Letter to Metis Community: updates

General
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Dear Metisian,

I just spent ten days in Singapore engaging with potential partners, liquidity providers, and our team. Elena, Yuan, and Tom were also present to announce the partnership with ABGA and Google Cloud for the Gamfi launchpad. I’d like to share my insights from this firsthand experience.

Ethereum Needs Layer 2

Vitalik Buterin recently discussed the progress and vision of L2s and Ethereum alignment:

The rise of other high-performance blockchains, such as Solana, Sui, Aptos, and the upcoming launches of Berachain and Monad, have highlighted the competitive landscape. Despite this, Ethereum’s approach to scalability through Layer 2 remains unique—it balances decentralization with efficiency, rather than compromising security for speed. This vision, championed by Vitalik and the broader Ethereum community, affirms the belief that Ethereum, empowered by robust L2s, will continue to lead the decentralized ecosystem.

At Metis, we firmly believe in this approach, and we are committed to pushing L2 technology forward. We’ve doubled our development team recently and are actively

  • enhancing the D-Seq framework,
  • migrating to Ethereum Blob
  • developing fraud proofs
  • expanding with cross chain accessibility and interoperability, leading with Chainlink conical CCIP integration

—all aimed at solidifying our position in the L2 ecosystem. By aligning our work with Ethereum’s roadmap and vision, we ensure that Metis not only contributes to Ethereum’s scalability but also remains at the forefront of innovation in the blockchain space.

User Growth & Ecosystem Expansion

We’ve implemented a user growth strategy, and our governance team has restructured the grants framework. Our recent release of the Metis Grants Framework has formalized our approach to processing grant requests and furthered our decentralization efforts. We’re collaborating with Gitcoin, Thrive, and our Portfolio Company P1X to bring high-quality projects to the Metis ecosystem, distributing the responsibility of verifying grant applicants and project milestone delivery. This ensures greater community involvement and transparency in the ecosystem’s growth.

DeFi Kingdoms Metis exclusive PVP Colosseum game is going live, and the Arena of Faith Tournament is about to begin. We also hope to attract more engaging games through the new Gamfi launchpad.

Artemis has accumulated over 240K Metis staking. OKX Earn, Hashkey Cloud, SNZ, TEB, and several others are set to join our sequencers. With D-Seq as our anchor, we’re seeing exciting business opportunities, including MEV and new global partnerships with high concentration in the APAC region…

Metis: The Innovator

Metis was among the first to launch an L2 mainnet, alongside Arbitrum and Optimism. We were the first to use Metis tokens for gas fees, implement off-chain DA (now evolving towards EigenDA, Celestia), and establish D-Seq. We’re also the pioneers in pushing the boundaries of decentralization.

Our approach to sustainability is unique. By incubating and investing in diverse areas, we can A/B test different business ideas, verifying their viability. Some examples:

  1. Governance Sharing: Our governance framework benefits all Foundation portfolio companies.
  2. D-Seq Enhancement: The improvements in D-Seq from Metis L2 and GOAT Network create a positive feedback loop, expediting advancement in the underlying tech stack.
  3. Security & Rewards: Metis Foundation operates sequencer nodes for both Metis L2 and GOAT Network, ensuring security while earning mining rewards, which are returned to the community.
  4. zkVM: With ZKM, Metis is the first OP L2 to have its own capabilities to integrate with ZKP, which also expands the outreach of the Foundation from Ethereum to Bitcoin, and more into the future as zkVM can work alongside MoveVM,Solana VM, etc.

With our portfolio companies expanding into different sectors, we’re reinforcing the sustainability of the Foundation’s vision to build a decentralized economy. Our commitment to driving innovation is unmatched.

What’s on the horizon

We see our vision is becoming a reality as we establish the core infrastructure needed to further expand the decentralized network.

One of our upcoming significant advancements will be the integration of a hybrid roll-up solution powered by ZKM. This unique approach combines the strengths of both ZK proofs and an Optimistic framework. ZKM will allow us to expand BTC utility on chain in ways that were previously not possible. This innovation positions Metis as a pioneer in enabling seamless cross-chain liquidity, which is critical in a highly fragmented economy.

Beyond technological innovation, we have strategically been expanding our reach into emerging markets. Over the past 12 months, Metis has been working closely with forward-thinking teams in Machine Learning, DePin and the payment sector. By aligning ourselves with pioneers in these fields, Metis is positioning to capture real-world value in areas such as AI, decentralized infrastructure, and borderless payments.

As we continue to evolve our governance model, we’re embarking on three key research initiatives to enhance community engagement and operational efficiency:

  1. Optimizing voting mechanisms
  2. Improving community participation incentives
  3. Streamlining operational processes

By analyzing voter behavior, exploring innovative reward systems, and identifying areas for automation, we’re laying the groundwork for a more robust, participatory, and efficient governance structure. These efforts will not only strengthen our decision-making processes but also pave the way for greater decentralization and community empowerment within the Metis ecosystem.

The Value of the Metis Token

Currently, the value of Metis tokens is primarily linked to user activity on Metis L2. However, through our incubation of projects like GOAT Network(ZKM), Nuvo, P1X, Artemis, and many more, the value capture extends across our entire portfolios. Token holders who lock their Metis will be eligible to receive tokens from these portfolio companies. I propose that we conduct a community vote to formalize this “holders’ mining” initiative.

Best Regards,
Kevin Liu

4 Likes
2

Great Update as usual.

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Let’s do it

I’m in all for a community governance vote in holders mining

Let’s keep bringing more value to METIS owners

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Hello Kevin,

I hope this message finds you well. It’s always great to see you actively engaging with the Metis community. Your presence and involvement are truly appreciated, and I thank you for your continued support and engagement.

I am, however, curious about the rest of the Metis OG team—Natalia, Elena, Yuan, Pavel, and others. It would be fantastic to see them active again, contributing to discussions around both general and Metis-related topics. We value insights from knowledgeable people, and having the original team more visible would be highly beneficial for the community

I have a few questions, thoughts, and observations that may be seen as concerns by some investors. I’d appreciate your feedback or comments regarding these points:

  1. The rewards for Metis decentralized sequencers are set at 20% for the first year. What APR can we expect in the second year and beyond? Additionally, where do you envision Metis and its ecosystem in 10 years, especially considering that the total supply will eventually be released? How will decentralized sequencers generate rewards in the long term?

  2. Since 2024, there has been a 40% inflation in the Metis token, according to data from IntoTheBlock. Is this information correct? What is your perspective on this, and is this trend expected to continue? Is there a planned token release schedule that investors can rely on?

  3. Regarding Artemis Finance, it’s advertised as offering a 20% APR on staked Metis, with rewards coming solely from decentralized sequencers. However, since its launch around May 1st, the redeem rate has changed from 1:1 to 1.0568 Metis per artMetis. This translates to an actual return of 5.68% over six months, which projects to an APR of 11.36%, not the advertised 20%. This significant discrepancy could be perceived as misleading by investors.

  4. Where are the Metis Foundation’s tokens currently held? Are they staked, locked, allocated to a market maker, provided as liquidity (LP), used for voting, or leveraged in any other way? Should the Foundation’s token holdings, as well as those of major stakeholders and VCs, be made public? Greater transparency in this regard would be highly valued by the community

  5. Does Metis have an official market maker for its token? Given recent regulatory developments and court cases, what is the Foundation’s view on this matter?

  6. Do you anticipate Metis L2 being officially classified as an Ethereum Layer 2 by the Ethereum Foundation and listed on their website? Do you believe this is an important milestone, considering that we have identified ourselves as Layer 2 for the past three years but have not yet received this recognition?

  7. Are you able to provide any rough estimates for Metis’s transition into a hybrid roll-up solution powered by ZKM?

  8. On the topic of the Metis token’s value generation, the concept of extra rewards to locked Metis from Foundation’s portfolio comapnies is attractive, but the details and actual value generation have been somewhat ambiguous. Please, provide more clarity when you can.

  9. The question old as time is whether there is any possibility or intent to perform a token split for Metis since every other L2s’ token price is in single digits.

I understand that some of these points might be pressing, but I believe it’s important to address them openly for the community’s benefit.
Thank you for taking the time to read and respond.

Best Regards,
Metisian

2 Likes
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Hi Jack,

Thank you for your questions, and apologies for the delayed reply—I didn’t receive any notification from the CEG website; it was my team that notified me.

The purpose of this community letter is to ensure regular communication between the team and our community. Since I lead the Strategy, I was chosen to represent our team for this communication. However, it is not just me—this effort involves the entire team.

Regarding your suggestion about getting more team members involved, I assume you meant being more active on social platforms. However, everyone has their own responsibilities. Elena has been working tirelessly to restructure the new grants program, build the internal Account Management system, manage business development, and support the entire team, our partners, and portfolio companies. I’ve seen her schedule—there isn’t a single open day. Yuan is also working around the clock with our expanded development team on the upcoming Blob and Fraud Proof System upgrade. Natalia leads all internal operations. Pavel, on the other hand, is tackling the challenging task of exploring the boundaries of zkVM to help Metis L2 build a future-oriented tech stack. Operating a blockchain is no easy task, but with the new structure in place, the team is aligned, focused, and committed. I’ll encourage them to engage more with the community whenever they are available.

To answer your questions:

  1. For the second-year MRR (Mining Rewards Rate), we will propose several options for the next year, and the community will vote to decide. With the launch of the Decentralized Sequencer, our growth strategy for the Metis ecosystem has become clearer. We anticipate a positive feedback loop: more dapps bring more users, which leads to more transactions and, in turn, more revenue and rewards. We are actively working on multiple fronts to onboard solid dapps onto Metis, which will attract more users and transactions. This will increase gas revenue and make sequencer mining rewards sustainable, which will attract high-quality node operators and result in more Metis tokens being locked—thus increasing the token’s value.

Regarding your concern about the mining rewards running out:

  • On the rewards supply side, we expect that more transactions on the Metis network will significantly increase gas revenue, which will be added to the mining rewards pool.
  • As for the MRR, it will not always remain at this high level. With more sequencer nodes joining, the rewards rate will decrease naturally, and some nodes may leave. However, the system will eventually reach a balance—similar to Bitcoin’s halving cycle every four years. Metis Sequencer Mining will follow a comparable mechanism.

  1. I believe the recent release of tokens relates to 1)the long-overdue vesting of tokens allocated to the Foundation and the core funding team. These tokens should have been fully vested long ago, but we only recently claimed them. 2)the distribution of ecosystem grants and sequencer rewards. You can find more details about tokenomics here:
    https://www.coingecko.com/en/coins/metis-token#tokenomics

  2. Regarding the MRR on Artemis, we noticed the discrepancy you mentioned, though I don’t believe it was due to miscommunication. Metis is pioneering Decentralized Sequencers, with no existing examples to follow. We calculated sequencer rewards based on block production, but the block production rate wasn’t fixed. When we launched Decentralized Sequencers earlier this year, the transaction volume was lower than expected, leading to reduced rewards. However, adjustments will be made to align the rewards with actual outcomes. After several months of operation, we’ve refined our approach, and the calculations will become increasingly accurate. As for any discrepancies, please don’t worry—LST stakers will be compensated accordingly.

  3. The Metis Foundation currently holds 4% of the total token supply, most of which is stored securely within the Metis network. The remaining tokens are staked in the three Genesis Sequencer Nodes:
    https://sequencer.metis.io/#/#sequencer
    You can view the full list of token holders here:
    $38.92 MVM_Coinbase | Token Tracker

  4. Regarding the market maker, yes, GSR handles market-making for us.

  5. In 2022, we realized that submitting all data onto Ethereum was too costly, so we implemented an off-chain Data Availability (DA) solution, reducing gas costs to just one cent—the lowest among all L2s. Although off-chain DA has since gained recognition with projects like Celestia and EigenLayer, it was considered too innovative at the time. We weren’t fully embraced by the Ethereum community, and L2Beat even created a new category specifically for Metis. However, Yuan is now leading the team to reintegrate the data back onto Ethereum Blob, and we are also working on the Fraud Proof System. These upgrades will bring us to Stage 1. While security remains our top priority, gaining recognition from the Ethereum Foundation is not our main concern. Ethereum is inherently decentralized, and seeking validation contradicts that ethos. We began as a grassroots project, and only by growing stronger—with community support—will we earn respect from our industry peers. Our motto is aligned but different, which drives our commitment to decentralization and innovations. We remain the only project to decentralize the sequencer network and share rewards with community participants.

  6. For the Hybrid Rollup, the main challenge is the performance of zkVM, which isn’t yet ready for high throughput—it’s still too expensive and relatively slow. As the ZKM team continues optimizing it and the industry progresses, we anticipate achieving the Hybrid Rollup in the first half of 2025.

  7. The governance team is actively working on the Governance 2.0 initiative, which encompasses holder’s mining, reassessment of builder mining rewards, and other aspects of revenue sharing. We’ve launched a community research initiative to gather insights and feedback on these proposed changes, please help to contribute here if you can Thrive Protocol.
    With the implementation of Governance 2.0, we anticipate greater community involvement in defining pathways and making decisions. This aligns with the “Stage 2 - Revenue sharing” outlined in our “Path to Decentralization” framework, which I shared in January 2024.
    These developments will further empower our community, including investors, to play a more significant role in shaping the future of the Metis ecosystem.

  8. I’m afraid the answer remains no.

Thank you again for your questions. I hope I’ve addressed them all and clarified our goals and approach. Your continued support means a lot to us!

Cheers,
Kevin

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