Introduction

MetalSwap is a decentralized platform that allows hedging swaps on financial markets with the aim of providing a coverage to those who work with commodities and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators.

At the moment, financial swaps are the most widely used "insurance" tool for large-scale exchanges of raw materials such as metals, but everything takes place on centralized markets that require financial hedge and bank credit lines that are not always accessible to all and with "restrictive" bureaucratic times.

With the concept of an economic incentive, given by the distribution of the governance token ($XMT), the system will have publicly accessible pooled liquidity. Through a set of "smart contracts", initially written on Ethereum, the contracts will make it possible to execute swaps without the need for intermediaries, at reduced costs and without time restrictions.

Issues of the current commodities supply system

Erosion in profit margins

due to persistent demand for purchasing efficiency improvements. Commodity consumers put pressure on their producers in order to have an always more competitive price, this constant pressure reduces producers' profits.

Excessive price volatility

Excessive volatility is detrimental to proper planning and prevents from securing a determined profit. To overcome the inconvenience, financial hedge is required, but this can take hours, if not days. As market prices move quickly, even a few hours of latency can represent a significant loss of profit.

Commitment to purchase volumes

Buyers of raw materials are forced to place orders significantly in advance of scheduled supply, with no guarantee that demand will remain the same…

Consider the following example: a chair manufacturer who sold 2,000,000 pieces the previous year needs to order metal for the legs of the chairs and does so under the assumption that he will sell 2,000,000 pieces again this year, but no one can guarantee that this will happen. The manufacturer still has to buy the metal in advance to make sure he can satisfy the demand for the chairs.

The traditional Centralized Finance solution

Traditional finance attempts to solve its problems through the tool known as "commodity swap".

The commodity swap is a contract between two parties that aims to set the price of a certain commodity.

The functioning of this tool is similar to that of a normal swap:

• once a notional capital is established, buyer and seller agree to make periodic payments to each other, the first party based on a fixed parameter, the second party based on a variable parameter that reflects the price trend of the underlying commodity.

• Commodity swaps were introduced in the mid-1970s to allow producers and consumers to hedge price risk in certain markets.

• Indeed, the consumer typically pays the "fixed leg" of the swap to hedge against a potential price increase, while the producer pays the "variable leg" to hedge against any decrease.

The elements that characterize a swap include:

• the notional capital of reference

• the stipulation date of the contract

• the duration of the swap.

The benefits of MetalSwap, DeFi's solutions

The issues expressed above and related to a CeFi (Centralized Finance) context, find their natural resolution with MetalSwap, developed on a DeFi (Decentralized Finance) system.

1. Costs minimized: The commission costs charged on the operation of hedging swaps for trading derive from the cost of the work performed by the financial intermediary: the broker. In MetalSwap there is no need for an intermediary, it is entirely based on blockchain technology through the use of smart contracts.

2. Trustless: Since there are no intermediaries, there is no need to trust anyone. The funds are not entrusted to a third party, they remain available in your wallet and you decide how to manage them.

3. Decentralization of the system: The issue of monopoly is overcome by MetalSwap's intrinsic automatism and by decentralized finance.

4. No need for bank coverage: Bank coverage is no longer necessary: MetalSwap solves this issue with a shared liquidity pool system, where each participant (Liquidity Provider- LP) is rewarded for their contribution through the provision of project governance tokens (XMT). Through XMT, it is possible to propose and/or vote on propositions to expand the project. MetalSwap allows you to open hedge positions only if they can be counter-guaranteed by liquidity pools. That's why in MetalSwap trust is not necessary, it is an entirely and mathematically trustless system.

5. Market open 24/7: Unlike traditional offices with their constraining hours, MetalSwap is open 24 hours a day, 7 days a week.

Liquidity pools

Liquidity pools form the store of value that funds MetalSwap's operations.

The liquidity injected into the Liquidity Pools consists of all crypto assets that can be used as underlying assets for swap transactions, and is contributed by users who decide to allocate their assets by becoming liquidity providers (LPs).

As compensation for their service, LPs will receive a certain amount of official project tokens, which can be used for project governance.

In order to guarantee the stability of the swap pairs, the liquidity balancer technology module is used, with the function of maintaining reserves of the various assets at similar levels between pools.

Staking pools

Staking pools are used to incentivise the blocking of project governance tokens by giving rewards to users who choose to participate in these pools. The rewards are managed with a system of weighted averages that take into account the time during which crypto assets have been allocated in the pool, and the amount of tokens paid in.

At the end of the staking period, fixed at the creation of each pool (e.g. 30 days, 90 days, etc.) the reward in tokens, previously blocked in the pool's smart contract, is distributed, according to the weighted average system.

Other systems in the architecture can be used to increase the various rewards (e.g. Dao voting or the Buyback reward system) of the pools. The accrued reward can be requested via the smart contract function connected to the web app GUI.

Buy-back system

A large proportion of the fees generated by the system will be used for a smart contract system that will buy back XMT tokens from decentralised marketplaces (such as Uniswap).

The buy-back system will help fuel the demand for XMT tokens and, at the same time, add tokens to the various incentive schemes, according to the logic pre-established and/or voted by the DAO.

WebApp

The webApp is the portal that the user uses to interact with the services offered by MetalSwap.

The webApp does not keep any user identification data and only requires the user to login with the web wallet. All the identification information of the user's operations, including the status thereof, are saved through the address of their wallet directly on smart contract.

When the user is performing operations, for example creating a swap, the webApp sends the data entered in the frontend, directly to a node of the blockchain, thanks to the web3 connector and a series of ad-hoc libraries.

These libraries allow the interaction with the smart contract functions using JSON-RPC calls and prepare the transactions that are then passed to the Web Wallet module. The user only has to sign the transactions confirming them through the Web Wallet GUI, and then he can comfortably follow the status until the execution is completed.

The webApp is implemented using an open-source and component-based Javascript library, React, with an asynchronous state management via redux paradigm.

DAO

The DAO constitutes the decision-making body of the MetalSwap project. It is composed of a series of smart contracts (acting as the main governance token) with which token holders can interface via webApp to vote on proposals and create new ones.

The DAO contract, through cross contract calls, may be able to directly execute the code of other smart contracts (after successful voting). Proposals that can be created can cover a few predefined categories, with some of them implementable in an automated fashion by the DAO's smart contracts, such as transferring project tokens in order to fund worthy user initiatives in support of MetalSwap, or as funding to support projects and enrolled technology integrations of the MetalSwap ecosystem proposed by users.

Among the types of proposals, it is possible to find ideas about long term or short/medium term objectives, both about MetaSwap features as well as about its technological macro-developments, for example: requests for new integrations of technological features to ensure compatibility with other ecosystems and/or blockchain markets, or requests regarding the creation of new synthetic crypto assets representing commodities, currently not yet included in MetalSwap. Holders of governance tokens can express their opinion on the worthiness of the proposals. The vote has a weight directly proportional to the number of governance tokens held in the owner's wallet.

MetalSwap Tokenomics (XMT)

The purpose of XMT Tokens is to participate in DAO deliberations.

Founders, team and advisors:

10% of tokens with 2 years vesting

Ecosystem Development:

10% of tokens with 15 months vesting

Seed tokens:

1% of tokens with linear vesting over 1 year

Private tokens:

4% of tokens with 6 months vesting

Treasury:

25% of tokens

Public sale:

15% of tokens (1% IDO)

Rewards and Community:

23% of tokens Marketing: 2% of tokens

Strategic investors:

10% of tokens

Governance

MetalSwap, through governance tokens, allows project participants to design the future of the project. XMT Tokens are used to make new proposals and/or vote on proposals that have been made.

To make a new proposal a minimum threshold of governance tokens will be required. Voting power depends on the amount of tokens held, staked or delegated.

Tracking Metal Swap