TL;DR：

1. Rumors about Metis’ founding team being “Vitalik Buterin’s mother/best friend” have only benefited the project.
2. Metis’ rapidly developing ecosystem covers all the market’s hotspots and has attracted many reputable developers.
3. With a multi-billion-dollar ecosystem incentive program, Metis has shown its commitment to expanding its ecosystem.
4. Unlike other Layer2 solutions, Metis focuses on decentralized sequencers to guarantee network security and decentralization.
5. The $METIS token has various uses, including network fees, node staking, and governance voting, contributing to the network’s development.

1.Project Summary

Metis is an Ethereum Layer 2 network that stands out among many Layer 2 solutions by introducing innovative technologies, such as a decentralized sequencer pool and Hybrid Rollup. Its goal is to maintain high throughput and fast transactions while ensuring the network’s decentralization and security.

2. Project Details

2.1 Team

The team currently has around 11–50 employees, with an average tenure of 1.8 years, and has seen a 4% increase in total employees in the past six months.

• Elena Sinelnikova (Co-Founder): Founder of Crypto Chicks, a non-profit organization dedicated to providing women with opportunities to learn about and enter the blockchain industry.
• Kevin Liu (Co-Founder&Product Lead): Co-founder and CEO of ZKM (zkm.io), as well as the Chief Strategy Officer of the MetisDAO Foundation, responsible for overseeing the development and implementation of the foundation’s internal strategic plans. Kevin received an MBA degree from the University of Chinese Academy of Sciences and is an active researcher in token economics, DAO, and governance protocols.
• Yuan Su (Co-Founder&CTO): Yuan Su holds a Bachelor of Computer Science and an MBA degree and has held multiple management positions at IBM Canada and CaseWare since 2003, with extensive experience in software engineering and management. In 2022, Yuan founded Nuvo Technologies.

2.2 Financing status

Institutions that have invested in Metis include Gate.io, DFG, AU21, HOT labs, CatcherVC, Parsiq, Chain Capita, Genblock Capital, and OK, among others.

Metis has completed angel and seed rounds of financing totaling $1 million, as well as a Series A round of financing totaling $4 million, with investment institutions including Block Dream Fund under OKEx’s OEX, Genblock Capital, Cryptomeria Capital, and others.

2.3 Recent Developments

2.3.1 Community Testing

Source: https://x.com/MetisDAO/status/1746940547619545590?s=20

On January 16th, Metis launched Season 1 Community Testing on the Sepolia testnet, which includes exploring various Dapps to test the POS Sequencer pool. Users will also receive corresponding Testing Points rewards.

Currently supported applications for Season 1 Community Testing include Hummus Exchange, League.Tech, Tethys Finance, Midas Games, and Netswap, with other projects such as Enki and League.Tech expected to join in the future. Each Dapp corresponds to a different points pool, and each operation has a different points ratio. Participants can obtain testing net $METIS through network faucets to participate and earn points at no cost.

Regarding the rules for points and rewards:

1. All participants can earn points by completing corresponding tasks, and a single operation can be repeated, but each repeat only earns 75% of the previous points.
2. If the amount held is greater than the total points, the points number will become the amount number (increasing the points).
3. The more points earned, the higher the reward, in proportion to the participant’s points ranking.

It is worth noting that the EDF plan (totaling 4.6M $METIS) launched by Metis in December 2023 will allocate $3M in tokens to realize the decentralization of Sequencer. It can be seen that this community testing not only has rich incentives at no cost, but also lays the foundation for the profit-sharing blueprint for Sequencer in the future. As a Metis community member, actively participating in ecological construction will provide benefits that other Layer 2 solutions cannot currently provide.

2.3.2 MetisEDF

On December 18th, Metis officially launched the MetisEDF (Ecosystem Development Fund) plan, which distributes 4.6M $METIS (worth $5.5 billion) to the implementation of decentralized Sequencer (as mentioned above), Dapp grants, Dapp Building mining incentives (as below), liquidity incentives, and other ecological development activities.

Dapp Building, also known as BMR (Builder Mining Rewards), will allocate 10,000 $METIS tokens to ecological projects each month, with 4,000 tokens linked to trading volume indicators.

There are no restrictions on ecological projects, and incentives are available for DeFi, ReFi, DeSci, NFT, DAO, GameFi, and more. Rewards are calculated based on the proportion of a project’s trading volume to the total ecological trading volume to ensure that project teams receive fair returns.

Source: https://metisdao.medium.com/dapps-wanted-4c4938ee0c70

2.3.3 MetisJourney

On December 6th, Metis offered a $5 million incentive program MetisJourney for the DeFi category to incentivize and attract more related Dapps to deploy.

Basically, Metis will focus on: decentralized Sequencer community testing, DA layer migration to Ethereum, decentralizing Sequencer, and focusing on the ecological deployment of LSD projects.

The above are only the main developments from December 2023 to the present. In just two months, Metis has provided billions of dollars in incentive programs, from decentralized Sequencer testing involving the entire ecosystem community to incentives for each project team’s activity. From funding support, community support to ecological resources, these actions have expanded Metis’ influence and activity.

These positive actions are also reflected in its ecological data. As of writing, Metis’ TVL/highest daily TPS has ranked in the top 5 of Layer 2 solutions, with a 120% increase in TVL within a month and a 337.16% price increase. Currently, Metis’ TPS can process 9.36 transactions per second. Although there is a big gap compared to networks like zkSync Era and Arbitrum, the comprehensive data and update frequency show that Metis’ network is iterated and updated quickly (compared to Optimism’s last highest data in July last year), and its performance and speed are relatively good.

These data fully demonstrate Metis’ strong development momentum and market recognition in the Layer 2 field, showing its huge potential and value in the Layer 2 market.

3. Technical Framework

3.1 Hybrid Rollups

As early as March 2023, Metis proposed the Hybrid Rollup solution, which combines OP-Rollup and ZK-Rollup technologies to take advantage of both.

For example, OP-Rollup makes optimistic assumptions about all transactions being correct, which speeds up on-chain processing and improves network processing speed, while ZK-Rollup has advantages in proving the validity of transactions and protecting user privacy. By combining the two, Metis DAO’s Hybrid Rollup will achieve:

1) EVM compatibility: Although it is a hybrid Rollup solution, it is still compatible with EVM, making it easy for existing Dapps to integrate.

2) Enhanced security: By incorporating validity proof, Rollup adds an additional security layer based on fraud proof design, and validity proof ensures the accuracy of off-chain transactions and reduces centralization risk.

3) Lightning-fast transaction confirmation: Using ZK Rollup technology, transactions can be quickly and finally confirmed, reducing confirmation time.

4) Optimized capital efficiency: With the ability of Hybrid Rollup to minimize Gas consumption, users can allocate resources more wisely and optimize their capital efficiency.

The ZKM launched by the Metis DAO Foundation is an open-source ZKP system service provider based on MIPS technology. By developing the ZK Rollup component zkMIPS, a functional component that can solve the shortcomings of OP Rollup and ZK Rollup and combines the advantages of both Rollups, it realizes the efficient application of Hybrid Rollup.

By dividing transactions between the two Rollup types, ZKM can:

• Process simple transactions quickly on OP Rollup.
• Use ZK Rollup for transactions requiring higher security.
• Avoid including too many fraud proofs on the main chain, thereby reducing costs.

This hybrid method aims to balance the trade-offs between speed, security, and cost, and achieve the best Rollup solution, making ZKM suitable for a wide range of transactions and users with different needs.

3.2 Decentralized Sequencer

In the Rollup solution of Layer 2, the Sequencer is responsible for collecting, sorting, and submitting user transactions. However, due to its sorting function, it is susceptible to MEV gray income. The Sequencer obtains additional income by disrupting or rushing transactions or prioritizing high Gas transactions, making transactions no longer decentralized, or a single Sequencer being attacked and affecting the entire network.

To solve this problem, Metis has made the Sequencer decentralized through a series of designs and technologies. The following are the basic concepts to understand this framework:

1. Tendermint consensus algorithm

In a certain consensus round, validator A is selected as the proposer and collects a batch of transactions to package them into a new block. Other validators check the validity of the block and vote. If the final positive votes exceed 2/3, the block will be finalized.

1. Threshold signature scheme (TSS) and multiparty computation (MPC)

Both are cryptographic techniques, where:

1. Threshold signature scheme: Threshold signature is a special digital signature technology that allows a group of users to share control of a key. In this scheme, the key is divided into multiple parts (or shares), and each user holds a part. Only when a sufficient number of users (reaching the set threshold) act together can a valid digital signature be generated. This method can increase the security of the system because attackers must simultaneously obtain enough key shares to attack the system.
2. Multiparty computation (MPC): It allows multiple parties to jointly calculate the output of a function without directly sharing inputs. For example, in a class’s exam scores, in order to protect the privacy of students, individual scores cannot be publicly disclosed to others, but the average score needs to be calculated. Each student only needs to provide their own score input, without knowing the input of other participants, to obtain the result. Other non-participants can only know the final result, but participants can know their own data and results, achieving privacy protection.

Metis turns the traditional single-point Sequencer into a Sequencer Pool, achieving decentralization (anti-MEV + solving single-point failures) by introducing node staking mechanisms and rotation mechanisms.

3.2.1 Sequencer Pool

Source: @LoveMetis/%E4%B8%80%E6%96%87%E8%AF%BB%E6%87%82-layer2-%E9%A1%B9%E7%9B%AE-metis-37aa859b2c7e">Metis Chinese Blog

Due to cost considerations, current Layer 2 solutions are running their own centralized single Sequencer, which introduces a single point of failure problem. If the Sequencer is attacked, the entire network will be affected. Metis has established a Sequencer node pool to solve this problem, which ensures that the network can continue to operate even if one of the Sequencers in the pool goes offline for any reason.

In terms of anti-MEV, Metis has introduced multiple Sequencers, and any Sequencer that enters by staking has the right to see the contents of the transaction pool and process transactions. If a Sequencer wants to act maliciously, it is not guaranteed that it will be selected to process transactions, and other Sequencers are watching the transaction pool. Once an issue is detected, the Sequencer will be penalized. In addition, when transactions enter the Sequencer pool, the Tendermint consensus algorithm is used, and 2/3 of the Sequencers’ signatures are required to package and submit transactions, ensuring that transactions are not disrupted.

By expanding the number of Sequencer nodes through the Sequencer pool to increase competition and transparency, and introducing consensus algorithms to decentralize power and eliminate single-point control risks, the decentralization of Sequencers is improved.

3.2.2 Node staking

We know that MEV is the cake of miners. When Metis used the sequencer pool to make its interests public, miners could not control it alone, which shook their interests. Will the miners resist the strike, leading to a reduction in network processing efficiency, especially the loss of users’ assets caused by Defi transactions, causing the loss of users, and the reduction in user usage, causing miners to be unable to make ends meet, ultimately forming a vicious cycle?

In essence, the decentralization of the sorter is not a technical trade-off, but a dispute of interests. The biggest difficulty in realizing the decentralization of the sorter is not a technical problem, but the resistance of vested interests.

As for the miners’ income, how does Metis do it?

Metis has introduced node staking mechanisms. Nodes must stake the network token $METIS to participate in the network. To become a Sequencer node, at least 20,000 $METIS (worth about $2.4 million) must be staked. However, once a Sequencer participates in transaction confirmation, it can receive both the Gas income from processing transactions and additional $METIS staking incentives. This not only makes up for the loss of MEV income for miners but also creates a positive feedback loop that enhances miner income.

Firstly, in terms of anti-MEV, it is unfriendly to miners but friendly to users. Users no longer need to pay extra Gas fees for faster transaction processing, and their interests will not be harmed by miners rushing to confirm transactions. When protecting user interests, users will flock to the network, and then as transaction volume grows, miners receive more Gas fees. Since Metis uses the native token $METIS as network Gas, each user transaction will increase the demand for $METIS, which will stabilize or increase its price, and the staking incentives held by miners will appreciate as the ecosystem grows.

In addition, verifier rewards are set up. When Sequencers are found to be malicious, verifiers will be rewarded with a portion of the assets seized from the malicious nodes, incentivizing verifiers to scrutinize the Sequencers.

By setting the threshold for node participation and increasing the sunk cost of nodes, the loss of the large amount of staked tokens after being found to be malicious acts as a deterrent to nodes. The token incentives for staking increase node participation enthusiasm, and the interests of the network are tied to miner interests. However, staking also controls the circulation of tokens in the market, maintaining the token price while also urging nodes not to act maliciously to avoid the loss of high-value assets, achieving “using tokens to protect the network”.

3.2.3 Sequencer Rotation

After the transaction is processed, it needs to be broadcast to other nodes for ledger synchronization (Proposer), which is responsible for finalizing the transaction. In order to ensure that the Proposer node encounters problems during the transaction finalization stage, Metis introduces a rotation mechanism.

All Sequencer Lists are stored in an address controlled by MPC, and the Sequencer selected from the pool for processing is determined by the POS mechanism. Block producers are selected in a fairer way based on their respective Sequencer node voting weights (related to the amount of pledge) and combined with the random drop of hash values. Of course, if a Sequencer is shut down or stops serving, it will also be rotated, ensuring that the network runs 24/7 and avoiding network paralysis.

Metis’s sequencer pool is fully linked to the pledge amount, binding node interests and network interests, fully ensuring the censorship resistance and decentralization of Sequencer, and returning network benefits to all contributors involved in construction and operation.The network’s capital volume is basically supported by the Defi category. Metis’ decentralized sorter undoubtedly brings a strong attraction to its Defi products. From this, Defi Lego such as Farming, LSD, Lending, CDP, etc., will build a Metis where a hundred flowers bloom step by step.

3.3 MVM

Metis has designed its own virtual execution environment MVM based on OP-Rollup, which is compatible with EVM while separating computing and storage modules. This not only makes it easy for any existing Ethereum dApp to build on Metis but also provides users with better processing efficiency and lower Gas fees.

MVM is designed based on OP-Rollup, it inherits its workflow for fraud proof. When a verifier packages the transaction result onto the chain, there is a challenge period that allows anyone to raise fraud proof challenges. If accepted, the incorrect state update will be revoked. The MVM_Verifier in MVM serves this purpose.

By running the calculation and storage separately, transactions are first calculated off-chain, and the transaction storage state is kept on-chain, achieving lower on-chain costs and efficient processing through concurrency.

4. Tokenomics

4.1 Distribution

Metis’ native token is $METIS, with a total maximum supply of 10 million, released in May 2021. The shares corresponding to “advisors, founding team, and investors” have already been unlocked, and the remaining tokens will be allocated to community development.

Currently, of the 4.5M $METIS in circulation, nearly 76.53% of the tokens are in the Metis Bridge, according to an analysis by 0xscan of the circulating supply. Addresses of Externally Owned Accounts (EOA) hold 17.94%. In the last month, the number of holding addresses increased by 17.5%, and the holders are primarily long-term bullish, with more than half of them holding $METIS tokens for over a year. Approximately 80% of the holders have token values not exceeding $1K, and only a minority of holders possess more than $100K in tokens. From the perspective of holding amounts, the distribution of tokens is relatively dispersed and more decentralized.

Additionally, among the Centralized Exchanges (CEXs) that support $METIS, Kucoin, MEXC, and Gemini have the best liquidity.

4.2 Token Usage

$METIS is mainly used for the following purposes:

1. Network Transaction Fees: Users interacting with Metis will need $METIS as transaction Gas. 30% of the transaction fees are returned to the protocol to support its development.
2. POS Staking: Nodes must stake to participate in the network; meanwhile, (orderer) nodes can earn both $METIS block rewards and staking rewards.
3. Community Governance: Holding $METIS confers ecological governance rights, allowing participation in network proposal voting.

$METIS differs from other Layer 2 tokens like Optimism and Arbitrum, which are only used for governance. $METIS has a rich array of use cases, undoubtedly increasing demand for the token. Moreover, through token staking, market circulation is controlled. Both strategies have contributed to $METIS’s price increase of 299.82% over the past month (although other factors related to active project development cannot be discounted).

Furthermore, $METIS is not yet listed on major exchanges like Binance. If it successfully completes decentralized orderer tests and addresses core Layer 2 issues like single point of failure and malicious actions in orderers, $METIS and its ecosystem are likely to experience a significant leap.

5. Ecosystem Projects

The Metis ecosystem currently encompasses DeFi, Infrastructure, Wallet, GameFi, DEX, SocialFi, NFT, Bridge, etc., with a focus on DeFi and infrastructure. Notable among these are WAGMI, developed by renowned developer Daniel (who previously brought $1 billion in TVL to the Fantom ecosystem), and rising testnet projects like League Tech, Hercules, Enki, and more. We will introduce these in detail next.

1）WAGMI

WAGMI (formerly Popsicle Finance) was officially deployed to Metis on January 10 and received a $2M grant from Metis.

WAGMI was developed by the well-known developer Daniele Sestagalli. Daniele has previously attracted billions of dollars in ecosystem projects for Avalanche and Fantom. His development of WAGMI for Metis, in terms of industry influence, development technology, and ecosystem resources, will undoubtedly greatly enhance the market’s positive outlook on Metis and raise its market value expectations.

As a comprehensive DeFi solution, WAGMI currently provides Swap, liquidity pools, and GMI functions. In the future, it will support arbitrage bots, perpetual trading, and more.

Once it supports perpetual contract trading, it will allow the creation of liquidity pools for leveraged trading without permission, as well as liquidity pools for trading native tokens of ecosystem projects such as Revenant, Hummus, Netswap, Athena, Tethys, and others. This greatly expands and satisfies the trading space for users, bringing higher activity and liquidity to the ecosystem.

Additionally, on January 2, WAGMI announced a partnership with market maker DWF Labs, which purchased 26.6 million $WAGMI tokens. Both the development of the project itself and its strategic deployment on Metis suggest that WAGMI and Daniele behind it could bring a strong positive impact to Metis.

2）Enki

ENKI is the first native LSD (Layer 2 Sequencer Decentralization) protocol on Metis and is launching a testnet based on the Metis Sequencer’s decentralized orderer (which opened on January 19th). ENKI plays a crucial role in the Metis nodes, aiming to simplify the staking process for orderers within the Metis ecosystem. This enhancement in staking yields enables even users holding smaller amounts of Metis to participate.

Users can earn rewards by staking $METIS. The Metis decentralized POS Sequencer community test requires each Sequencer to stake 20,000 $METIS. For nodes with insufficient funds, they can go to the ENKI platform to allow community users to participate in node staking and earn rewards from node test incentives and mining incentives.

Furthermore, as Metis is recently focusing on the LSD track, the TOKEN on the ENKI platform will hold significant value within the Metis ecosystem.

In summary, ENKI’s solution lowers the barrier to entry for users, enabling more people to participate in the Metis ecosystem, and provides a more inclusive and efficient platform for staking and earning rewards.

3) League Tech

League Tech is a SocialFi platform on Metis, similar to “Friend.tech” on Metis, introducing new unique features such as a short-selling mechanism, dynamic reputation, badge system, league creation and betting, as well as a three-tier access model, among others.

It is currently actively deploying and preparing to participate in community testing.

4）Hercules

Hercules is a DEX custom-designed for Metis, developed using CamelotDEX technology, offering a variety of DeFi financial services. Its main services include:

I) Dynamic AMM: Supports dynamic asset liquidity based on the UniSwap V2 model.

II) Directional Swap Fee: Customizes fees based on direction (buying or selling).

III) NFT Liquidity Positions: After opening a position, users receive non-fungible collateral positions (spNFTs), enjoying additional composability for higher capital efficiency.

V) Customized Launchpad: A tailored platform offering various token issuance strategies: fair launch, referrals, discounts, airdrops, whitelisting, etc.

Hercules offers rich financial services and aims to become the primary DEX on Metis by creating a broad range of financial instruments.

5) NUVO

Metis’s first inscription project, Nuscriptions, featuring NIP-20 and NIP-721 protocols, provides an efficient DeFi solution by addressing congestion and high costs. It is used for inscription deployment, minting, and transfer.

It mainly includes two primary product functionalities:

1) NuMarket: A dynamic trading platform for asset flow between EVM and Inscriptions, enhancing accessibility and market dynamics.

2) NuDex: A specialized derivatives trading market where transactions can be initiated at zero cost (no need for $METIS Gas). It offers perpetual contract trading, margin trading, spot trading, lending, and borrowing, providing a cutting-edge financial experience.

NUVO, as an inscription protocol, also supports asset liquidity and derivatives trading, offering substantial support for the liquidity of inscriptions and other assets.

In addition to these emerging protocols, top DeFi applications such as AAVE, Stargate, Sushi, and others have also actively supported Metis, bringing a significant user base and liquidity. The support from these leading DeFi applications not only validates the reliability and stability of Metis’s technology but also significantly enhances its market recognition and influence.

Of course, there are also some native projects on Metis that are worth attention, such as NetSwap (the first native DEX), Tethys Finance (a financial services platform), Hummus Protocol, etc. Leveraging Metis’s technological advantages, especially in the DeFi category, these projects offer noteworthy user experiences and ecosystem support.

6. Conclusion

1. Since its inception, Metis has attracted widespread market attention due to its co-founder being known as “Vitalik Buterin’s mother/best friend”. Whether this is a marketing gimmick or a reality, this attention has brought a lot of favorable exposure to Metis.
2. The current ecosystem projects on Metis are progressing rapidly, covering all the hot topics in the market, such as the inscription project NUVO, social layer project League Tech (Friend.tech), LSD track project Enki, and many renowned developers like Daniele (who brought billions in TVL to Fantom) joining in. We can clearly see Metis’s accurate capture of market trends and its application, and the thriving ecosystem with active developers undoubtedly lays the foundation for Metis’s explosive growth.
3. Metis has recently launched several ecological incentive projects totaling billions of dollars, attracting more high-quality projects to deploy on Metis while maintaining existing ones. This continuous expansion of the ecosystem and the proactive approach have significantly contributed to the growth in the ecosystem’s size and applications.
4. Compared to other Layer 2 solutions, Metis initially focused on decentralizing orderers as a key breakthrough. By creating pools of orderers and node staking mechanisms, and with the ongoing community tests, Metis not only maintains network security and decentralization but also redirects the undue profits of orderers back to the community, addressing the longstanding issue of centralized orderers in other Layer 2 solutions.
5. The $METIS token differs from other Layer 2 tokens in its broader utility, ranging from network fees, node staking, to governance voting. $METIS serves not only as a value carrier but also contributes to the network’s development.

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