MELON PROTOCOL: A BLOCKCHAIN PROTOCOL FOR DIGITAL ASSET MANAGEMENT DRAFT 5 In conclusion, by having decentralised storage and ex- Aspecial thanks to Garrett Cassidy, Andr´e Wolke, Ro- ecution one can mitigate some of the potential security man Bischoff, Jorge Mielgo, Sandro Lera, Dylan Grice vulnerabilities and market inefficiencies, such as reducing and Andrey Ternovsky for their support, feedback and single points of failure, custody-, counterparty-, and set- improvements to this paper. tlement risks. 8. Protocol Development References To build the Melon protocol and strengthen the net- [1] Augur - decentralized prediction market. workeffect, there will be a digital token issued. This token http://www.augur.net/. Accessed: 2016-08-26. is called the Melon token (MLN) and will be distributed [2] Beteiligung der gl¨aubiger an der bankenrettung. through a contribution period. https://www.finma.ch/de/ueberwachung/banken- These Melon token can then be used to use the core, und-effektenhaendler/aufsichtsinstrumente/stabilisierungs- as all usage fees are collected in Melon token. Since mod- und-abwicklungsplanung/kapitalmassnahmen/. ule developers invest time and effort into building these Accessed: 2016-08-26. modules and since many of them will have an active cost [3] Deal reached on bank “bail-in directive”. of running, such as for example server costs of running http://www.europarl.europa.eu/news/en/news- a price feed, there needs to be a way to incentive them. room/20131212IPR30702/Deal-reached-on-bank- Melon solves this by incentivizing module developers in %E2%80%9Cbail-in-directive%E2%80%9D. Ac- the same way as almost every blockchain incentivizes its cessed: 2016-08-26. miners. By giving them the transaction fees - or usage [4] Digix platform. https://www.dgx.io. Accessed: 2016- fees in the case of the Melon protocol - and by creating 08-26. an amount for them created through inflation. The Melon [5] Ethereum - token standard. protocol will do the same thing and thus effectively future https://github.com/ethereum/EIPs/issues/20. proofing development Accessed: 2016-08-26. [6] Ethereumclassic. https://ethereumclassic.github.io/. 9. Future Directions Accessed: 2016-08-26. 5 [7] Ethereum platform. https://ethereum.org/. Ac- To drive adoption, there will be portals . These are cessed: 2016-08-26. user-friendly web applications to access the Melon proto- [8] Etherex - decentralized exchange. col. This will allow users to interact with the protocol https://etherex.org/. Accessed: 2016-08-26. easily. [9] Hedge fund cost survey. Thevalueoftheprotocol is directly correlated with the https://www.altassets.net/pdfs/KPMG%20Hedge value of these portals. The better and easier the portals, %20Fund%20Survey Sept2008.pdf. Accessed: the more usage fees will be collected and the higher the 2016-08-26. rewards for module developers. [10] Makermarket. https://github.com/makerdao/maker- 10. Conclusion market. Accessed: 2016-08-29. [11] String technology. http://string.technology/. Ac- TheMelonprotocol proposed a blockchain protocol for cessed: 2016-08-26. digital asset management on the Ethereum platform. It [12] t0. https://t0.com/home. Accessed: 2016-08-26. enables participants to set up, manage and invest in dig- [13] N. M. et al. The Dai Credit System. ital asset management strategies in an open, competitive https://makerdao.com/dai02.pdf/. and decentralised manner. [14] P. Wei, Y. Altshuler, and A. Pentland. Decoding 11. Acknowledgements Social Influence and the Wisdom of the Crowd in Fi- nancial Trading Network. MIT Media Lab. We would like to use this opportunity to express our [15] D. G. Wood. Ethereum: A Secure De- gratitude to everyone who supported us throughout the centralised Generalised Transaction Ledger. course of writing this paper. http://gavwood.com/paper.pdf/. Appendix A. Terminology Token: By the term token is meant, a digital token of value adhering to the Ethereum token standard [5]. Portfolio: A collection of smart-contracts, divided into a core smart-contract(s) and into auxiliary smart-contracts called modules. Portfolio Manager: Portfolios are managed by one person or a group of persons, referred to as a Portfolio Manager. Module: Amoduleisonorasetofsmart-contractswhichhasanauxiliaryfunctionality to the core smart-contract of the portfolio. Time Step: The term time step means, the time interval between blocks on the Ethereum Blockchain. Where time is taken from the block timestamp issued by the miner. For example (ti,ti+1] is the time between after block with timestamp ti and the following block with timestamp ti+1. 5One example for a portal is the Melon portal: https://melonport.com.