Mettalex DEX Breakdown

Mettalex DEX Breakdown

Go Back:

Our Projects

Researchers: @kchoe.eth @Yoon Lee @Jonathan Naour

The current opportunities of DeFi to revolutionize the financial system are great, however many are of limited to digital assets. The race to plug off-chain assets such as physical goods to on-chain finance is at the crux of what will enable the next generation of DeFi applications.

The investment team spent this semester conducting a deep-dive of Mettalex, a decentralized, blockchain-based derivatives exchange (DEX) focused on traditional and crypto commodities, unique DeFi markets, and traditional and crypto spreads. They are building a solution that can bridge that gap, to create real-world DeFi, with physical assets on top of a trustless infrastructure, starting with the metals sector.




Mettalex addresses the problems of traditional commodity futures markets, including lack of transparency, high fees, and limited access for smaller traders. By providing a decentralized platform for trading tokenized commodity futures contracts, Mettalex eliminates intermediaries, reduces fees, and increases transparency. This is critical for smaller traders who have historically been excluded from traditional commodity futures markets due to high entry costs and limited access. The protocol is open-source, live on the Ethereum mainnet, and has been audited for security.

Mettalex address challenges related to cost and capital efficiency, liquidity, risk management, and market access.
Mettalex address challenges related to cost and capital efficiency, liquidity, risk management, and market access.
Each smart contract in the AMM is associated with a pair of specially designed tokens, called Position tokens. The smart contract acts as a decentralized clearing house so it facilitates the matching between buyers and sellers on the market. Traders can exit or open a position whenever they desire without the need to find a counterparty interested in the trade.


The decentralized finance market has grown exponentially over the past year and is expected to continue growing in the future. As of March 2023, the total value locked in DeFi protocols is over $50 billion USD, and it is projected to grow to over $1 trillion USD by 2025. Within this market, the market for commodity derivatives is significant, with a global market size of over $20 trillion USD.

“For a scale comparison, the total value locked in DeFi ventures today is around $6.5 billion. In contrast, the size of the global commodities market is hard to measure accurately, but could be up to $20 trillion annually.”
“For a scale comparison, the total value locked in DeFi ventures today is around $6.5 billion. In contrast, the size of the global commodities market is hard to measure accurately, but could be up to $20 trillion annually.”

Product Market Fit

Mettalex’s decentralized platform for trading tokenized commodity futures contracts addresses a clear need in the market for DeFi products. The high fees and lack of transparency in traditional commodity futures markets have made them inaccessible to smaller traders, and Mettalex’s platform addresses these issues. As the global commodity futures market grows and more traders seek exposure to these markets, there is an increasing demand for decentralized platforms that offer a wide selection of futures contracts and low transaction fees.

By offering a wide selection of contracts, Mettalex allows traders to diversify their portfolios and hedge against various market risks. Through a hybrid on-chain/off-chain architecture, this structure allows for fast and efficient price discovery while keeping the costs low. The use of a dynamic AMM pool ensures that the market is always liquid, reducing the risk of price manipulation.

Mettalex aligns the incentives of physical commodity holders, traders and speculators, and liquidity providers.
Mettalex aligns the incentives of physical commodity holders, traders and speculators, and liquidity providers.


Mettalex has executed well in developing and launching its platform on Ethereum. The platform has been in development since 2018, launched in May 2021, and has executed well on its product roadmap so far. Since then, the platform has continued to add new commodity futures contracts and has integrated with other DeFi protocols to increase adoption and liquidity. However, as with any new protocol, there are still challenges and risks to be navigated, such as ensuring sufficient liquidity for all contracts and maintaining the accuracy and reliability of its oracle design.

“Additionally, the platform will provide speculators access to markets in thinly traded commodities, and to provide liquidity providers an income for providing liquidity.”


Strengths • Decentralized and transparent platform • Accessible to smaller traders Low fees (0.05%) • Wider selection of commodity futures contracts
Weaknesses • Limited liquidity for some contracts • Limited brand recognition compared to larger competitors
Opportunities • Expansion to other commodity futures contracts • Partnerships with other DeFi protocols
Threats • Competition from other decentralized exchanges and protocols • Regulatory uncertainty

The platform currently has limited liquidity, which can make it difficult for users to trade large volumes of contracts. Mettalex also faces competition from Synthetix and UMA, which also offer tokenized futures contracts. Established centralized commodity futures exchanges, such as the Chicago Mercantile Exchange can limit Mettalex's market share.


The platform offers a wider selection of commodity futures contracts, including base metals, precious metals, and agricultural commodities. This allows traders to diversify their portfolios and hedge against various market risks. Moreover, Mettalex is built on a unique oracle design that uses data feeds from trusted sources to ensure the accuracy and reliability of prices. This is a significant edge over its competitors, who have faced challenges with price accuracy and reliability.

  1. Combinatorial Auctions and Smart Markets which are deployable within Smart Contracts → high liquidity, lower barrier of entry
  2. Unlock new funding models for supply chain participants by allowing them to collateralize material and production capacity → full realization of value of underlying commodity held
  3. platform with ML / AI framework → solve autonomous monitoring, fraud detection compared to commodities trading market struggling to adapt to blockchain model


According to the website, the core team is comprised of 5 individuals.


Humayun is an entrepreneur, investor, and visionary focused on Al, machine learning, blockchain, and token-based economies. He was a founding investor in DeepMind, co-founded Fetch ai, Atomix, Mobix, uVue, and itzMe. In addition to his strong technological background, Humayun also has extensive experience in financial markets, including commodities trading and derivatives. Matt was a quantitative developer and quantitative analyst at Fidelity International and has previously assumed a data scientist role at fashion tech startup Metail, before joining and Mettalex.


One notable partnership is with Chainlink, a leading provider of decentralized oracle solutions. DEX Metallex has integrated Chainlink's price feeds into its platform, allowing users to trade commodities using real-time market data. This partnership enhances the security and reliability of the platform and is likely to attract more users to the platform. Another significant partnership is with the Ethereum-based stablecoin, USDC. DEX Metallex has integrated USDC into its platform, allowing users to trade commodities using a stablecoin that is pegged to the US dollar.

This integration enables users to trade commodities without being exposed to the volatility of the cryptocurrency market, making it a more attractive option for traders. Furthermore, DEX Metallex has also partnered with several other decentralized platforms such as Aave, Compound, and MakerDAO. These partnerships enable users to earn interest on their crypto holdings while they trade commodities on Mettalex, providing users with additional incentives to use the platform.

Price Benchmark Providers and Ecosystem
Price Benchmark Providers and Ecosystem


Mettalex had great partnerships and with that, they were able to show interesting numbers for open and closed contracts of different commodities.

The open contracts in the platform were “Steel Rebar”, “Uranium Ore V1”, and “BTC TSLA Spread V6 ” which had a notable amount of Total Value Locked (TVL). The closed contracts contained more variety than the open ones ranging from Aluminum to MATIC. Each contract's financials were the sum of all versions of each contract (e.g. TVL of BTC TSLA Spread is the sum of all TVLs from V1 to V6).

Below is the summary of the financials of each contract.

TVL (⚙️)
*Fees (⚙️)
Steel Rebar
$ 20,179
$ 71
Uranium Ore V1
$ 1,000
BTC TSLA Spread V6 (V1-V5 settled)
$ 20,000
Aluminum (Settled)
$ 25
HMS 1&2 (80:20) CFR Turkey (Settled)
$ 20,224
$ 106
AKHMS 1&2 (80:20) CFR Turkey (Settled)
$ 19,739
$ 141
100x FET (Settled)
$ 22,438
$ 179
MATIC (Settled)
$ 20,451
$ 107

⚙️ Thousand dollars ($1,000)

*Fees that were generated from the Liquidity Pool

Here are two takeaways from the financial metrics provided above.

  • Compared to other Contracts, FET was more actively traded (before the settlement booking $179,000).
  • AKHMS 1&2 CFR Turkey, a metal scrap contract liquidity pool, had the second highest profit among all contracts.
  • Both metal and cryptocurrency contracts had a high amount of TVL

Missing data is not giving a perfect picture of the contract but with what we have we can draw a conclusion that metal contract is as popular as cryptocurrency contracts which is a great indicator of growth potential.



Mettalex is dedicated to creating a blockchain-powered commodities exchange that allows market participants to benefit from economic exposure to the current commodity spot price. The Mettalex DEX offers risk-hedging options for both physical holders of the commodity and speculators looking to leverage their positions. In order to ensure adequate liquidity, the platform relies on liquidity providers to provide the collateral for long and short-position token pairs. Originally, the collateral had to be a stablecoin such as USDT, but this limited liquidity because crypto holders preferred to keep their assets instead of exchanging them for stablecoins.

This approach ensures traders can continue to use the DEX in stablecoins while liquidity providers can supply liquidity using non-stablecoin tokens. This system also encourages liquidity providers to lock their MTLX tokens by paying them in MTLX tokens, thereby increasing buy pressure on MTLX. Furthermore, there is a vote escrow token locking mechanism that rewards liquidity providers with a portion of trading fees earned and allows governance operations, providing an incentive for them to lock MTLX tokens. Finally, the Mettalex system comprises four layers:

  1. An exchange layer for taking long and short positions against reference assets or related derivatives
  2. A tokenization layer for representing long and short positions
  3. An autonomous market maker layer linked to reference assets
  4. A liquidity provision layer where lenders can supply liquidity to the autonomous market makers and receive a proportion of the market-making fees

The governance layer rewards liquidity providers with governance tokens based on the amount and duration of liquidity supplied to the system.

Overall, the Mettalex DEX is dependent on liquidity providers (LPs) providing stablecoin liquidity to support the formation of position token pairs. In return, LPs earn trading fees from DEX traders and also receive rewards in the form of MTLX governance tokens. There are plans for the future to utilize the MTLX token for governance purposes such as market creation and fee setting.



Once MTLX tokens or other means of investment open up to retail investors like you and I, we should be aware of the risk associated with the investment.

The United States former Secretary of Defense, Donald Rumsfeld, had a good risk management principle where he put risk into 3 categories: known known, known unknown, and unknown unknowns.

We are going to focus on all three of them for this protocol.

Known knowns

As everyone knows, the interest rates are not at rock bottom anymore like in 2021. The Fed has been increasing interest rates to tame inflation, and this is not good news for risk assets like Mettalex(MTLX).

As the interest rate goes up, the nominal yield that money market funds and Treasury bills provide to investors goes up as well. In order for risk assets such as equities to have a better return than the interest rate is to have an income growth rate that is higher than the interest rate that is present. However, as interest rates go up, the likelihood of companies outperforming the fed funds rate gets slimmer and slimmer.

As of April 6th, 2023, the fed funds rate has been sitting around 4.75% to 5%. Remember, the interest rates were 0% to 0.25% during Covid-19.


This interest rate risk can be mitigated by hedging the expected direction of the interest rate-buying interest rate futures or buying gold.

Another known risk is the security risk of the Mettalex platform. All DeFi applications have security / smart contract risk, and Mettalex is not safe from it. has been audited by Certik, and it has received a security score 95.68, which is the 16th most secure network among all blockchain networks that Certik has audited. Despite its good security score from an audit company, Mettalex is being run on a fairly new born protocol,, so there are protocol risks, remember DAO hack in Ethereum?

So, if you are planning on investing some capital into this protocol, make sure that you do your own research to lower this risk.

Known Unknowns

Aside from the US increasing interest rate and protocol risk that Mettalex has, we have another big one coming: US is building regulations for the crypto space.

After the collapse of FTX, cryptocurrency exchange and decentralized finance industry grabbed a lot of attention from US regulators. US citizens from the bottom to the top of the income percentile were affected, so there will be strong regulation ahead of us.

Since Mettalex is a metal contract exchange platform, it is likely to be regulated by CFTC. But what do we know about how the regulations will play out? A complete ban of Mettalex? An agreement for the platform to be partially or fully centralized? We do not know.

Another possible known unknown risk is a hack on your personal hot wallet, so make sure that you keep your crypto in a cold wallet.

Investors should know other unknowns and prepare themselves for such risks.

Unknown Unknowns

Besides from potential known risks that are laid out, there are other unknown events that could play out in the future like COVID-19 did in 2020…, say WWIII, internet shutdown, who knows?

As Nassim Taleb puts it, “black swan” events could happen, and it happens multiple times throughout one’s journey as an Investor, so one should always adhere to their principles and do everything they can to stay away from potential things that can push them out of their stasis.

The risks are laid out. Now, we should take a look at the catalysts of positive price action for Mettalex.



Potential New Steel Scrap Contract

Mettalex is discussing the possibility of introducing an Asian-focused scrap contract with various exchanges. There is potential for a derivative in the growing market of steel scrap transported in containers. Mettalex has been working on developing a forward curve for this product and has engaged in talks with multiple exchanges.

It’s important to note that the success of a new futures contract for steel scrap also depends on competition from other exchanges and the availability of alternative risk management tools. If there are already established futures contracts for steel scrap on other exchanges, or if there are alternative risk management tools available to traders and producers, the demand for a new contract may not generate significant profits for the futures exchange. However, steel scrap is also a key input in the steel production process, and its price is often closely linked to the price of steel which has proved to be very profitable. Therefore, by adding a futures contract for steel scrap, traders and producers in the steel industry can manage their price risk more effectively, which can lead to increased hedging and trading activity on the platform.

Orion Network

Mettalex has partnered with the Orion Network to become a broker, allowing for the trading of both real-world and cryptocurrency-based commodity derivatives on the Orion Terminal across multiple chains. By joining the Orion Broker Network, Mettalex will contribute to the Orion ecosystem's expansion of cross-chain liquidity for commodity derivatives, including exotics.

Orion Protocol will support Mettalex by providing revenue through transaction fees and fostering growth and accessibility. Orion Protocol consolidates liquidity, order book depth, and price discovery from various centralized and decentralized digital asset markets, creating the Orion Terminal, a decentralized portal for cryptocurrencies. Furthermore, Mettalex's native token, MTLX, will be listed for trading on Orion Terminal.

Liquidity Provider Rewards

The majority of potential Mettalex tokens, equivalent to 87.5% or 35 million, have been allocated for rewards to liquidity providers during platform operations. This token distribution will take place over a four-year period, spanning 8,409,600 blocks, each lasting 15 seconds. The approximate rate of distribution will be = 4.1 MTLX per block.

Network Incentives

  • A total of 12.5% of the tokens have been earmarked as network incentives for participants in the Mettalex ecosystem. The allocation breakdown is as follows:
    • The first portion of 1M tokens, equivalent to 2.5% of the total, will be initially distributed to FET stakers over 21 days.
    • An additional 1M tokens, or 2.5% of the total, will be reserved for future FET staking in increments of 500k, 350k, and 150k tokens.
    • An incentive pool of 2M MTLX tokens, representing 5% of the total, will be released over a year for stakeholders and partners.
    • The team will receive 1M tokens, or 2.5% of the total, to be distributed over a period of three years.
Profit Strategies

Profit Strategies

Market Timing


In the most recent annual report by BIS, the research group was carefully thinking about the possibility of stagflation for the upcoming years where we experience stagnant growth with high inflation. Usually in the time of stagflation, it is known that commodity price* and bond yields rise, but stock prices fall. The heavy borrowing from the low interest rate era and now the slowing growth rate with high interest rate will likely to cause some disturbances in the market before the above mentioned stagflation price dynamic play out. So, in a macroeconomic perspective of the market, we have a big storm ahead of us but we may not know exactly when it will, so it is wise to deploy capital periodically like DCA (Dollar Cost Averaging).

*refer to Graph 1 for commodity price action relative to USD index.


Since Mettalex is in its early stage, we have a high chance of losing money but if we are right the upside is even greater. In order to hold this token long enough to capture the upside, it would be great to allow up to 50% loss on this position, but let it run until the position doubles, so the principal can be protected, and the investor can have a peace of mind.