Open Finance Fundamentals: Melon looks to reinvent digitally-native asset management

This report is part of a weekly series where we will explore the mechanics behind major Open Finance protocols and evaluate them on a fundamental basis. You can view prior reports here.

Melon is an open-source protocol that enables the setup and management of pooled digital assets on-chain. It was one of the first DeFi projects where they dissolved the issuing entity, Melonport AG, successfully ceding control to a DAO. The native MLN token acts as “asset-management gas” that is subsequently burned after performing functions such as creating a fund, requesting investment, and redeeming assets. However, users do not need to buy or hold MLN in order to execute these functions as this is abstracted away to improve the user experience. This buy and burn framework aligns the growth of the network with the value of the token.

To assess the growth of the network, a key metric is the assets under management.

After the Melon Council DAO raised the AUM limit, there were two distinct spikes in AUM on Oct.1st and 9th. The increased investment demonstrates more people are finding value in the platform, which will inevitably lead to more actions that require burning MLN. While it's too early to draw a correlation between the AUM and price, it is interesting to notice the price increase coinciding with the first spike. This is a positive sign that investors and traders are looking at fundamental metrics indicating the health of the network and future growth potential.

You can read more about the mechanics of the token burn and other facets of the Melon protocol on their asset page. In the future, we will look to perform a more granular analysis of the types of actions being taken to further evaluate Melon on a fundamental basis.