Fixing Traditional Finance

Market Disruptors podcast. Today I am joined by Mona Elisa and she is the CEO and founder of Melanport, which is working in the decentralized finance space. She has a really unique background working in traditional finance and raising money through hedge funds and dealing with the bureaucracy and the

high expensive costs it takes to do that. She saw those massive problems and figured out there's got to be a better way, and she has since worked on decentralized technology, using the blockchain to build new applications to cut down on that red tape, cut down on time, and save money. You got a really unique perspective. It was a great conversation. Let's goad just jump right into it. Hey, everyone, welcome to another episode of the Market Disruptors Podcast. Today. I'm

sitting down with Mona Elisa. She has the CEO and founder of Melanport. Um there in the decentralized finance space a really exciting area. I'm excited to sit down and and talk with her this morning. Somna, welcome, thank you. UM, great to be here, all right. So, UM, yeah, I know you're in the decentralized finance space. You kind of have an interesting background. UM, that's led you here. Why don't you just fill everybody in and kind of what you've been doing, um, and that brought you to the

space and what you're doing currently. Yeah, sure, so UM, I mean I I started my career in London working for Goldman Sachs and equity trading, which was kind of a hybrid role between market making and prop trading at the time. And eight years later A decided to go and work for one of our clients based in Geneva, who was a large hedge fund and I ran a

long short equity book for him. So I basically sat on the other side of the trading desk, which was kind of the investing role, investing other people's money and m and four years later I got um made an offer. This is this is a part of my life I

don't talk about very much. But four years later I got made an offer by a small family office who wanted to see me twenty million dollars to launch my own long short equity fund, and I, you know, as most young aspirational traders, I jumped on the opportunity, and I thought, this is a this is an opportunity to make a name for myself and my own track record

and do what I love doing. So I took the offer and moved to Zurich and I tried to launch my own long short equity fund, and my my dream quickly became my nightmare because it was a horrible year. UM Launching a fund with anything less than two hundred million dollars is very, very difficult in this day and age. UM there's an incredible amount of administration, operation compliance that needs to be done, and I was very naive thinking that I could do that with twenty million. I actually

raised thirty million in total UM. But basically within a year I realized that most of my time was being spent in an operational and administrative role when I should have been focused on investing and preserving capital of my investors. And ultimately I decided to wind it down. UM, I was going to take a year off. But essentially during that year I discovered blockchain and discovered etherium, starting with bitcoin obviously, UM. And then and then I thought, why

don't we do this all again? UM? I mean when I say do this all again, I mean, why don't we just reinvent the financial infrastructure so that we can lower these barriers to entry and automate all of these processes and and make it make finance much more easily available to people who want to um, who who are talented and and aspiring, and who want to be able

to do things without the large headwinds. Yeah, that's that's awesome. UM. It's amazing to think that thirty million is not enough to start a fund, especially when you're saying that you're really being gobbled up or swallowed up by the fees and admin costs. Yeah, it's insane. I mean it's Anyone who's raised that kind of money before for the first time without a track record knows how difficult it is. Yeah. What what year was that? That was in two thousand

and fourteen? Okay, okay, so even when you had a good market behind you, Yeah, so it wasn't about the market. It was really about the not about the performance of the market. It was about the market overall, or the regulations and admin costs that are involved with ut Yeah, it was just you know, I mean, if you want a little, you know, peek into what my my kind

of average day look like. It was dealing with UM. Okay, So starting with the end of a trading day, you know, I'd have to fill in four different types of spreadsheets. Each of them had forty different columns reporting um, forty different bits of information on each trade that I had done.

One spreadsheet for equities, one spreadsheet for FX or currency trades, one spreadsheet for bonds, once one spreadsheet UM for cash management, and report that into the fund administrator, who's then receiving the counterparties, you know, reporting on the other side, who checks them. Sends a bunch of emails the next day saying this trade doesn't match, that trade doesn't match this Your fourth decimal place doesn't match his fourth decimal place. Some one of you is wrong. We've got to settle

this before we can settle the trade. That's one part of it. Then there was like you know p n L spreadsheets where you know, at the end of the day, I have my piano calculation of fund administrator has their calculation almost never matched. They were always slightly off. Have software for that? Oh yeah, you have software, but I mean you have software that costs a hundred thousand dollars a year to run. Again, that's back down to the you know, to the barriers. How much do you want

to pay to run and operate your fund? You know, when you when you're thirty million dollar fund and you're charging what one per cent and feest you've got a manager. You know, you've got a manager. Operating costs become you know, quite crucial where you spend them, right right? Yeah, So even those p and and monitoring tools are not perfect. You know, they require they still require a lot of manual input. Right. Um, So those are the costly layers there,

um that you saw. Now, so so you saw a theorym and then you figured there's some way that that that compliance piece, that those layers could be compressed down using the blockchain. Yeah, well, I mean what what what ethereum really gave us was well what let's let's take a step back. What Bitcoin gave us was a way

too was an accounting system. Right, an accounting system which was UM a way to transfer money from A to B with no counterparty, no sorry, no into between two counterparties, with no intermediary in the middle, in a completely transferse way. Then you had Etherium, which took that same accounting methodology and secure secure accounting methodology and embedded an entire coding language on top of that, giving you something that looks like you know, they used to call it a computer.

I think you know when you can code, when you can code UM rules and conditions onto how transactions can be spent, and when you know what you can and

can't do. This becomes a very powerful tool in finance because it basically solves all This is essentially what the operational layers are there for, right, to make sure that fund managers don't UM run off with your money in basil your money, steal your money and run away to spend is in a way that wasn't that they weren't permission to UM as per the kind of advertisement or or fun perspective perspective of that product. UM. And we

see that. You know, it's happened time and time and again in history, whether it's rogue traders at ubs or whether it's a model for whether it's whatever. You know, the system constantly fails people. People people managed to get away with things, spending investors money or savers money in a way that they were not permission to do. Yet we keep adding these layers of compliance and layers of

operations to check and double check and triple check. But the problem with the traditional financial system is that it's so untrained, it's so it lacks transparency. There are so many layers of technology. There are so many there's such a lack of technology actually, and you know, tracing a

trade is just like it's a very difficult process. So so it's easier to get away with things because there wasn't you know, there wasn't a good trace trace ability, and there's so many part is in the middle, you never know where something is. Um So blockchain etherium gives you this transparency, accountability and a way to kind of

embed rules sets within smart contracts and enforce them. The blockchain can enforce them, so all of a sudden you can do away with these operations, compliance teams, um you know, accounting teams, etcetera, etcetera, because you have an immediate almost immediate settlement time. You have a completely transparent settlement system. You know when a trade fails and why it fails.

You can see where everything is at any time. You can see in you know, we will get to Mala in a second, I'm guessing, but you can see, you can you can predefine rules by which people can do things or can't do things um. And there's absolutely no way those rules can be broken because they're embedded in

a smart contract. So when you talk about the settlement times in the traditional stocks, I mean there's so many different people in the middle, right, So from the from the company issuing it all way down to the individual maybe retail investor or trader who owns that stock or thinks they own that stock. There could be what five six different people in between, and then when someone trades that stock or buys your shells at stock, then it has to get settled all the way through the line.

Is that what you're talking about? Yeah? Absolutely, you know you need exactly you need to transfer ownership um And believe it or not, you know, ownership in the traditional world of finances is literally a bit of paper, a legal document that tells you yes, so and so owns this, we need to transfer, you know, the ownership of this asset to the new person. And this is it's it's a lengthy process, so it takes time, it takes verification, it takes people, it takes it takes a lot of

manpower as it stands today, and manpower costs money. So it adds costs layers of costs. So some of that also has to do with like the custody, right, So then um, just like with what what the blockchain has enabled us to do is to take custody of the asset um not i and all these intermediaries to keep keep their ledgers up to date or sort of speak

absolutely yeah. Yeah, But actually this is very interesting point that you bring up because so um, over the years, it's become a regulatory requirement that every hedge funder asset

manager has a fund administrator and a legal custodian. And the reason that that those rules have been enforced by law are that it's it's a way of ensuring that the fund manager can't just run away with the assets and spend them on porsches and private jets and whatever, but they actually have to spend the funds they you know, investors are trusting them with in the within the within the kind of rule sets that have been defined to

the investor. UM. When you talk about the world of blockchain, this rule actually just becomes a nuisance, right because investors always are the the the owner of their own funds, because they're always holding custody or at least the world defy decentralized finance is such that investors should always have

custody of their own assets if they want it. Um. And so this rule about having a custodian and a fund administrator suddenly becomes quite interesting to to reassess because, um, everything is so transparent and everything is pre defined in code. So why would you need, you know, why would you need to replicate this role when it's arguably more efficient and potentially in future more secure than having uh kind

of manual intermediary in the middle. Right. So to set the stage, then, so the big problem that you ran into and that everybody is facing is massive administrative cost because of the way that custody is happening and settlement has to happen through multiple people, and so the compliance to keep up with that UM is just just too

burdensome and just to to cost too costly. Absolutely, and and you know, compliance requirements are only going in one direction because every years, there's every two or three years as another scandal, there's another you know, financial meltdown, and then regulators deal with it by slapping on more and more rules and more and more restrictions. And in order to you know, to to meet those reporting requirements and to meet those regulations and rules, you know, funds essentially

just get slapped with more and more costs. So it's it's a yeah, it's a difficult environment for funds. And what you end up seeing is instead of the biggest, instead of the best fund managers doing best, doing well, what you end up seeing is it's the big ones getting bigger and the small ones getting smaller because the cost, because of the cost to do the administration. Exactly, you need the scale to be able to suck up the administration.

It was a great I wish I could remember the source, but there was a great article um a couple of years ago. I think it's said something like of the world's assets invested in hedge funds are invested in five largest hedge funds. Yeah, one about that. We see that all throughout different areas in the world. For example, in e commerce, right, so you have am on that's continued to grow bigger and bigger and bigger, and then regulations have been constantly put into place for small businesses to

keep up with, like local tax jurisdictions for example. UM, and so it's it's too burdensome for those small entrepreneurs, those small sites to keep up with those regulations. And so Amazon of course has the scale and they can do that. So UM and we can see that just play out over and over and over, and it's it's kind of kind of what you're saying, is it's kind of like, on one hand, Um, the regulations continue to build up and continue to make it harder and harder

and harder. But at the same time, we're on a system that's been around for eighty years or I don't know, sixty seventy years and it hasn't really changed. Is that kind of what what you see? Absolutely? And and the thing is, you know, eighty years ago we didn't have very exciting technology. Today we do, and UM and probably you know we've had exciting technology for the last couple

of decades as well. But the financial system, so UM, you know, it's it's so fragile right now because we've just slapped layers and layers and layers of um of old technology on top of our new technology on top of old technology for so many years that the technology stack that they're dealing with such a mess in banks and financial institutions. So to to try and you know, make any proper use cases or to use blockchain or new technology to its food potential, it's almost impossible if

you're a large incumbent. And I think the people that are doing the really exciting stuff now are the people that can really start from fresh, take all the technology that's available to us today, and reinvent things from scratch. You I want to ask you, um how hard that's going to be because of the incumbents that are there on the regulations. But before we get to that, UM, let's jump back to UM. Let's just jump back now

to melon. So you've seen these problems, You've you've had to deal with this in real life, the burdensome costs and compliance and labor and so forth, and so UM using this new technology of bitcoin, etherory and blockchain, UM, you think you found a better way? Absolutely? I mean, we are. It's still very early days in terms of where the whole space is UM, but I think you know.

In February nineteen this year, we went we went to main net with version of one of Melon, and Melon enables you to As of today, you can set up a crypto fund within a few minutes. You can define UM. You can pre define things like who is allowed to invest UM, where to your asset universe, which trade, which exchanges are you allowed to trade with? Which, what's your maximum number of positions, what's your maximum position size? All the kind of things that you can define in a

fund perspective which is enforced by financial intermediaries. We can start to define those by smart contract code in a customizable way. I can customize my fund with its rules and its parameters. I can select my fees, my my management and my performance fees, and I can deploy this fund to the blockchain. It takes the form off its

token and people can invest. The smart contract takes care of the accounting, the share creation, the fund administration, the risk, the risk management, everything operational about the fund except the except the investing, which is done by the manager is taken care of, which just frees up the manager to focus purely on investing. Now, UM, that's huge when you think that. You know, my fund took six months to launch. UM,

they can take up to twelve months to launch. And the costs involved before you even launch are north of a thousand dollars in most cases, and the running costs of a fund are at least that per year. So you know, we've reduced that to process to a few minutes and um less than a hundred bucks. And you can, yeah, and you can, and you can start to see. You know, the user experience is not as easy as UM. You know we'd like it to be, but that's largely because

of other developments that need to happen. There is the user experience on setting up a traditional fund. It's true, that's true. But you know, blockchain is not perfect. And I'm not trying to sit here and say as of

today it's perfect. But UM, if we keep if we keep improving, or if we keep developing things in the way at the speed that have they have developed in the last three years in the blockchain world, I think that three years from now we'll be looking at a system which is massively, massively better experience than the traditional experience of fun management. Now when you say a fund um, uh,

there's there's a couple different things. I mean. Originally I was thinking MELON was like helping someone set up like an index fund, which means I would say, you know, for simplicity sake, I have ten different assets in there at at different ratios, and um, someone could buy into that index fund. UM. But I think now you're talking about setting up a fund where I could raise however much money and then go invest that kind of whatever.

My thesis is, Yeah, I mean, and I use the word I default to the word fun because it seems to be a word that most people can relate to. But actually you can use melon to set up any kind of investment vehicle. It can be an e t F, It can be a hedge fund, it can be a VC fund, it can be whatever you want. It can be a dow UM. There's actually no limitations on because

each each investment vehicle is customizable. But you know, what we give is and what we hope is that one day, you know, five years from now, maybe any kind of investment vehicle is doable on melon um all the rule sets, all the risk management rule sets. You can imagine are available because obviously there's a limit finite amount right now based on the fact that we're a small team UM

and we're only two three years into the project. So um but you know, it's all open source, it's all code that's there for anyone to see, anyone can participate, anyone can um submit proposals or code, and it's you know, it's easily integratable. So there's absolutely no reason why it couldn't be used as the future financial infrastructure for all asset management. And so how how would someone use that now?

I know, for example, we talked about um ash that's building on top of that, and they're doing some sort of like gamified UM fund fund investing type platform. So if I was a builder, I would want to build on Melon and I could come build my fund. I mean, I guess you're saying like the options are endless, or like I would set up like my own marks index fund or um or I could say, hey, this is just give me just raise a million dollars and I'm just gonna go invest it. However, I see fit, I

mean any option that I want. So Melan just kind of takes care of the compliance piece of that. So You can think of Melon as the infrastructure, right, the infrastructure which gives you the tool kit to build whatever you want to build. In the asset management space, you can you can set up a vehicle. This vehicle can be invested in. You can limit the number of investors, you can keep it unlimited, you can you can select. It gives you all the tools that you need to

to customize whatever you want to do. Now, we haven't got all the bits there, but we have a full feature set and we've delivered everything, all the features we promise, and we're now looking towards the future to what else. You know, what are the next features that people want to see? Ashes building a use kick that we never actually imagined on Alan and I just came along UM I think it was a year and a half ago, and they said, oh, we love what you guys are doing.

We uh, we're really good with UX and you I and UM. We want to build a fun use case on Melon and we want to kind of do something like a Battle of the fund managers on Melon where people can just challenge one another to short or long term you know manager competitions and UM and you know there's a there's sort of sort of prize pool which gets allocated to the winner, and it's all very competitive and there's a very playful there's a very playful element

to it. UM. I have actually envisioned the use case of Melon initially to be much more serious because I come from the traditional world of finance. But I'm very open to anything that anyone wants to build on Melon because ultimately, it's all the same infrastructure and it's all

the same you know, it's all the same tools. And the more people that are building on Melon, the better, because that's when we're going to get the best features, the best functionality, the best minds on it, the best the you know, the more the more developers that work on it, the more secure it is. UM. So, so we're very open to working with any teams that want to build on Melon to build anything asset management related. Now.

UM basically, what you're trying to do is make it much easier to build a fund in the financial space, and we talk about like compressing those layers, the costly layers, taking out some of that admin. A lot of that is there because of laws regulation. UM there's a lot of people that make money from that as well, So it seems like quite a lot of people are going to be disrupted through this process. So, UM, are are the regulators going to allow this to happen or what's that?

What's that battle going to look like? Yeah? You know this is this is I mean, this is the this is a great question. UM. Who knows? Um? You know you you see there was a report. I'm just trying to put it up now so i can give you the title. It's just shocking. But you know, the center of fund administration in the world is Luxembourg, as you probably know, and there was a report UM published by Deloitte this week or maybe it was last week. The

title is quite striking. It's called um blockchain technology has the potential to wipe Luxembourg off the map something along those lines. And you know that's because Luxembourg, basically, I think most of it's g d p IS is made from servicing the fund market, the funds asset managers. So UM, so you know people are signed it. We've we've been saying this for three years. I was amazed at this report came out now, but you know this is this has been our belief all along. Our regulator is going

to accept it. You know, it depends, um that some are more open to others. Um. If you're Luxembourg, probably not, frankly, but if you're you know, if you're a jurisdiction that that embraces new technology doesn't have a lot going for you in the asset management space to start with, or in the finance industry, Hey, you may want to make a name for yourself by being open minded and embracing this kind of technology. Um. But in general we're seeing

mixed you know, mixed um, mixed reactions on that. And in general, the law is the law at the moment for most of the kind of financial centers where you do need these financial intermediaries and so well, you know, we'll either see creative technological solutions that come come up that sort of build the technology in a way where um, you know, where where the law you know, there's no kind of strict definition on how the law can be interpreted, or you'll see the technology being built in a way

that you know, can fit into the existing law. I hope it's the innovative way we see because there's absolutely no point in in in there's no upside in this technology if you have to fit it into the regulatory box. Frankly, UM, you think regulators should be open to people experimenting and to seeing what can happen. And I think ultimately it's better for UM, it's better for you know, sandbox environments are very good, but it's better to it's better to

the potential. The potential of what this technology can do for the fund administer, just for for the fund industry is huge, yea. And I think it's largely you know, the focus seems to be people seem to be getting stuck on K y C A m L A lot. And I think, yes, maybe you could argue that, uh, you know, depending on which angle you're looking at, it could be a disadvantage from a regular from a regulator's perspective.

But the flip side, I mean the advantages that get ignored, you know, risk management, control, transparency, reporting possibilities, UM, you know, the fact that the investors can keep custody of their assets, that the fact that UM, you're somehow protected from a market downturn in the way that you weren't during Lehman for example. So UM, I think that there's a large

educational role that needs to be played there. I think that sandboxes are good, you know, you know, in increasing usage in a sort of controlled environment to prove your use case and then going you know, kind of mega big with it. It's always a good way to do things. UM. But you know who knows? Yeah? Now, currently are you only doing it on digital assets like the digital assets are? Are you? Is it being done on actual securities right now? Oh? No, no,

we're We're not. We're definitely not able to interact with securities UM in the traditional sense. Um. There's because none of them have been none of them have been tokenized. No, No, definitely something that might become possible in future. Um. We're only able to include e r C twenty tokens UM in the Melon protocol UM. And yes, if there are e r C twenty tokens that are securities, users can make them part of their asset universe. UM. But that's that's really a user. It's kind of part of the

customization process, right. The users select which assets they want to trade. If they're UH, if they're able to trade securities within their fund, then then they can. If they're not able, and they should stick to other types of tokens. Right. We are starting to see some people um, like, uh, they called wrapping them or you know, creating an arc token that represents an actual security. So maybe something like that. We actually have wrapped BTC already available in the Monon protocol,

which is cool. Okay, I'm curious. Um, I'm curious. Coming from Switzerland, which is known for having one of the hardest, most sound moneys, Um, what you think about bitcoin overall? And then and then how like ethery um compares to that? I mean, are you are you a hard sound money person or do more like the expandable fiat kind of money. I'm not originally from Switzerland, but I definitely love this country, and I, um, you know, I if I had to put my money in any fiat I would I would

probably pick the swizz frank frankly. Yeah. But as far as um crypto goes, I think, um, you know, I do, I do see I do see Bitcoin and etherorum in a slightly different way. Bitcoin is for me a you know, a digital um, a digital money. You can you can buy things for you know, you can exchange it, you can you can you can use it as a store

of value. And it's for me, it's um, it's it's I see it as a compass with Frank, but maybe even more secure and in fact, definitely more secure UM and an etherory m. I see it in a slightly different way, you know, I see a theorym as um more of a platform that will grow with with its use cases. I don't really see it so much as a as a currency, although it can be used as a currency, right, So not direct competition. They're serving different

purposes and different needs in the market. Yeah, you know, the pure noess of bitcoin, the fact that it can only be used to hold or exchange, you know, exchange for good to deser versus um makes it characteristically more like a currency for me, a digital currency, right. And then as far as building on Ethereum versus other protocol platforms, um have you guys, did you guys do due diligence on other platforms? Is it something where like at some point you could move it to another platform or are

you sold on Ethereum's position in the marketplace? And and you think Ethereum is kind of the front running winner at this point, Yeah, well funny you say that. But back when we started in two thousand and of two thousand fifteen, I mean, there weren't that many other platforms today, Yes, UM, and we started my ethereum UM. We continue to keep an eye on other blockchains that are emerging in the space. I still don't think there's anything that offers to you

what ethereum can offer. UM. Having said that, UM, there's there seems to be a lot of blockchain new block newer block chains that are going to main net soon ish and UM, and you know, we plan to research them and and we've definitely researched. We've definitely you know, started looking at things like the Polka Dot network and into as we think about scalability and interoperability. UM. But you know, ethereum two points around the corner two and

we're excited about that. And it's just a matter of keeping in touch with what's happening in this space and making sure that UM, you know, we're we're up to date and we're ready to to make a necessary amendments. However, as of today, most of the decentralized finance, in fact, all of the decentralized finance applications are on ethereum, and so moving away from ethereum would be silly at this stage. Yeah, UM, for the decentralized finance space. It's an area that that

that I think is just fascinating. I mean, I love the decentralizing everything. Um. Do you see that as kind of being like the main use case right now or the primary use case, um of what of what we're doing with this technology? Yeah? I do, I really. I mean I'm biased obviously because of my background, but I think that I think that, um, you know, the industry, the only industry that hadn't been disrupted by technology, in my opinion, was was financial services um um. And finally

it's happening. You know. I think etherium gives us the possibility to to to finally get rid of a lot of the fat in the financial industry and do it in a different and better way. UM. So I'm really excited about that. Yeah. Now let's just jump into the

next thing. Now. What I what I find is really interesting is how talking about how I just mentioned how I love everything becoming decentralized, Um, you would actually built melon and now have launched it in a more decentralized manner where you've kind of I think, created like a doubt decentralized organization and kind of giving it back to

the community. Can you talk about that a little bit. Yeah, so we yeah, so we always promised that at the end of the two years, when we completed our roadmap, we would um, you know, we would sort of let

Melon out into the wild, so to say. So, we to the main net UM and we I wanted to make a point of giving up any control over the protocol UM, so we we handed it over to decentralized kind of UM government system, which we call the Melon Council, which is composed of a group of technical users and UM user representatives and it's running currently on arragon os UM software. So so we did that UM and yeah, it's completely you know, we we have a seat on

the council. UM. We're definitely consulted when the decisions have to be made, but we have no more than one vote on the council. So and and over time I would expect that to you know, of as the council grows, i'd expect you know, our our influence and influence just continues to diminished. But what does that look like? So, I mean, you've given it up to the to the community. Uh,

you're still taking a seat on there. So now it's like up to the community to vote on the direction that it goes and new features and stuff, but who actually will manage it and run it or or or develop on it. So UM, so there's a few, there's a couple of different parts, so the council. So let me take a step back, UM in order to use the Malon protocol, so we have we have a token.

Uh we there is a MELON token that exists which basically is a usage token and is basically consumed as a kind of asset management gas whenever anyone is interacting with certain functions in the system. When the ecosystem UM, the tokens are are basically burnt once they've been spent.

On the flip side of that, there's an annual amount of tokens which are created by the network and these go towards future maintainers and developers of the network, and they are allocated, uh allocated or burned by the TAO as per the needs of the network. So essentially UM, the token holders and the users are somehow aligned by the token o mix. So users are incentivized to help grow the network because as usage goes up on the network.

In theory UM, this should be linked to the token value and the future maintainers and developers are also incentivized because as they develop cool new features and maintain the software effectively. Also, users go up on the network and they're earning in this kind of token UM. And and then the one kind of stakeholder in the ecosystem that is not represented anywhere is the user right because the user UM just wants to use a secure protocol. They

don't really care are about the token. And so when we designed our governance, we said, like, you know, how can we design a governance system that represents the stakeholder that is underrepresented in our ecosystem? And so we said, okay, if we were users, we would want to know that people looking after this UM software are technically competent or user representative. And so that's exactly how we designed the

Melon Council in the dow around it UM. So basically, anyone who joins the Melon Council has to prove that they're somehow technically competent in order to make decisions around upgrades or UM any kind of protocol related decisions. And on the flip side of that, UM, if you're a user of the network and you can prove that you're a user of the network and you're you're you're sort

of elected by the other users. You can join the Melon Council to represent the users, so you can say to the you can say to the technical council, you're spending too much time on security. Actually, we really wanted this cool new feature. You know, go ahead, guys, build this for us UM and this is this is I'm representing the users and this is what we want. So it's kind of um, it's kind of a good balance

between the token economics and the governance. We've basically represented and looked after we hope all users and stakeholders in the ecosystem interesting. And so you have the new tokens being created that can fund it um, you have the token holders the users, which are are voting in the governance of that, and then you have the funding that that can pay for the ongoing development. Just to be clear,

the token holders do not vote with the token. The token holders basically just benefit as used it of the network goes out the users. UM, the users consume Melon as they use the network, and the yeah, and the and the the us the exactly. Yeah. So the reason we didn't go for the token holder voting, which is on chain government, and it's because it's too easy. In our opinion, for our use case, it was too easily gamable.

So if you had token holders vote voting on sensitive things like protocol upgrades, it's very easy to influence or manipulate the vote. UM when you when you're not necessarily technically qualified to make a vote on an upgrade, right, or even worse, we've seen and a lot of protocols which have token hole token voting rights, we've seen apathy in voters. So uh, you know, something like less than fifteen percent of people will typically turn up to vote

with their tokens. And this um, this is also a negative for the protocol because you know, then the swing vote or the ability to influence a vote in a malicious ways is too easy. So we've we decided to Actually, if we had on chain governance, this would have made the users very vulnerable. You know, you could have had a competing network come along and try to maliciously upgrade code to something that was insecure, or you could have had um, you know, you could have you could have

had a number of malicious attacks. UM. So what we tried to do here is give the give the users of the network. Um, We're sorry. Give the token holder is something to Tom to look after them, and that is the more users on the network, the more the token holder benefits because the the buying burn model links

the value of the token to the usage of the network. UM. And what we gave the users is this governance which is designed in a technically competent way so that people making the decisions around the future of the protocol have to be technically competent to do so, or at least user rep provably user representative. Yeah. Yeah, we're really interesting.

It's such a it's it's so fascinated to see these different types of governance that are that are coming out of this use of blockchain techn apology, you know, theoryum and whatnot. So um. You know, it's all very new and experimental. The whole idea of decentralized governance. I mean maybe Switzerland is the closest example to it, you know, given they have a very decentralized government government system here. Um. But it's in terms of doing it tech on technology

with tokens and on chain versus off chain. It's still very early days and I think time will tell, you know. I think a lot of the stuff being done now is still very experimental. Yeah, yeah, great, Well, UM, I wanted to get into more stuff, but we are running long on time, so I think we'll have to go ahead and wrap it up here. But I'm definitely gonna be keeping an eye on Melon for others that are interested, UM, what are some things that they should be looking for

where they should be watching. UM. We're very active on our Twitter channel, so Melon Protocol we are. We try to write UM regular blogs on Melon Protocol medium page. UM. And if you want to chat to us directly, you can join our get your channel. There's one for users and one for developers UM, and we're always happy to take questions on either of those subjects anytime. All right, Mona, it's been been fascinating. I love to hear how this old old style of finances being disrupted and I'm excited

to see it happened. And I appreciate you taking the time to explain to everybody. Pleasure to be here. Thanks about Mark, Take care. Hey. If you like this episode of the Market Disruptors podcast, please help us take this to the top of the podcast charts. Just please do me a favor and rate review. And subscribe. Taking fifteen seconds to just leave a quick review goes a long way and helping us reach more people and disrupt more markets.

I really appreciate you listening and I'll see you next time on the Market Distructors podcast