Mettalex is the groundbreaking Fetch.ai powered decentralized derivatives exchange (DEX). It will enable commodity market instruments to trade in tokenized forms and enable the buyback of FET. You can learn more about it in this interview: https://www.youtube.com/watch?v=OZy5vD8dgAo

Mettalex is the first real-world commercial deployment powered by Fetch.ai. The launch of the platform will increase the utility and demand for the FET tokens. More details will be published soon, but in this case of the  commodities derivatives exchange, MTLX governance tokens will have to be locked up  in order to vote on creating new markets.  Initially MTLX tokens will be allocated to FET holders locking up FET in a staking contract.

Some fraction of the exchange fees and autonomous market maker spreads is used to buy back MTLX governance tokens. 

The open beta release phase of Mettalex, with video walkthroughs and interactive demos will take place in early Q4. Whilst the precise list of commodities that will be on the exchange initially is yet to be finalized, it is highly likely to include Copper, Aluminium, Steel, Zinc and Iron.

The MTLX token genesis distribution will take place on Tuesday 8th September. FET token holders will be able to stake FET for 21 days to receive a share of the 1 million MTLX to be distributed during the genesis period.

How to receive MTLX governance tokens:

1.  FET holders will be able to stake the tokens from the 8th of September up to 10th of September at staking.mettalex.com
2. On 10th September at 6pm UTC the staked FET will be locked for 21 days and during this period no FET can be withdrawn
3. During the staked period MTLX tokens earned can be withdrawn but not the FET
4. On 1st October the FET tokens will be unlocked.
5. In October v1 of MTLX liquidity pools and community testing phase will be announced

The main objective is to provide access to risk management tools to a large audience of physical commodity traders. These users currently only have access to risk management tools via financial market intermediaries who charge high spreads and have limited liquidity. Mettalex will change that.

Additionally, the platform will provide speculators access to markets in thinly traded commodities, and to provide liquidity providers an income for providing liquidity.

As we discussed in our recent article “Decentralized Finance in Commodities Markets”, the opportunities of DeFi to revolutionize the financial system are great, but thus far these opportunities are limited to digital assets.

For a scale comparison, the total value locked in DeFi ventures today is around $6.5 billion. In contrast, the size of the global commodities market is hard to measure accurately, but could be up to $20 trillion annually.

The race to plug off-chain assets such as physical goods to on-chain finance is at the crux of what will enable the next generation of DeFi applications.

We are building a solution that can bridge that gap, to create real world DeFi, with physical assets on top of a trustless infrastructure, starting with the metals sector.

The current problems in commodity trading are mainly to do with liquidity (where you need to create a marketplace), and the barrier to entry into existing platforms is very high.

These problems are solvable with the unique approach Fetch.ai is bringing to the market – in this specific case, we are talking about Combinatorial Auctions and Smart Markets which are deployable within the Fetch.ai Smart Contracts.

Mettalex will also unlock new funding models for supply chain participants by allowing them to collateralize their material and production capacity, which will enable full realization of the value of the underlying commodity they are holding.

While the commodities trading market has struggled to adapt to the blockchain model mainly due to the absence of autonomous monitoring and fraud detection, the Fetch.ai platform with its ML / AI framework will also help solve these issues.

You may find this video of CEO Humayun Sheikh discussing Mettalex useful: https://youtu.be/OZy5vD8dgAo 

Whilst we’ve yet to reveal the precise details, it is expected that Mettalex will be an application running on the Fetch.ai Mainnet version 2 – i.e., powered by Fetch.ai.  The IBC protocol will enable Eth-based token transfers to be used as collateral in Mettalex. Holders of these tokens will provide liquidity to the exchange.

The initial release of the Mettalex exchange uses existing DeFi building blocks from the Ethererum ecosystem and some centralized components. This provides an entry point for commodity and crypto market participants to the system to allow iteration on requirements.  

The roadmap for increasing use of Fetch.ai technology in the system includes:

• Replacing the centralized exchange with a decentralized exchange using the Fetch.ai ledger for high transaction rates (c.f. Eth level 2 scaling).
• Fetch.ai agents and collective learning acting as index providers e.g. monitoring process metrics throughout supply chains to create spread tokens for supply chain optimization.
• Autonomous market makers running on Fetch.ai ledger for increased capability.
• Fetch.ai interoperability technology will enable these use cases e.g. stablecoin pegging with the Ethereum network to enable the transactions in DEX and AMM use cases.

Ferrometrics, Bastug Metallurgy and Javelin Global Commodities are just three of the companies currently involved with Mettalex.

Initial distribution to FET stakers: 1M (2.5% of total) over 21 days, 1M reserve for further FET staking in intervals of 500k, 350k, then 150k tokens.

• Total blocks in first reward phase: 120,960
• MTLX token drip rate per block: ≈8.2
• Distribution rate: Linear
• Tokens accepted for staking: FET
• Restricted jurisdictions: US and OFAC
• Maximum supply (Hard Cap) for circulation: 40M MTLX Tokens
• Token supply to liquidity providers: 35M MTLX Tokens (87.5% of total) over 4 years (8,409,600 blocks) (≈4.1 drip rate per block)
• Token supply to stakeholders and partners: 2M MTLX Tokens (5% of total) released over 1 year
• Team: 1M (2.5%) released over 3 years

For the first year token distribution is limited to the following:
After 3 months: ≈3.08%
6 months: ≈7%
1 year: ≈13%
2 years: ≈25.15%

The MTLX governance tokens (MTLX) will be used as follows:

• to vote on system parameters such as choice of autonomous market makers to back with liquidity from the liquidity pool
• vote on the creation of new markets
• the usage of exchange fees
• the percentage of the spread going to the pool
• the buyback and borrowing rates from the liquidity pool

The Mettalex decentralized exchange will also use a fraction of the exchange fees earned on the platform, to algorithmically buy MTLX tokens back from the market.

Governance tokens are minted at a linear rate to incentivize early liquidity providers in the system. As the total liquidity in the pool increases, liquidity mining will become more difficult.

FET plays an integral role in the Mettalex system, in a number of ways

• The decentralized exchange will use the Fetch.ai ledger for high transaction throughput
• Fetch.ai agents and collective learning acting as index providers e.g. monitoring process metrics throughout supply chain to create spread tokens for supply chain optimization
• The Autonomous Market Maker (AMM) runs on the Fetch.ai virtual machine for increased mathematical processing capability

Minted MTLX tokens will be distributed in proportion to the amount of liquidity supplied to the system at each block.

During network usage, a fraction of the exchange fees and autonomous market maker spreads are used to buy back a portion of the MTLX tokens.

• A decentralized exchange layer where traders can take long and short positions against a range of reference assets, commodities and crypto derivates
• A tokenisation layer that provides tokens representing the long and short positions, together with autonomous market makers linked to the reference assets
• A liquidity provision layer where lenders can supply liquidity to the automated market makers in return for a proportion of the market making spreads
• A governance layer that rewards liquidity providers with governance tokens in proportion to the amount and duration of liquidity they supply to the system

The decentralized exchange integrates a reference price feed for settlement and pricing of commodity tokens. These tokens represent derivatives of those commodities. Traders in the commodity tokens will be able to open and close positions using stablecoin collateral by trading against other participants or automated market makers. They will also be able to provide liquidity by using the Mettalex contract to mint token pairs, or use it to redeem a paired position in long and short tokens to reclaim the backing collateral.

Each commodity token pair has an associated autonomous market maker that allows market participants to exit a position at any point without having to find a counterparty on the exchange.

The autonomous market maker uses a liquidity sensitive algorithm with bounded loss to manage market risk. The AMM architecture also allows plugging in different AMM strategies. This is something MTLX holders can vote on (c.f. yearn).

The liquidity pool is a decoupled provider of collateral to the autonomous market makers. Liquidity providers receive an aggregated return from all commodity market maker fees and spreads in exchange for providing collateral that the market makers can use to mint position tokens. In addition liquidity providers receive a pro-rata distribution of MTLX governance tokens based on the amount and duration of their participation in the liquidity pool. The MTLX tokens holders would also receive a portion of the fess and spreads.