TLDR

• Enzyme collects access fees in MLN
• Token inflation is used to fund protocol maintenance and development.
• Protocol access with MLN began for the first time with the launch of Enzyme v4 in March 2022. V4 vaults now need to access the protocol by using MLN.
• On 9th August, 2022, a burn of 54,669 MLN tokens occurred automatically.
• To date, 382,125 MLN tokens have been burned. This figure can be tracked here.
• The MLN collected by the protocol is unlikely to offer any value to the MLN token in the short term given that inflation is likely to exceed the amount burnt for many years to come.

Enzyme was first deployed to main-net (as Melon) three and a half years ago. The protocol’s governance methodology and its token’s economic utility have evolved over that time. This blog post will serve to aggregate the latest state of tokenomics and governance in one place.

Part I: Utility & Network Value

AUM-based Access

In essence, MLN is a utility token which gives you access to the protocol. The network collects access tokens in MLN. The number of MLN you need to access the network is equivalent to 25 basis points of the AUM linked to your usage of the protocol. Once collected, these tokens are automatically burned.

This applies to vaults on v4. If users fail to pay fees in MLN, they will get penalised for this because the protocol will dilute their vault shares by 50bps.

Token Burn Monitoring

The aggregation of MLN burnt can be monitored here.

The MLN collected by the protocol is highly unlikely to offer any value to the MLN token in the short term given that inflation is likely to exceed the amount burnt for many years to come (see next section).

Part II: Development, Maintenance & Security

On the other side of the equation is the ability for the minter contract to mint new tokens. Enzyme’s supply began with a low number of tokens, and the minter contract allows it to mint 300,600 tokens every March.

The Enzyme Council DAO can review grant applications and allocate those funds to projects, developers, maintainers and auditors who they believe can add value to the Enzyme ecosystem.

Some example of grantees over the last year include Avantgarde, who pitched to take over core development of the protocol in the last bear market, Exponent who are building treasury management products on top of Enzyme, Theo who built the PoolTogether adapter, Atlantis DAO who are adding Enzyme to their Metaverse and many more. Earlier this year we moved many of the Council decisions to Snapshot for greater transparency.

Part III: Governance

As the DAO membership grows, this has not come without some pain points and frustrations which have forced us to iterate on processes.

Two major initiatives in recent months are worth highlighting:

• An improvement proposal was voted in to delegate specialised responsibilities to various council members. The background and rationale behind this decision can be found here.
• The introduction of minimum participation requirements for the council members. Many metrics are easily measurable and therefore subject to easy implementation of minimum requirements. The Council has self-imposed a minimum requirement of participating in at least 33% of all votes and attending at least 50% of all calls. The goal is to leverage tooling to automate these metrics, make them more transparent and review them periodically. Members of council who fall below the minimum threshold for a period of 3 months will be warned and, after 6 months, removed from the council if no improvement is seen.

The most up to date information on who is on the council can be found in our docs here.

Part IV: $MLN Token Supply

MLN is a utility token, and can mint 300,600 MLN per year. These tokens are intended to fund critical development, maintenance and marketing activities. Unspent tokens may be burned but we do not anticipate this to be a common occurrence in the early stage of the protocol.

‍