on behalf of the funds, and Shares, a component that tracks fund ownership.
The Infrastructure Layer
The infrastructure layer is controlled by the Melon Council, Enzyme's DAO.
Some examples of infrastructure contracts include:
The ‘adapter’ contract – which links certain assets to price feeds for trading.
The ‘engine’ contract – which buys MLN for ETH to help pay for certain computations.
The ‘price source’ contract – which provides general information needed for actions within the funds.
Why does MLN have value?
The MLN cryptocurrency is used to execute fund operations and for voting on the protocol’s software policies, such as its inflation rate. Fund operations might include transaction costs or performance and management fees.
A total of 1,250,000 MLN coins were created and distributed during the contribution period, and each year, a fixed amount of 300,600 MLN are minted.
Notably, the protocol implements a buy-and-burn model in order to incentivize MLN’s use.
Since network fees are paid for in ETH, the DAO converts the collected ETH to MLN and burns the coins, effectively removing them from circulation.
This creates upward pressure on the price and may make MLN coins more valuable long term.
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Why should I use MLN?
Aspiring to bridge the gap between asset management companies and investors, Enzyme Finance is a novel experiment in applying cryptocurrency to traditional finance.
You may be interested in using Enzyme's technology if you want to build a fully audited and transparent fund on the blockchain.
You can also use Enzyme Finance to invest without knowing or trusting a fund manager to manage your money, as managers are bound by specified smart contracts on Enzyme.
Traders may want to add MLN coins to their portfolio if they believe investors will continue to use the platform and that it will come to play a greater role in crypto asset management.
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