Metis Research Report | The First Decentralized Sorter of Layer 2

Metis Research Report | The First Decentralized Layer 2 Sorter

Author: Riyuexiaochu, Core Member of Hu Zi Guan Coin Community, Source: X@riyuexiaochu

The first decentralized sorter in Layer 2, Metis takes the most important step

1 Basic Situation

1 In Layer 2, the role of the sorter is to organize, sort, and compress hundreds or thousands of transactions into one transaction, and then submit it to Layer 1 for confirmation. It can be said that it realizes the high performance and low transaction fees of Layer 2. However, if the important things are centralized, there is a risk of malicious behavior or single point of failure. It can be said that the decentralization of the Layer 2 sorter is imperative. Metis, on the other hand, took the lead and conducted tests on the decentralized PoS sorter on the 27th in the Holesky testnet, with community testing scheduled to begin on January 2nd.

2 Metis is a Layer 2 developed by Optimistic Rollup, launched on the mainnet in 21 and is the earliest Layer 2 network to go live with Rollup. It was upgraded in 24 to combine the Optimistic Rollup architecture with zero-knowledge proof zk, forming the Hybrid Rollup.

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3 Metis has a circulating market value of only 83 million and an FDV of 180 million US dollars. The quotas of institutions and teams have already been unlocked. According to on-chain wallet tracking, the institutional chips have long been sold, indicating that there are no more institutions. In comparison, OP and ARB still have a large amount of institutional and team chips to be unlocked, which is equivalent to a huge monthly increase in circulation. In terms of token functions, in addition to governance functions like OP and ARB, Metis is also used for gas fees in the network, as well as node staking (each node needs to stake at least more than 20,000), which brings real demand to Metis.

Official Website: https://www.metis.io/

Twitter: https://twitter.com/MetisDAO

Date: November 30, 2023

2 Project Introduction

Metis is an Ethereum Layer 2 scaling solution developed based on Optimistic Rollup, aiming to solve the three difficulties of blockchain:

1. Decentralization

2. Security

3. Scalability

The increased demand for Ethereum has led to skyrocketing transaction prices and lagging transaction speeds. As Ethereum’s Smart L2, Metis not only increases transaction speeds (rapid confirmation) but also increases throughput (processing a large number of transactions per second).

Most importantly, Metis is creating an accessible, affordable, and adaptive solution that allows anyone to use blockchain technology to build, operate, and grow any application, business, or community.

Hybrid Rollup

On March 2, 2023, MetisDAO announced that they are building the “first-ever hybrid Rollup,” combining the Optimistic Rollup architecture with zero-knowledge proof zk. According to the ChainCatcher report, on July 13th, the MetisDAO Foundation announced the official launch of its incubated project ZKM. ZKM is scheduled to go live on the testnet before the end of the year and upgrade the existing Optimistic Rollup to Hybrid Rollup, allowing for timely withdrawals (the original withdrawal period for OP was 7 days) while ensuring security.

It is reported that ZKM uses the MIPS instruction set to achieve zero-knowledge proof (ZKP) security for all virtual machines (VMs) and applications from the CPU level, and supports multiple blockchain smart contract engines. The plug-and-play feature allows developers to apply ZKP without changing the codebase, reducing adoption costs. With the decentralized security infrastructure of Ethereum, ZKM can verify all blockchain and non-blockchain transactions. The goal of this project is to go beyond L2 and expand into L1, cloud computing, and the IoT field, making Ethereum the settlement layer for the global blockchain and non-blockchain world.

3 Decentralized Sorter

For each layer2, users’ transaction data needs to be transferred to the mainnet ETH. In principle, users’ transaction data can be directly transmitted to layer1. However, if this is done, transactions on layer2 will be as expensive and slow as those on ETH. This obviously goes against the original intention of layer2. Therefore, the solution is a sorter, which compresses hundreds or thousands of transactions on layer2 into one transaction and submits it to the mainnet for packaging. This can greatly reduce transaction fees and confirmation time on Layer2.

The significance of Layer2 lies in improving ETH throughput and reducing transaction fees. It can be said that it is the sorter that has achieved this goal for layer2, and its importance is self-evident. The current actual situation is that the sorters for layer2 are centralized, basically operated by project parties, such as the OP Foundation and Arbitrum Foundation. So, the highly centralized sorter is a major concern, regardless of whether they will act maliciously. From a practical perspective, if a centralized sorter fails or is attacked, it can easily pose a threat to the entire layer2.

Although major layer2 solutions have plans to decentralize sorters in their roadmaps, the reality is that there have been no results for a long time. It may be because the priority is not that high, or it may be related to interests (bringing huge gas revenue to project parties every year). Therefore, every L2 scaling solution needs a decentralized sorter to enhance security and reduce risks. And Metis will soon be the first L2 to achieve this goal.

The decentralized PoS sorter of Metis is now running on the Holesky testnet, and it can be divided into three rounds, including simulating the behavior of real nodes, increasing the number of nodes, staking tests, etc. It will start on January 3, 2024, and open testing to the community. Users can interact with dApps in the Holesky testnet and receive rewards for one month.

Each sorter node requires a stake of 20,000 Metis, and of course, mining rewards will be generous as well. 50% of the total supply of Metis will be used for node rewards. For users who do not have enough funds to become a node, Metis will soon launch a staking dApp called Enki, allowing these community users to participate in staking and gain corresponding returns.

4 Project Status

According to L2beat data, the current TVL of Metis is $81.45 million, ranking 12th among layer2 solutions. The highest TVL reached $165 million this year.

Among all layer2 solutions, Metis has the lowest transaction fees. ETH transfers cost less than $0.01, compared to $0.12 for Arbitrum, $0.08 for Optimism, and $0.24 for StarkNet. Token swaps only cost $0.04, second only to Boba Network, and much less than Arbitrum and Optimism.

However, in the near future, Metis transaction fees will increase and be comparable to Optimism. The current low fees are due to Metis integrating a decentralized storage solution called MemoLabs. Metis only submits transaction commitments to the Ethereum main chain in the form of merkle trees and provides complete transaction data in MemoLabs, which validators can download and submit fraud proofs if necessary. But a community vote has already passed to change the DA layer to use the ETH mainnet. This change will achieve the highest security standards for Rollup and meet the needs of a decentralized PoS validator.

Project Ecosystem

Defilama lists 44 protocols, some of which are multi-chain projects, including AAVE, Stargate, Synapse, Beefy, Sushiswap, and more. In the near future, with the launch of a decentralized PoS validator and the incentives from the ecosystem fund, we can expect a wave of new application developments.

Maia

https://linktr.ee/maiadao

Maia is a yield enhancer for DeFi. MAIA is a token that is 100% fairly distributed through bonding. In return, the goal of the Maian ecosystem is to become a one-stop shop for various native financial tools in DeFi, a mature trading hub that currently includes:

• Maia decentralized strategy library

• Hermes Omnichain AMM and YLM (yield and liquidity markets)

• TALOS transparent automated liquidity full-chain strategy

• Ulysses Omnichain liquidity protocol

Hummus Exchange

Hummus is a stablecoin trading platform on Metis. It is a one-sided automated swap trading platform that supports deposits into one-sided stablecoin pools.

Netswap

Netswap is a decentralized exchange (DEX) on the Metis chain, using the same AMM model as Uniswap, and it has a governance token called NETT.

5 Tokenomics Model

Metis has a total supply of 10 million tokens, TGE (Token Generation Event) date: May 13, 2021.

• Founding team 7%: Locked for 6 months, then 12.5% locked every quarter for 8 quarters.

• Foundation 4%: 10% unlocked at TGE, then 11.25% locked every quarter for 8 quarters.

• Advisors 1.5%: 5% unlocked at TGE, then 11.875% locked every quarter for 8 quarters.

• Angel investors 1%: 5% unlocked at TGE, then 11.875% locked every quarter for 8 quarters.

• Seed investors 6%: 10% unlocked at TGE, then 22.5% locked every quarter for 4 quarters.

• Private 7%: 10% unlocked at TGE, then 22.5% locked every quarter for 4 quarters.

• Community Star 3%: 10% unlocked at TGE, then distributed monthly for 12 months.

• Strategic 1.5%: 10% unlocked at TGE, then distributed monthly for 12 months.

• IDO 0.3%: 100% unlocked at TGE.

• Airdrop 6%.

• Liquidity Reserve 6%.

• Community Development 3%.

• Trading Mining 14.86%.

• Trading Mining 32.84%.

1. From a timing perspective, investors including angel investors, seed round, private round, community round, and strategic round have all been unlocked. And they have been unlocked for a long time.

2. From a timing perspective, the shares of the founding team and advisors have also been fully unlocked in November this year.

3. After the Pos Sorter is launched, 50% of Metis will be used for node mining.

Utility of the Metis token:

1. Gas token: Each transaction requires the consumption of Metis tokens as gas, similar to conducting transactions on Ethereum, where you need to pay ETH as gas fees.

2. Builder mining rewards: Metis provides long-term support for ecosystem development, and all builders in the Metis ecosystem will receive builder mining rewards based on the transaction volume they bring to the network. The more transactions, the higher the rewards, creating a win-win situation for the ecosystem and builders.

3. Staking to enhance network security: With the launch of the first decentralized Sorter pool, all Sorter nodes need to stake a large amount of Metis tokens to qualify as Sorter nodes and process transactions. Therefore, the more tokens staked, the higher the likelihood that these Sorter nodes must process on-chain transactions. With Metis staking, new business models will also emerge, such as Metis LST.

4. Sequencer mining rewards: Sequencer nodes contribute to network protection, transaction processing, and mine Metis tokens as rewards.

5. Governance: Metis tokens can be used for voting and participating in important decision-making within the ecosystem.

6 On-chain Data Analysis 1130

https://etherscan.io/token/0x9E32b13ce7f2E80A01932B42553652E053D6ed8e#balances

https://andromeda-explorer.metis.io/token/0xDeadDeAddeAddEAddeadDEaDDEAdDeaDDeAD0000/token-holders

On November 30, 2023, the total supply of Metis is 5.41 million. Among them, 2.81 million are on the Metis blockchain,

Holder Address 1: Metis on the Metis mainnet

Holder Address 2: Presumably investors and the team, initially generated 3 million Metis, which has now been fully unlocked, with a remaining balance of 845,000 tokens in the wallet.

Rank Address 3: KuCoin Exchange, holds 100,000 tokens

Rank Address 5: Uniswap, holds 64,000 tokens

Rank Address 6: DWF Wallet

Holder Addresses 8, 10-12, 14-16: Coinbase cluster wallets

Tracking Holder Address 2

Holder Address 2 is believed to be the wallet of investors and the team. Based on the timeline, all tokens have been unlocked, but the wallet still holds 845,000 tokens. We traced the flow of funds and found that most of the Metis has been sold on exchanges. The wallet that obtained the most Metis is FBG Capital, which received 166,600 tokens and sold them all a year ago. The second wallet owner is unknown and all tokens have been deposited into the Metis mainnet. The third wallet belongs to Okx venture, which received 75,000 tokens and also sold them all a year ago. Overall, due to the length of time, some early institutional chips have already been sold. The Metis held by the team founders still remains in that address and has not been moved.

Metis Network

In terms of the number of tokens on the Metis network, there was rapid growth before June 2022, with two instances of stepped growth, most likely due to unlocked tokens. The highest point was reached in May 2022 with 2.88 million tokens. In the last 18 months, there was a small decline followed by a recovery, reaching a recent high of 2.81 million tokens. Therefore, the tokens on the Metis mainnet are relatively stable.

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