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Jeff Garzik Explains the Metronome Cryptocurrency

Launched in 2018, Metronome is an autonomous cryptocurrency originally developed by Bloq and its BloqLabs group, both led by former Bitcoin core developer and Metronome Chief Architect Jeff Garzik. Metronome supports use cases such as a store of value, unit of account, and payments. According to Metronome, the native currency, MET, have been distributed in a fair manner – the team did not have access to tokens before the general public. Metronome features smart contracts and  APIs to make it self-governing, reliable, and portable. Although Garzik is interested in bitcoin’s design, Metronome is more based on Ethereum.

Users of Metronome desktop wallets for Windows, MacOS, and Linux can send and receive MET and ether (ETH) and/or Ethereum Classic  (ETC); participate in daily auctions (more on that below); and exchange MET for the native token of the chain that the MET is on, and vice versa, with Metronome’s Autonomous Currency Converter instead of an exchange. Metronome is actively researching Qtum and RSK.

“These mobile wallets have been engineered and audited to reflect the same thorough standards of excellence as the Metronome system itself,” said Jeff Garzik, chief architect of Metronome, in a press release. “Our community has been asking for a way to take the complete Metronome experience mobile, and we are proud to have delivered.” The wallet has been audited by industry professionals both inside and outside the blockchain industry, such as Zeppelin Solutions and <a href=”https://medium.com/@MetronomeToken/metronome-minute-gustav-simonsson-fd887ab8a045″ target=”_blank” rel=”noreferrer noopener” aria-label=”“These mobile wallets have been engineered and audited to reflect the same thorough standards of excellence as the Metronome system itself,” said Jeff Garzik, chief architect of Metronome, in a press release. “Our community has been asking for a way to take the complete Metronome experience mobile, and we are proud to have delivered.” The wallet has been audited by industry professionals both inside and outside the blockchain industry, such as Zeppelin Solutions and Gustav Simonsson.

Garzik’s work on Metronome has taken the lessons learned since Bitcoin’s initial release and incorporated them into the cryptocurrency’s design.

“You try to boil all that into a comprehensible user experience,” he said. “If we took all the lessons learned from all the blockchains and all the currencies from 2009, bitcoin’s launch to today, what are some of the risks that we would adjust against? What are some of the attributes we would build into that currency? What are some of the missing features that you would want that aren’t in a Bitcoin or Ethereum or currency three, four, five, six,” he said, while speaking on Metronome at CoinDesk’s Consensus 2019. “What makes a foundational cryptocurrency? What makes it a currency that is built to last? Obviously there’s the store of value component. But, how do you make sure that it maintains its integrity across a lot of events like chain forks or double spend attacks, 51% attacks, etc?”

Chain Hop

A critical part of the Metronome architecture is its chain hop feature. “That’s the feature that really proves out the Metronome story,” says Garzik. “It is the only token that can survive the death of a blockchain and chain hop is the feature that lets you move away from risk [in order] to risk adjust to another security warehouse or blockchain.”

Users can use MET tokens across different blockchains. They can move their MET tokens from one blockchain to another. They can move it from the Ethereum blockchain to Ethereum Classic, and, in the future, onto QTUM. MET is designed to use other blockchains, such as Ethereum, Ethereum Classic, and Bitcoin, purely as security rails.

“We’re demonstrating that a blockchain is this security warehouse for these tokens,” said Garzik.

Garzik is quick to caution that this is not a swap, which is a taxable event. “When you go from bitcoin to litecoin, bitcoin to ethereum, you’ve sold bitcoin,” he says. “And, in most tax jurisdictions, you have a taxable cost basis that you just locked in with that transaction.”

With Metronome’s chain hop feature, you’re moving the asset itself from one blockchain to another. “[It’s] like picking up a gold bar and moving the gold bar from one warehouse to another,” explains Garzik. “You are moving your Metronome Tokens from one blockchain to another.” That’s not a sale or swap, he said, before explicating upon the gold bar and security warehouse analogy.

“We use the blockchain purely to secure the Metronome system [and] the metronome token,” he said. “Why would you want to move it from one blockchain to another? One real world example is that different chains have different transaction fees. Bitcoin and Ethereum have a higher transaction fee level than Ethereum Classic. If you’re doing a lot of Metronome transactions, what might be a smart is to move your MET from a high security Bitcoin or Ethereum chain to maybe a little bit lower security, but cheaper Ethereum Classic [in order to] do a lot of transactions, pay very low fees, and then move back to the highest security chain. That’s one real world use case.” Garzik mentions perhaps a more pressing use-case. What if a certain blockchain is going to cease to exist?

“What if there are some serious problems coming down the road?” he rhetorically asked the audience. “You can risk adjust away from that chain. And 1,000 MET is still 1,000 MET. Just like when you pick up a gold bar and move it from one warehouse to another warehouse, you still have one gold bar and there were no taxable events. Similarly, when you move met from one blockchain to another, it’s still MET. It still has the same value as it did before. It’s just maybe quicker settlement time, lower transaction fees or avoiding a chain disaster, chain drama or something like that.”

Unlike atomic swaps or atomic exchanges, which involve two currencies and create taxable liability for anyone who’s holding it, a chain hop isn’t a taxable event, says Garzik. An atomic swap is a peer-to-peer exchange of cryptocurrencies from one party to another without the need for a third party service such as an exchange. Atomic swaps, which are also known as cross-chain trading, can either be directly executed between separate blockchains with different native coins or can be executed off-chain.

“Metronome can hop from one chain to another for governance reasons, but what’s very, very consequential on the economic side is what does not happen,” said Garzik. “You’re not going from one asset to another. Therefore, there’s no taxable event.”

Garzik argues that, for this reason, Metronome is less expensive to hold, because anytime users move from one warehouse to another, they chain hop without a taxable event to record. “You’re just moving your assets to a new location,” says Garzik.

Garzik believes portability is a big part of the Metronome story. “[It’s] a big part of the governance story of Metronome itself,” he said. “We built this to be an autonomous currency. That means that it’s not controlled by anyone, even the authors. And a key part of that self-governance is that you, the Metronome holder, can vote with your wallet [on what blockchain  Metronome] should be to secure your assets. That gives you freedom of choice, that gives you the ability to seek out the strongest chain, the least costly chain in terms of transaction fees, [and] the best chain in terms of settlement.”

MET holders enjoy freedom of choice. “It’s a store of value and MET is still MET no matter what chain it’s on.”

The wallet will come with an integrated porting function to switch between blockchains. Most blockchain users might not get much value out of this feature. “Most users will stick to one chain most of the time, absent emergencies and disaster recovery. Traders will definitely use the porting function quite a lot. I think that if you have some automated systems, you’ll use the porting to optimize for, say, lower fees if you’re doing a lot of MET transactions, and then move over to [Bitcoin or Ethereum] for a higher security rail.”

Proof of Burn

MET employs Proof of Burn. Proof of Burn is a distributed consensus method. Usually, certain coins are sent to a verifiably unspendable address. The Proof of Burn confirms that an owner moved their Metronome from one chain onto another.

“The B word is a little bit scary,” says Garzik, but what it is guaranteed proof that your Metronome can exist on one and only one chain. This is a synchronized function, a synchronized metronome tick – like a clock tick across all of the chains where metronome lives.”

This creates a constant global supply where one chain, even through a hard fork, can’t inflate the metronome supply by having the same MET token represented on separate chains. Validators assist when Metronome goes from one chain to another by validating a Merkel receipt. Validating the Merkle proofs is a very slow process.

“The import export waits a number of confirmations and so it’s like a 12 to 24 hour export import process for that reason,” says Garzik. “So, absolutely, it’s not just one block [confirmations].”

Portability makes freedom of choice possible, says Garzik. “You want to have that self governance,” he says. “ And that self governance is the reason why we feel that Metronome is the most resilient currency regardless of whether if Bitcoin lasts forever or if ETH lasts forever or Etc. – pick your chain. Metronome can function on that security rail. But, if one of those has a problem, you can risk adjust away from it. It’s not a network for swapping other coins. This is a novel way to make Metronome the token that lasts for a hundred plus years.”

Daily Supply Lots (Daily Auctions)

On Metronome, daily auctions of MET act similar to the mining mechanism of other blockchains.  There is a small daily mintage. Upon network launch, there were 10 million tokens live. Every day, 2,880 (two per minute) are minted and sold at auction at market prices across all chains. That is, until a 2% annual mintage rate is reach, after which the daily mintage will increase to achieve that 2% rate, ad infinitum. A smart contract makes these available at a daily descending price auction, in which the price per item begins at a maximum price, and as the item goes unsold, the price declines.

Metronome asks for a price far above market price, and then the price ticks down every 60 seconds until an equilibrium price where market buyers are willing to buy tokens. Every 60 seconds in the case of Metronome’s Daily Supply Lots, the price drops to 99% of the previous price.

The auction is not all one price for all the tokens. Rather, it is a real time auction with varying prices. Tokens are sold at a certain price for however many tokens buyers want to buy. The auction ends and the price stops decreasing once all 2,880 MET are sold.

The funds generated in this auction are locked in a smart contract that Garzik refers to as a “savings basket.”  25 basis points of the total balance of that proceeds contract (based on the chain MET is being run on) goes to the autonomous converter.

There are arbitrage opportunities between external exchanges and the autonomous converter, allowing users to look at how the price balances across three external exchanges and the autonomous converter. The autonomous converter is a simplification of the algorithm used by Bancor, a decentralized liquidity network that ensures continuous on-chain liquidity between blockchain-based assets. Users can autonomously convert MET with another blockchain’s native currency.

The autonomous converter acts as both an exchange and a market maker with liquidity that you can trade and exchange MET for ETH or ETH  to MET. “If I want to sell my MET, I can go directly to the Ethereum blockchain and swap it for ETH at any time,” explained Garzik. “The reason why I can do that and get a pretty good market price is that liquidity.”

MET earns proceeds on the auction, which don’t go to people or a team to build a promise.

“Proceeds are locked and managed by a smart contract exclusively,” said Garzik. “We don’t have access even in an emergency to those funds. And that’s a very important point from a governance perspective. It’s locked away and algorithmically controlled.” Currently, there is approximately $5 million locked in the smart contract, though that fluctuates based on price of the cryptocurrency in which it is held.

Metronome estimates the community bootstrap fund from the proceeds contract, will last about three or four years. “It’s kinda like a slowly deflating balloon,” he explained. “The money gets trickled out to the community through an interesting mechanism. Every night, every 24 hours, the smart contract buys MET on the open market at market price using a tiny bit of those community funds.”

It kind of performs this price stabilization or price floor or volatility dampening type feature. We feel it’s an important one in Metronome land is, while everyone else wasmdoing these wacky, line your pocket  ICOs, we went in a totally different direction. We wanted to do something that we felt that if Satoshi was doing a token with a clean slate, a clean sheet of paper, trying to do an ethical coin raise, that’s how he would do it.

In the Metronome wallet, an auction screen gives you the time remaining in the auction or, if the auction is already closed, the time that you have to wait until the next auction opens.

Volatility Dampening Effect

New Metronome tokens are minted in an auction format and locked in a smart contract with no human access. The smart contract buys Metronome on the open market at market prices, thus creating a price floor – Garzik calls this a “volatility dampening effect.” Garzik this volatility dampening effect worked during the crypto winter.

“When tokens were on a downward curve, this volatility dampening both reduced the volatility and it also served as a price cushion,” he says, noting that there are a lot of variables at play. He claims that MET fell less than other crypto tokens during the crypto winter. The volatility dampening works through a daily liquidity injection.

“It’s kind of like a slowly deflating balloon that injects liquidity into Metronome in the early days of the system,” says Garzik. The Metronome team estimates this fund will deplete over the course of three to four years.&

Garzik calls volatility dampening unique. While other coins just took a nosedive during the “Crypto Winter”. Metronome was engineered to not take a nosedive. “It was based on my theory and the market actually tested and proved it,” said Garzik. “It is like being a scientist and gathering field data. You make a hypothesis, but you don’t know if it works until you get the data. Hypothesize, experiment, results – the standard scientific method.” Metronome price dampening makes MET more appealing as a store of value.

Metronome’s volatility dampening feature might be one of the only times you’ll catch him talking about price in general. “I focus day-to-day on the technology and I like to say that, whether bitcoin is $1 or $8,000, it still has that built in security layer that’s providing security for the money transfers,” he told me. “And, similarly, Ethereum is the same story, whether it was $200 or $1, it’s still providing that same service. You put a token into the arcade machine, the arcade machine runs for a little while. And so, as long as you have a minimum level of price, you have a minimum level of security that lets you trust that particular blockchain network.

Autonomous Converter (Decentralized on-chain exchange.)

Metronome is built to be compatible across multiple chains. The system is built on the Ethereum blockchain. For now, the autonomous converter has a MET-ETH pair. More are planned.

“On Ethereum Classic, you’ll have an ETC-MET pair and on each chain, all those auction proceeds that go into that savings basket, that proceeds contract, that goes into the native currency side of the trading pair.”

The autonomous converter is present on each one of the chains that Metronome supports. There will be a native token whether it’s ETH, ETC, RSK on bitcoin, QTUM or EOS, says Garzik. “Any of these will have a native token to MET converter that really helps the ultimate project goal of a single global currency across all these blockchains.”

Validators (The Centralized to Decentralized Flight Path)

At the beginning of Garzik’s talk, he had mentioned Bloq’s centralized to decentralized flight path. He went into further depth here as he spoke of network validators.

“The first phase is basically a Federated Network, just like everyone else is doing,” he says, referring to an arrangement in which control is given only to few predetermined nodes. “You have five people who are independent legal entities like Bloq and Bitpay, and X, Y, Z, for example. And they each run the same protocol.”

In the event of a fork on one of the blockchains Metronome supports, the validators serve as a which fork you choose point, says Garzik. “The validators are the ones that sit in between chains and we have three phases of validator development.” In the event of a Bitcoin fork, as in the case of Bitcoin Cash, the validators would declare which blockchain is the real bitcoin.

In such an event, those validators are the ones who say which is the real bitcoin. Bloq nor Metronome makes such a choice. In Phase One, it’s the validator network making that choice.

“Metronome validators looks at a group of ETH validators that attest to that this is the real ETH [or] a group of Bitcoin validators that attest to how this is the real bitcoin,” says Garzik. “It’s in Phase Two, we remove us and our validators out of that pick [of] which fork the community chose. You have essentially a group that’s saying this is the fork to pick on the Bitcoin side, this is the fork to pick on the Ethereum side.”

Metronome is only designed to follow one fork. In the example of Bitcoin-Bitcoin Cash fork, the Bitcoin Cash branch would just be ignored. “It can’t be Merkle validated by the metronome global supply,” says Garzik. “So when you have twins, you’ve got to pick one.”

In Phase One, there are only five validators. “It is centralized,” says Garzik. “In Phase Two of the validator network, you get to chain specific tip validators, and, specifically, validators stop validating Metronome transactions, and completely remove themselves from that governance perspective.” He mentioned that Metronome is investigating the use of reputation monitoring, using a very large number of validators, and echo algorithms. The technical term for echo algorithm is ‘flood-fill algorithm’. Garzik mentions this in his talk on Consensus. I asked a few months later if he could define that in his own words.

“That’s an algorithm that ensures that all the money transactions that have to do with money supply going from say, ETC to ETH chain in a chain hop is copied to every single chain,” he said. “To be specific, we’re about to have three chains: ETH, ETC, and a third one, QTUM. If you and I move our MET from chain one to chain two, from ETH to ETC, QTUM also has to hear about that. That’s basically the process of ensuring that all of the chains hear important information related to the MET chain hops and money supply.

“We want to have that flight path to decentralization,” he said. “That’s key to the governance story. Very central to Bloq is having that centralized to decentralized flight path. Where the ultimate end state is there is no validators at all, that are special parties on the network. In Phase One, we have this Federated Validator type network. Phase Two, we have individual chain validators which attest to tips and those are the pick a fork validation step.”

Phase Three is what Garzik refers to as “blockchain of blockchains.” He says the logic behind this is similar to the logic behind Bitcoin. “You might have 10 nodes on the Bitcoin network. The way blockchain works, every single one of those nodes has 100% copy of the blockchain, 100% copy of the ledger. It’s not partitioned, it’s not sharded. Every one of those 10 nodes has a complete copy. We’re similar in design. Phase Three of the Metronome cross-chain feature is that we actually have ablockchain stored in a smart contract and communicated between chains.”  The blockchains aren’t exactly stored in smart contracts. Each smart-contract-ready chain in the MET ecosystem has the four MET contracts (ledger, auction, proceeds, converter.)]

These blockchains stored in smart contracts are called lily pads at Metronome. “This cluster of smart contracts on one blockchain, say ETH, communicates with another lily pad on another blockchain, say, Ethereum Classic.”

It’s like the Bitcoin algorithm. “It’s sharing the transactions that move not from address to address, but from chain to chain across all of the chains that support Metronome,” he said. “Just like bitcoin broadcasts transactions, we broadcast chain hop transactions to Metronome ‘lily pads’.”

In Phrase Three, there is no validator at all. “That’s a key observation about this centralized to decentralized flight path,” he says. “The validator network that we’re about to debut is something that we plan to eliminate.”

For practical purposes, the system functions basically like an ERC20 on the local chain and when you transfer from address to address. “It’s exactly like an ERC20 so all of the assumptions that come with the ERC20 token on, say, ETH. You’ll get the exact same experience and it’s just when you move MET from one lily pad to another, that’s where in Stage One you have to trust the validator network, which we’re going to eliminate. In Stage Three, you have to trust, just like bitcoin itself, the algorithms.”

The system is stake-weighted per lily pad. If a new Ethereum fork only ends up with two validators on it, that is a very low stake weight versus existing lily pads. “You have the trust metric based on how many people are on each lily pad in Phase Three.”

Metronome is inviting external community folks to be validators. To participate, you’ll need to run a geth node. “If you’re technically inclined, it’s just docker container and the MET validator image inside. So even for technical folks, it is really just a download and go.”

Garzik says his team observed again with a lot of deep thinking on the history of lessons learned. “A lot of these tokens when you launch, they kind of need a centralized to decentralized flight path,” he says. “And that’s very critical as you need some support in the early days, just like a young child. But, eventually that child needs to leave the nest and be decentralized. Otherwise, we’ve failed. And so that key piece of economics was baked into some of the code.”

Payments (Transaction Batching, Subscriptions)

Metronome has also been designed to streamline payments made via blockchain services. He highlights how subscriptions are very hard to implement on blockchains, which are made for  push-payments; in order to send a payment, you must sign a transaction. A credit card transaction, on the other hand, is a pull or a periodic payment. Metronome adds subscription material and capabilities to the blockchain and cryptocurrency ecosystem.

This will be of interest to cost conscious users of non-bitcoin forked blockchains, such as Ethereum and Ethereum Classic. Unlike Bitcoin and its related cryptocurrencies, Ethereum is a one-to-one payment. In Bitcoin, you can pay a thousand people or ‘one-to-many’. Garzik wanted to add it to Ethereum, so he did.

“Mass payment is a one-to-many payment that saves you quite a bit on transaction fees because you [can] create one transaction to pay 10 people or one transaction to pay 25 people,” he explains. So, it’s far more efficient to the network and [it costs] less in terms of transaction fees.”

The system also makes subscriptions possible. “Subscriptions are another thing that are unique to blockchain projects in that normally you initiate a payment and it goes out to folks,” he says. “That’s the basic format that all blockchains very natively support.” But, subscriptions are radically different.

“That’s a periodic pull payment,” he says. “But blockchain, cryptocurrency, and tokens were intentionally designed so that some third party cannot just go and yank your money. That’s a really fundamental part of the system.” Metronome sought to resolve this paradox.

“We added very, very specific subscription features to Metronome,” says Garzik, adding that as far as Bloq is aware, this is unique in blockchain.

“Since the approval was already approved by the payer, anyone in the world – Bloq or a volunteer or the subscriber – can release that payment, move that payment,” he says, going on to explain how this plays out in the context of the Metronome ecosystem. “We have a robotic service that can go out there and call out and initiate payments on behalf of anyone. And we’re not custodying any money. We’re not in the moneyflow chain. We just have this machinery that issues payments on a periodic basis.”

This feature had to be form fit to work. “The user experience is a little bit different from your credit card subscription payments of ‘I authorize $10 a month from Netflix,’ but it’s getting very, very close to that,” says Garzik. “And, with a little bit of wallet, client-side modification will actually get there in terms of user experience. So, that’s one of the features that excites me the most is bringing these very familiar form factors, payment factors from outside the crypto world, and making it more in a way that makes sense in the crypto world.”

Metronome by some metrics is certainly on the map in terms of DeFi. It has several million dollars locked up in its converter contract and proceeds contract. “That puts us on the map in terms of these DeFI smart contract instruments where people lock up capital and then do something useful with it,” said Garzik.

After his talk on Metronome at Consensus, I spoke with Garzik in the Bloq suite.

We discussed what differentiates Metronome from other projects.

“When we launched metronome, it was unlike any other token out there,” he said. “In the 2017 ICO craze, we wanted to do the ethical initial coin offering. That [meant] no private sale, and all of the sale opportunities were public.”

While others lined their pockets before building anything, Metronome chose to go the exact opposite route and put 100% of the funds from the coin offering into a locked smart contract.

“That’s really going on our principals,” he said. “That’s using code to lock the funds away from us, as well as everyone else. The funds are used to bootstrap the community.” Every 24 hours, some of the auction proceeds go into the autonomous converter.

“Everyone else just shoves out a smart contract, shoves out a wallet,” he said. “We had the smart contract and wallet triple audited. We tried to add that extra bit of safety, because unlike every other ICO project out there, when we launch it, it’s done. It’s not, I launch a token to fund a team to build the thing. We used our own money, which is totally unusual, then we launched it. No other token follows that flight path except maybe Bitcoin. It was built, and then it was launched. And I think that that’s a healthier way to launch a token. And it’s less scammy. Principles and ethics are very important to us.”

Having bore witness to the ponzi schemes and scams that were prevalent during the ICO boom, Garzik is glad to see the free market is identifying and clearing ponzi schemes and scams out.

“What’s left after the hype, boom, and bust cycle is the people and projects. They’ve learned, they’ve been there, they’re not scams. The more trusted projects are left after the dust settles.”

Even today, more than ten years after the release of Bitcoin, you’re an early participant, he says. I ask him about the biggest challenge he faces. He ripostes that its finding resources for all his ideas.

“The biggest challenge is time in the day and more people than I can hire,” he says. “I have a stack of ideas that are our work on paper, and there’s only so much time in the day. It’s already gotten to the point where I’m trying to charge other people to go take my idea and run with it, because I don’t have time to do it. I can’t claim to have a solution for that. But the biggest challenge is just the time of the day from all the amazing things to do, all the stuff that needs to be built out.”

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