Pantera Capital is the first institutional fund in the US to invest in Bitcoin, holds one of the largest cryptocurrency portfolios, and is an investor of Meter.
Since 2013, Pantera has focused on investment in the blockchain field, and has continued to invest in high-profile cryptocurrency projects such as Ethereum, Ripple, Bitstamp, Zcash, Filecoin, Polkadot and many others.
It has obtained handsome returns in the crypto world. According to relevant data, at the end of 2017, Pantera’s investment in the blockchain field has achieved a return rate of more than 25,000%.
Pantera’s layout in the Defi Field
1. Pantera’s investment logic in the Defi field
Currently, decentralized finance (DeFi) has gradually become one of the largest areas for growth of cryptocurrency in 2019. Paul Veradittakit, one of Pantera’s partners, wrote that DeFi is one of the hottest innovation directions in the blockchain world, and the market is huge.
Pantera’s Chief Investment Officer (also founder of Augur) Joey Krug stated in the article that there are many intermediaries in the financial field and that the financial field has not been democratized. By opening opportunities for democratization of new financial markets, society will benefit from the scalability brought by the information revolution from the past. But this time, the financial revolution empowered by the blockchain will transform three things — value, money and finance.
2. The opportunities in the Defi space are huge
Veradittakit listed some of his investment principles in the Defi field. He illustrates all aspects of a DeFi project in terms of market, product, interest rate and collateral, degree of decentralization, liquidity, transaction volume, and maximum value. He focused on explaining that decentralization is a key element of blockchain technology and an important factor in evaluating a DeFi project.
Krug wrote in his blog post that from a fundamental standpoint, a financial system requires a unit of count, leverage, margin, exchange infrastructure, along with lending and issuance infrastructure. Krug believes that cryptocurrency as a whole will create a choice of financial infrastructure, which will be borderless, cheap and fast.
It’s clear that Pantera believes that DeFi needs a decentralized, borderless, and fast financial infrastructure.
Considering the above conditions, it is not difficult to understand why Pantera invested in Meter.
Meter has built a completely decentralized financial infrastructure through the combination of a Proof-of-Work (PoW) stable coin (MTR) and Proof of Stake (PoS) governance coin (MTRG).
Meter’s decentralized financial infrastructure
Meter’s decentralized financial infrastructure has achieved the following:
- High performance
Meter redesigned the underlying consensus to clearly separate bookkeeping and currency issuance.
In the real world, the gold miners are solely responsible for mining, and the bank staff are solely responsible for bookkeeping. Similarly, in the Meter system, the consensus of PoW is responsible for the issuance of currency through mining, and the PoS consensus uses the BFTC (Byzantine Fault-Tolerant Consensus) algorithm to do bookkeeping quickly, while preventing double spending in the system.
Under these conditions, the PoS bookkeeping main chain can produce blocks every 10 seconds (after the upgrade in August, the block production time will shorten to 3–5 seconds) and 2000 transactions per second (TPS). Compared to existing blockchain networks, the performance of the main network is greatly improved.
- Highly decentralized and secure
Meter uses a Proof of Value (PoV) consensus mechanism, a hybrid PoW/PoS consensus which alleviates the disadvantages of a single consensus mechanism.
For example, the 51% attack in the PoW mechanism, the Nothing at Stake and long-range attack in the PoS mechanism, and other security risks are avoided to achieve system security. Many of Meter’s design details are determined after careful consideration on how a highly decentralized currency system can be achieved and how the system can survive nation-level cyberattacks.
For example, in order to avoid the block node’s review of transactions, or to prioritize transactions that are beneficial to itself, the block node is replaced for each block of Meter. The operation of replacing block nodes has a very high complexity and communication cost for Cosmos, Harmony, Near and other platforms using traditional pBFT algorithms. The cost is so high that Zaki Manian, the head of R & D at Cosmos, tweeted to praise Harmony after it released code to automatically replace block nodes in the event of block node downtime.
Meter’s PoV BFT algorithm works so that even if each block replaces the block node, the complexity of the algorithm remains the same as without replacing the block node. In order to allow more nodes to participate in the consensus, Meter’s basic PoV consensus allows hundreds of nodes to be selected from the thousands of participating nodes every hour as representatives to participate in the consensus through the natural random number generated by PoW.
In comparison, Algorand’s only contribution at the algorithm level is that a cryptographic algorithm can be used to implement verifiable pseudo-random numbers to accomplish the same function.
In addition, due to the introduction of PoW, the Meter system is invincible. For example, if a network disconnection accident occurs between China and U.S., the Meter network may temporarily stop trading to ensure user account security. But if enough PoS nodes are reconnected, Meter can automatically resume operation. Meter uses a concise PoV hybrid consensus algorithm to achieve better performance and stronger attack resistance than these star projects.
- Strong scalability. Break the “lone island” and provide a channel for high-speed circulation of assets between chains
Meter’s underlying architecture can support main chains, side chains, and parallel chains at the same time. It can provide Bitcoin and Ethereum with a set of stable underlying financial systems to supplement their functions in the decentralized business sector.
In the future, Meter.io will support connectivity with BTC, ETH, EOS, and other public chains. The Meter.io team will develop bridges and SDKs that link to other public chains and will support cross-chain protocols with Cosmos and Polkadot. Developers can easily transfer assets between different chains on Meter.io, which will solve the issue of asset transactions and swaps between chains for Defi products, and bring about huge changes in the ecological development of Defi products.
In addition to its impact on the DeFi field, Meter’s world currency system will also be a revolutionary innovation in the crypto world.
Meter.io’s global currency logic opens the door to Hayek’s ideal of denationalization of money
Joey Krug stated in an article that Bitcoin might become digital gold, but would never succeed as a currency, as a decentralized financial system needs a unit of count.
This was also the inspiration for Meter’s global currency system design.
If a cryptocurrency can be as successful as money without the drawbacks that come with money, it may be the solution that thousands of blockchain projects and blockchain innovators have been looking for.
Meter proposes an innovative solution in this field.
During the long evolution of money, people have found that as a medium of exchange for daily social value, money needs to bear the intelligence of the unit of measure. With the unit of measure, the value generated by social labor can be measured reasonably, which allows for reasonable and relatively fair exchanges. Such fair exchanges can promote the good flow of social value.
1. Why does the crypto world need a unit of measure / value scale?
Since primitive societies, as surplus goods increased, people began to exchange surplus value in exchange for other goods they needed. With the continuous improvement of social productivity, the growth rate of surplus goods has also become faster.
Society finally realized that by measuring the value of goods through a certain amount of currency that can reflect the social production time of goods, it is possible to quickly and easily achieve the exchange of goods. This is due to one of the basic functions of money as the value scale.
It can be said that as long as there are market activities and the exchange of social values, currency with a value scale is required to promote the development and circulation of commerce.
The same is true of the crypto world. When market behavior is transferred to the crypto world, and when people’s market behavior takes place in the crypto world, there is a need for currencies that can measure value.
On the other hand, a currency with a value scale is fundamental and essential for business development in the crypto world.
With Bitcoin’s deflationary nature, we expect its price to continue rising. Thus is cannot be used as a unit of measurement of social labor. In addition, Bitcoin and a lot of other cryptocurrencies lack the liquidity of valid currencies due to their investment attributes.
Obviously, neither excessively deflated nor excessively inflated currencies can be used as a unit of measure to achieve a measure of socially generated value.
The currency system proposed by Meter claims that its currency has the intelligence of a value scale. But how does Meter do it?
2. How does Meter make MTR stable？
Adam Smith wrote in The Wealth of Nations that the value of a commodity depends on the amount of labor invested by the producer, and the two must be directly proportional. He believes that the amount of labor required for production is the best measure of value.
- MTR mining issuance
In the decentralized world, Bitcoin is a practitioner of this theory. Bitcoin is issued through mining, and the reward of miners depends on the labor output of the miners.
Meter understands the essence of this theory and knows its advantages. The stable currency MTR in the Meter system is generated by PoW mining, where the value in the Meter network is exchanged through the labor of miners.
This is how MTR is issued in the Meter network. But how is MTR priced?
- Priced based on electricity
The essence of mining is the cost incurred by the competition of hashing power between miners, which primarily includes the cost of electricity (in addition to the cost of mining machines). Some people specifically calculated from the price change of Bitcoin and concluded that the market price of bitcoin is about 85% related to the marginal cost of its mining (mainly power consumption).
Meter relates this phenomenon to stablecoins. By linking MTR to the cost of electricity (and thus the stability of the physical world), it ensures a better standard to ensure stable purchasing power.
The price index of industrial electricity, from the 1960s to the 2010s, was calculated based on actual purchasing power (excluding inflation) and was almost more stable than most fiat currencies.
Meter anchors the mining cost of the MTR stablecoin to the power consumption of mining one MTR. By fixing the cost of one MTR, it reflects the supply and demand relationship of MTR through the economic behavior of miners seeking profit, and stabilizes the market price of MTR to maintain a stable purchasing power.
Through MTR’s mining issuance and cost anchoring measure, the stability of MTR is guaranteed.
Meter provides a stablecoin MTR as a value scale in the system, which is used for efficient value exchange to promote the development of commerce.
But Meter.io feels that stablecoins alone aren’t perfect.
There are many stablecoins that exist now. But many are not decentralized and thus cannot have an independent monetary policy.
Meter believes that there should be a system that can realize Satoshi’s dream of a decentralized currency independent of fiat currencies.
3. Meter’s dynamic monetary policy
MTR is not pegged to fiat and is issued through mining. As a result, MTR relies completely on market behavior and the profit-seeking behavior of miners to balance its supply.
Nonetheless, Meter has added another layer to guarantee the stability of MTR and to ensure the smooth operation of the decentralized commercial market.
The PoV (PoW + PoS) hybrid consensus adopted by Meter enables the PoS bookkeeping main chain to issue MTRG equity coins for bookkeeping and governance of the Meter ecosystem, while the PoW mining sidechain issues stablecoin MTR.
MTR holders can obtain MTRG through auctions. Part of the MTR in the auction funds are burned during the auction process. The burning mechanism will automatically remove those MTR tokens from circulation. When MTR tokens are insufficient, as with the increase in its prices, miners should be willing to mine more MTR with their computing power.
Another part of the MTR tokens enters the reserve pool as rewards for block verification nodes to produce blocks. This regulates the money supply and plans for future ecology.
In other words, there are two guarantees in Meter’s currency system:
• MTR is issued through mining and is pegged to electricity. The profit-seeking behavior of miners automatically adjusts the supply of MTR in the system to maintain the stability of MTR.
• In extreme cases, community managers holding MTRG can adjust the money supply by using the system’s built-in financial leverage.
If you compare it to the real world, you can think of Meter as a completely decentralized commercial bank.
The Meter team does not have the right to issue currency, but anyone in the community has the right to issue currency by becoming a miner. Community participants can earn profits through providing transaction security and liquidity for the financial system. Consequentially, their behavior will also improve the stability and balance of the currency system.
Maybe we can say that Bitcoin and Ethereum are not the competitive currencies envisioned by economist Friedrich Hayek, but Meter has pushed the door of Hayek’s ideal nation open.
Meter solves many of the issues facing both crypto- and fiat currencies face today. As such, Pantera Capital invested in what may be the global medium of exchange of the future.
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