MelonFarm is a fully decentralized elastic stablecoin protocol built on Ethereum ecosystem.

MelonFarm forms the new monetary for the new economy of the Ethereum ecosystem, permissionless, freedom, powered by the native currency, a stablecoin called Melon.

A stablecoin that lives on the decentralization infrastructure and doesn't require collateral or backing assets, trends toward more stability and liquidity, will unlock the potential of DeFi, and open the new economy system.

MelonFarm's primary objective is to incentivize independent market participants to regularly cross the price of 1 Melon over its dollar peg in a sustainable fashion.

The idea behind MelonFarm was inherited from the original Beanstalk idea with many improvements objective decentralization, expansion, and adoption.

Why MelonFarm

MelonFarm is designed from first principles to issue capital-efficient, decentralized stablecoins that are accessible to anyone with an internet connection.

Today’s predominant stablecoins suffer from one or more fundamental issues, primarily centralization and scalable.

Fully Decentralization

Stable-value assets are an essential building block for blockchain applications and have grown to represent hundreds of billions of dollars in value.

However, the vast majority of this value is in the form of fiat-collateralized stablecoins like Tether and USDC. The businesses that issue these stablecoins are subject to external oversight and governmental coercion and have the unilateral power to freeze their stablecoins.

Decentralized stablecoins like DAI and LUSD make up only a small portion of the total stablecoin supply, meaning the vast majority of stablecoins are centralized.

MelonFarm, on the other hand, is operated by immutable smart contracts and uses an on-chain price oracle to determine the price of a dollar. MelonFarm is highly resistant to censorship by design such that anyone, anywhere can access low-volatility assets in a fully permissionless manner, ensuring that the protocol remains fully decentralized.

Elastic Supply

A scalable stablecoin should tend to the demand of the market. It should be able to expand supply when the market demand goes high, and also reduce its supply when the market demand goes low.

MelonFarm was designed to serve exactly this idea of the market. When the market needs more stablecoins, MelonFarm can be able to expand Melon's supply by minting new Melons. On the opposite, MelonFarm has mechanisms that can be able to burn existing Melons from the markets to reduce its supply.

The Ultrasound Money

Ethereum blockchain has the biggest DeFi ecosystem that includes many scalable layer-2 blockchains, thousands of DeFi applications, and billions in market valuation.

Additionally, since "The Merge" and the upgrade of EIP-1559, Ethereum blockchain has switched to "Proof-of-Stake" and become a deflationary asset.

MelonFarm was designed to grow alongside with Ethereum ecosystem. MelonFarm aims to build an elastic stablecoin that will be the base layer asset and liquidity for DeFi applications and is backed by the deflationary asset - Ethereum native token (ETH).

How MelonFarm Works

MelonFarm does not have any collateral requirements. MelonFarm uses credit instead of collateral to create Melon price stability relative to its value peg of $1. The practicality of using DeFi is currently limited by the lack of decentralized low-volatility assets with competitive carrying costs. Borrowing rates on USD stablecoins have historically been higher than borrowing rates on USD, even when supply increases rapidly. Non-competitive carrying costs are due to collateral requirements.

MelonFarm relies on three native assets and three interconnected facilities to regularly oscillate the price of Melon across its value peg:

Tokens

MelonFarm issues 2 tokens:

• Melon - the MelonFarm ERC-20 stablecoins.
• Seeds - illiquid tokens that are planted and yielded each Season.

Primary Facilities

The Sun

MelonFarm uses the Sun to create a cost-efficient and protocol-native timekeeping mechanism. The Sun keeps time on the Farm in Seasons. Each Season is ~1 hour long. MelonFarm adjusts itself to return the Melon price to its value peg at the beginning of every Season.

In practice, the Sun calculates the price of 1 Melon in the primary liquidity pool that is paired with the Ethereum native token (ETH). After that, the Sun makes the decision in two directions based on the price of 1 Melon that is greater or lesser than $1.

The Sun uses the Melon price to determine how to change the Melon supply and Soil supply.

The Silo

MelonFarm uses the Silo, to create a robust decentralized staking mechanism. Farmers can earn yield from passive participation in the Silo by depositing assets on the Deposit Whitelist in the Silo to receive Melons and Seeds.

To encourage consistent security:

• Seeds yield every Season.
• Seeds earn newly minted Melons share every Season.
• The associated amount of Seeds from a given deposit must be forfeited when it is withdrawn from the Silo.

Deep and consistent liquidity in liquidity pools Melons trade in improves stability. Liquidity providers to liquidity pools whose LP tokens are whitelisted can also deposit their LP tokens in the Silo to earn Seeds. LP token deposits earn more Seeds than Melon deposits.

The Field

The Field is MelonFarm’s decentralized credit facility. Anytime the Melon price is too low, MelonFarm uses the Field to attract lenders who can lend their Melons to MelonFarm, which are subsequently burnt in exchange for Pods, MelonFarm’s native debt asset. Pods are paid out on a First In, First Out (FIFO) basis when new Melons are minted.

Soil is the number of Melons that can be lent to MelonFarm at any given time. Any time MelonFarm is willing to issue debt, there is Soil available in the Field. Any Melons not in the Silo can be Sown (lent) to MelonFarm in exchange for Pods.

Pods have a fixed interest rate and unknown maturity date. The number of Pods that grow from 1 Sown Melon is determined by the Temperature— the MelonFarm-native interest rate — at the time of Sowing. Pods become Harvestable (redeemable) for 1 Melon on a First In, First Out (FIFO) basis when new Melons are minted.

How can we earn with MelonFarm?

On the MelonFarm, farmers may be stakers, sowers (lenders), traders, or arbitrageurs.

For Stakers

Stakers can deposit Melons or Melon LP tokens into the Silo and start to earn new Melon distributions.

• Melons - Stakers can purchase Melons from the Uniswap exchange.
• Melon LP tokens - Stakers can provide liquidity on the Uniswap exchange.

For Sowers (Lenders)

Sowers (lenders) can sow Melons in exchange for Pods in the Field. The return on investment is fixed at a rate (Temperature) and will be paid in the future via new Melon distributions.

For example, if the current Temperature is 120%, and you sow 1000 Melons, you can get back 2200 Pods that can be harvested for 2200 Melons later.

For Traders

Traders maybe also sowers can trade their Pods in the Pod Market. If you want to exit early, you can list your Pods on the Market for sale at an attractive price to attract Pods buyers.

Furthermore, our Pod was designed to be an ERC-721 token that can be tradable on any NFT marketplace like Opensea, Blur, ...

For Arbitrageurs

Our system tends to maintain the Melon price around $1. If the Melon price is less than $1, this is an opportunity for arbitrageurs to purchase Melons at a low price and sell them later for a higher price.

MelonFarm is under development, if you want to ask questions or contribute your ideas, please join our community at Discord. You can read more about MelonFarm on our Documentation page.