Mantle Network 20,000-word research report From technical features to token models, in-depth understanding of modular Layer2 new stars

Mantle Network In-depth analysis of modular Layer2.

Mantle Network is a modular Layer 2 network compatible with the Ethereum Virtual Machine (EVM), incubated by BitDAO. It provides high throughput, low fees, and fast determinism through roll-up technology and a decentralized data availability layer (Mantle DA), while ensuring Ethereum-level security. It also uses multi-party computation and decentralized sorters to enhance network security and decentralization. The goal of Mantle Network is to provide a high-performance, low-cost, and user-friendly platform for the Ethereum ecosystem to promote the mass adoption of decentralized applications.

1. Research Focus

1.1. Core Investment Logic

Mantle Network is an L2 scaling solution based on Optimistic Rollup technology, providing EVM compatibility and modular design. Its core investment logic is mainly reflected in the following aspects:

Mantle Network, incubated by the well-known DAO organization BitDAO, has significant advantages in terms of technical team strength and financial support. This lays a solid foundation for Mantle to establish a strong position in the competitive landscape of Layer 2. At the same time, Mantle has already formed strategic partnerships with multiple top projects, which will facilitate its rapid integration into the Ethereum ecosystem and the gathering of users and application scenarios. As the Ethereum ecosystem continues to grow and develop, Mantle can further tap into a huge market space. It can be said that Mantle has a strong technological and financial backing, broad market prospects, and is building a win-win ecological system. This is the key to its long-term investment value. In addition, in terms of asset allocation, Mantle Treasury holds a large amount of mainstream digital assets, which provides stronger liquidity support and market-making capabilities, helping to consolidate the price of the MNT token. Compared to other DAOs that only hold governance tokens, Mantle’s richer asset reserves also enable it to fully finance ecological construction. Mantle can use its asset advantage to establish an ecological fund and attract high-quality projects. This is also the key support for Mantle as one of the important Layer 2 networks with long-term development prospects.

A sound governance mechanism contributes to the long-term stable appreciation of the token. The organization behind Mantle Network, BitDAO, has taken various measures to enhance the long-term stability and appreciation potential of its token economic model. For example, it has changed the donation model of Bybit, reducing the donation amount in fixed stages and reducing token circulation; it has mitigated the inflation risk of treasury tokens through governance theory; it has learned from other L2 token models to control the incremental supply not exceeding 2% of the total supply, and so on. These governance measures reflect the importance that the organization behind Mantle Network attaches to maintaining the value of the token and its ability to learn from other successful cases. This also gives the MNT token better long-term appreciation potential compared to other cryptocurrencies. It can be foreseen that as the ecosystem matures, Mantle Network will continuously improve its governance mechanism and formulate more policies to enhance the intrinsic value of the token based on the collective wisdom of the DAO, laying the foundation for the long-term investment prospects of MNT.

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The various operational mechanisms of Mantle Network provide a way to reduce the circulation of MNT tokens. Unlike other L2 networks that use ETH as the gas token, MNT tokens are used as the gas token for the Mantle chain. As the ecosystem develops steadily and the on-chain interactions become active, MNT will be stably consumed without the need for other artificial adjustments, creating a stable deflationary model. At the same time, through multiple token staking scenarios, the circulation of tokens can be effectively reduced, thereby enhancing the value of the tokens. The economic model design of Mantle Network provides support for the long-term investment value of MNT by having mechanisms to reduce token circulation in multiple aspects, which is a core logic of MNT investment.

Mantle Network adopts a modular technical approach, reflecting the forward-looking nature of its technical system. The functions of each component of Mantle are clearly divided and designed with loose coupling, ensuring the flexibility of the system to adjust components as needed to adapt to technological and business changes. For example, the data availability component EigenDA can be easily replaced with other storage solutions. Compared to the Monolithic architecture, the modular system of Mantle is easier to update and iterate, and it has higher security and stability. If there are problems with the system, they can be resolved by upgrading individual components instead of requiring a complete reconstruction. In addition, modularity allows third parties to only access or use certain functions of the Mantle system according to their needs, expanding the system’s applicability and scenarios. This design concept is worth learning for other projects and is the technical foundation for Mantle’s long-term investment value.

Mantle Network achieves a level of scalability that other L2 networks find difficult to achieve. By using Optimistic Rollup and the independent data availability layer EigenLayer, Mantle can provide lower cost and faster transactions. This architecture is different from other Ethereum Layer 2 scaling solutions such as Cartesi, Loopring, Polygon, and Arbitrum. Although Mantle is not the only L2 solution that uses an independent data availability layer, its data availability layer, MantleDA, is decentralized, while the data availability layers of other L2 networks often adopt a centralized architecture. This allows Mantle to achieve true decentralization and high scalability. Through this technological architecture innovation, Mantle is expected to provide transaction performance and cost advantages that surpass other L2 networks. This scalability improvement will contribute to its widespread adoption and competitive advantage. Therefore, Mantle’s high scalability is an important differentiating technological advantage and investment value proposition.

The security of Mantle Network is built on the strong consensus mechanism and the set of validation nodes of Ethereum. The state and transactions of Mantle are verified by Ethereum validation nodes in the same way as on the L1 chain. In other words, the set of nodes that verify the security of Mantle transactions is consistent with Ethereum, which is different from other L2 networks that use their own consensus models. Mantle directly inherits the strong security of Ethereum, and its security is not weaker than the Ethereum mainnet. This close integration of Ethereum’s security model design gives Mantle a unique advantage and higher reliability in terms of security compared to other L2 networks. This is a core competitive edge and investment value proposition of the Mantle network.

1.2. Valuation

According to CoinGecko data, as of September 3, 2023, the price of $MNT token is $0.45, with a market capitalization of $1.459 billion, a circulation of 3.234 billion tokens, and a total supply of 6.219 billion tokens. The fully diluted market value is $2.805 billion. After conducting in-depth analysis and valuation of the Mantle Network project, we believe that the $MNT token is somewhat overvalued at the current stage. However, in the long term, if Mantle is able to fulfill its technical commitments, develop its ecosystem steadily, and fully demonstrate its technical advantages, ecosystem potential, and market space, there will be room for valuation improvement.

We will detail the valuation analysis method and basis of Mantle Network in the subsequent report (Section 6.2 Valuation Level of the Project). At the same time, we will continue to monitor the development dynamics of its ecosystem in order to timely adjust our valuation judgment.

1.3. Project Risks

The main risks currently faced by Mantle Network are: competition risks in the fierce Layer 2 competition environment, technical security risks, risks of being in the early stage of project development, negative impact of poor performance of BIT token on MNT, and the risk of the OP Rollup technology direction it represents no longer receiving community support. For specific details of project risks, please refer to Section 6.3 Project Risks.

2. Project Overview

2.1. Business Scope of the Project

Mantle Network is an Ethereum Layer 2 solution based on the Optimism OVM architecture. It adopts a modular design and attempts to use EigenDA as the data availability layer and Specular Network’s fraud proof system to achieve transaction validity proof.

According to the official information of Mantle Network, in addition to being an L2 scaling solution providing fast and low-cost on-chain transactions and establishing a sustainable business model for public chains, its other main businesses include:

1) Mantle LSD (Coming Soon)

Mantle LSD is a decentralized staking service based on Lido, which allows users to stake ETH on Ethereum 2.0 and receive mntETH as a voucher. Mantle LSD aims to become the preferred solution for ETH liquidity staking in the Mantle ecosystem by leveraging the synergies of the Mantle Network ecosystem. It can reduce Mantle’s deposit costs and allow third-party applications to use and expand without permission. Mantle LSD also has a simple and secure system architecture that can leverage the existing capabilities of the Mantle ecosystem, such as community, governance, brand influence, etc., to promote the development of the Mantle Network ecosystem.

2) Mantle EcoFund

Mantle EcoFund is a $200 million ecological fund provided by Mantle Treasury, jointly invested with strategic partners at a ratio of 1:1. The main goal of EcoFund is to promote the adoption of developers and DApps on the Mantle Network, while considering the sustainability and returns of the fund. EcoFund will prioritize investment in teams building high-quality and innovative projects within the Mantle ecosystem and increase investments in potential outstanding projects at the appropriate time.

3) EduDAO

EduDAO is a decentralized autonomous organization (DAO) that connects different university ecosystems to enhance collaboration and data exchange, nurturing the next generation of blockchain and Web3 innovators. EduDAO is funded by the BitDAO treasury and operates as an independent steering committee, allocating up to $11 million in funds annually for project grants, research, and independent product development. EduDAO’s university partners include Berkeley RDI, Berkeley Blockchain, Penn Blockchain, Harvard Blockchain Club, MIT Sloan Blockchain Club, Michigan Blockchain, USC Blockchain, Oxford Blockchain Society, and Tsinghua University Student Blockchain Association. EduDAO aims to cultivate the next generation of leaders and creators in the blockchain industry.

4) Game7

Game7 is a game accelerator that aims to drive the development of permissionless and interoperable gaming worlds. Game7 provides game developers with essential tools such as NFT marketplaces, cross-chain bridging, and game DAOs.

Game7 and Mantle Network are both projects incubated by BitDAO and have a close collaborative relationship. Game7 will leverage the infrastructure provided by Mantle Network to offer high-quality user experiences and ecosystem interoperability for its incubated and invested gaming projects.

2.2. Team Situation

2.2.1. Overall Situation

Mantle Network, as a Layer 2 network solution, is incubated and supported by the renowned DAO organization BitDAO. The initial concept and prototype of Mantle were proposed by Ben Zhou, the CEO of Bybit, and other prominent members of the crypto community, including Sreeram from EigenLayer, Dow Jones, and Cooper Midroni. The team consists of over 50 professionals from different fields and backgrounds, working in a flat management structure.

2.2.2. Team Background

Mantle Network’s creation background, resource commitments, and future vision are closely related to its incubating organization BitDAO. To fully understand the historical origins and development of Mantle Network, it is necessary to explore the relevant history of its incubating organization BitDAO. Mantle and BitDAO can be seen as two integral components, with Mantle’s success relying on BitDAO’s strong resource support and shared vision and goals.

1) BitDAO

BitDAO was founded in 2021 by Daniel Yan and Ben Zhou, co-founders of the Singapore-based cryptocurrency derivatives exchange Bybit. The treasury assets come from fundraising and donations. In June 2021, BitDAO raised $230 million in a private financing round, with investors including Founders Fund, LianGuaintera Capital, Dragonfly Capital, and others. In August of the same year, BitDAO completed an auction through the BIT-ETH pool on SushiSwap’s MISO platform, issuing 200 million BIT tokens and raising 112,670 ETH (worth $360 million at the time).

BitDAO is one of the largest DAO organizations to date, with its DAO treasury managing assets worth about $3.4 billion, mainly composed of BIT, MNT, ETH, USDC, and USDT.

The reason why BitDAO is able to gain popularity is thanks to the contribution of its backer Bybit. As the biggest supporter of BitDAO, Bybit has committed to donating 0.025% of its futures contract trading volume to the BitDAO treasury. Some public data shows that between July 2021 and June 2022, Bybit has donated over $1 billion worth of tokens to BitDAO. In June 2022, Bybit announced that it will continue to donate tokens to BitDAO regularly for the next 4 years, but the donation amount will gradually decrease. The specific daily donation information and disclosures may need to be obtained through the BitDAO community.

2) Ecosystem Merger

In May 2023, BitDAO completed the merger with Mantle Network through the BIP-21 proposal, unifying the brand and token as Mantle (MNT). This established a larger ecosystem, and the MANTLE ecosystem inherits BitDAO’s vision and obtains its financial and community support for the operation and development of the Mantle Network. BitDAO’s token BIT is also converted to MNT at a ratio of 1:1. After the merger with BitDAO, Mantle Network has become the largest treasury in the cryptocurrency industry, with a value exceeding $3 billion at the time of writing this article.

It can be seen that Mantle has strong support from BitDAO, with abundant financial strength, and the exploration of decentralization by the centralized exchange Bybit is beneficial to the future development of the Mantle Network. At the same time, the integration of token economy also consolidates the ecological resources, providing strong guarantees for the further development of the project.

2.2.3. Core Members

Arjun Kalsy: The ecosystem leader of Mantle Network, responsible for project marketing and ecosystem construction. He is a successful blockchain entrepreneur and advisor, and was the Vice President of Growth at Polygon, responsible for business development and ecosystem expansion of the platform. He has also been involved in major corporate collaborations, such as Reddit, Instagram, and Disney. Prior to this, he was a customer relationship manager at Playment, where he helped clients train high-precision AI/ML computer vision models, with a focus on applications in autonomous driving and transportation.

Joshua Lapidus: Strategic advisor to Mantle Network, responsible for assisting in the development and expansion of Mantle Network, as well as collaboration and interaction with other Web3 ecosystems. He is the current host of Unemployable, a podcast for freelancers, independent workers, and self-employed individuals. He also serves as a writer for BanklessDAO and is the founder of three successful NFT projects: Rainbow Rolls of NFTP, BufficornBUIDLBrigade of ETHDenver, and Public Nouns (a project that forked from NounsDAO, dedicated to providing funding for public goods through creative means).

Pranjal Bhardwaj: One of the co-founders of Mantle Network. Pranjal has worked in the cryptocurrency field for many years, previously serving as a senior development engineer at Polygon and later joining BitDAO. At BitDAO, Pranjal is responsible for the development team and has participated in multiple projects incubated by BitDAO, including Mantle Network. In the Mantle Network project, Pranjal Bhardwaj serves as the technical lead, responsible for the design of underlying technologies such as blockchain and smart contracts. He is a key member of the Mantle Network technical team and has played an important role in the design of the project’s technical architecture.

Sreeram: Co-founder and Chief Technology Officer of Mantle Network, as well as co-founder and Chief Technology Officer of EigenLayer. Sreeram is an experienced software engineer and architect who has worked on projects in distributed systems, big data, machine learning, and other fields for companies such as Dow Jones and Cooper Midroni. He is the main designer and developer of Mantle DA, focusing on providing efficient and secure data availability layer.

Other members: The Mantle Network team also includes several outstanding engineers, designers, operations personnel, marketing personnel, etc., who are responsible for different aspects of Mantle Network, such as network development, contract writing, interface design, community management, brand promotion, etc. Together, they constitute the core strength of Mantle Network and have made contributions to its development and growth.

2.3. Financing Situation

As a project incubated by BitDAO, Mantle did not conduct independent public financing. Initially, Mantle was funded by Bybit, but after the BIP-19 proposal was passed, funding was provided by the Mantle budget managed by BitDAO. According to the Mantle core budget address provided by BitDAO, the current funding is over 18 million US dollars.

2.4. Past Development and Roadmap

2.4.1. Past Development

2.4.2. Current Progress

According to information from its official website and forum, Mantle Network is currently undergoing or planning the following major work:

▪ Improve and optimize the technical architecture and functionality of Mantle Network, including EigenDA, MPC, decentralized sorter, etc.

▪ Promote the ecosystem construction and partnership of Mantle Network, including integration and support with Ethereum protocol, cross-chain bridges, DeFi applications, GameFi applications, etc.

▪ Release and operate proprietary products and services of Mantle Network, including LSD (Liquidity Staking Derivatives), EduDAO, Game7, etc.

▪ Establish and manage the ecological fund and treasury of Mantle Network, including providing funds, resources, and incentives to ecological projects and developers.

▪ Enhance and expand the community and brand of Mantle Network, including organizing various activities and competitions, releasing various promotional and educational materials, establishing various social media and communication channels, etc.

2.4.3. Development Plans and Roadmap

According to the information on the project’s official website, the future development plans and roadmap of Mantle Network are as follows:

▪ September 2023: Mainnet Beta version goes live, providing more stable and reliable network services and supporting more DApps and protocols.

▪ October 2023: Launch EigenLayer data availability layer and inherit the security and decentralization of Ethereum through re-collateralization of ETH.

▪ November 2023: Introduce multi-party computation (MPC) and use threshold signature scheme (TSS) technology to improve the correctness and privacy of off-chain transactions.

▪ December 2023: Introduce decentralized sorter functionality and provide secure and trustless block production by rotating permissionless sorter sets.

▪ January 2024: Launch cross-chain bridging functionality and achieve interoperability with other L2 projects and public chains.

▪ February 2024: Launch NFT marketplace functionality and support users in creating, trading, and showcasing NFTs on Mantle.

▪ March 2024: Introduce DAO functionality and allow users to participate in the governance and decision-making of Mantle through the $MNT token.

3. Project Analysis

3.1. Project Background

The emergence of Mantle Network is mainly based on the following two aspects:

1) Market Trend Background

The birth of Mantle Network takes place in the context of the rapid development of Ethereum L2 and increased global regulatory scrutiny. With the rise of DEX, the trend of cryptocurrency trading migrating from CEX to DEX is evident. However, the high Gas fees and low throughput of Ethereum L1 have limited the development of DEX and DeFi. Therefore, L2 scaling solutions have become the key to addressing this pain point. The Ethereum Cancun upgrade planned for November 2023 will significantly lower the storage costs of L2, further promoting innovation and competition in the L2 space.

In addition, the wave of compliance is driving the efficient era of Layer 2. As regulatory authorities tighten the use of crypto assets, compliance has become an important issue in the blockchain industry. This has led many Layer 2 projects to adopt a model of non-token issuance, profiting through Gas fees and MEV revenue. Currently, mainstream solutions like Arbitrum and Optimism adopt a centralized sorter architecture. This efficient setup allows them to enjoy the benefits of Layer 2 while better addressing regulatory requirements. It can be foreseen that in the trend of compliance, lightweight asset Layer 2 networks will unfold more rapidly, forming scalable applications, which is almost the deterministic future of Layer 2 development. As a new generation Layer 2 network, Mantle is also influenced by changes in the regulatory environment, and adapting to compliance will be an external situation that Mantle needs to pay attention to, launching together with other Layer 2 projects to jointly promote the arrival of the Layer 2 era.

2) Technical Background

In the L2 rollup technology camp, both OP fraud proof and ZK zero knowledge proof have their own advantages and disadvantages. Storage cost and computation cost are the challenges they need to face. In addition, most existing solutions adopt centralized sequencers, which are prone to single point failures. As an Optimistic Rollup-like solution, Mantle’s key innovation lies in its modular network architecture design. Mantle can decouple and optimize different components such as transaction execution, data storage, and confirmation process. This modular approach can improve network throughput and scalability without compromising security. It also enables Mantle to achieve more cost-effective contract development and deployment. In addition, to address the issue of centralized sequencers, Mantle Network plans to decentralize sequencers in the future, allowing the community to participate in the operation and governance of sequencers, thereby increasing the decentralization and attack resistance of the network.

Furthermore, the current challenge period for OP fraud proof is 7 days, which means users have to wait for 7 days to withdraw assets from L2 to L1. This has a certain impact on user experience and liquidity. In order to solve this problem, Mantle Network plans to shorten the challenge period to 1 to 2 days by implementing multi-party computation (MPC).

3.2. Project Principles

The core principle of Mantle Network is to use Optimistic Rollup to achieve L2 scaling solutions. Optimistic Rollup refers to a technology that uses fraud proof mechanism to ensure the security and synchronicity between L2 network and L1 network. The basic principle of Optimistic Rollup technology is as follows:

1) Deploy a fraud proof contract on the L1 network to receive block hashes from the L2 network and provide a mechanism for challenge and proof.

2) Run an execution layer on the L2 network to execute transaction requests initiated by users on the L2 network and update the state on the L2 network according to state transition rules.

3) Select a sequencer on the L2 network to collect users’ transaction requests, package them into blocks in a certain order, and submit the block hashes to the fraud proof contract.

4) Run multiple validators on the L2 network to monitor the block hashes on the fraud proof contract, replay the transactions in the blocks according to the state transition rules, and verify their correctness.

5) If validators discover errors or fraudulent transactions in the blocks submitted by the sequencer, they can initiate a challenge to the fraud proof contract and provide corresponding evidence. If the challenge is successful, the sequencer will be punished and the erroneous or fraudulent transactions will be rolled back. If no one challenges the blocks submitted by the sequencer within a certain period of time, or if the challenge fails, the blocks will be considered valid and the transactions in them will be finalized.

Next, let’s compare Mantle Network’s network architecture:

Image source: Mantle Network official website DOC

According to the network architecture of Mantle Network, let’s briefly interpret the operation process of its system:

1) When users initiate transactions or execute contracts on the L2 network, the transaction requests will be sent to the sequencer, which will sort the transaction requests according to certain rules and package them into blocks.

2) Each block has a unique identifier called a state root, which represents the L2 network state after block execution. The latest state root will be submitted to the Multi-Party Computation (MPC) nodes for verification. MPC nodes use the Threshold Signature (TTS) algorithm to sign the state root to confirm its correctness. After the state root obtains the MPC signature, it will be submitted to the Fraud Proof Contract (SCC) on Ethereum L1 for storage, which will be used for future state verification and withdrawal operations.

3) When users want to withdraw assets from the L2 network to the L1 network, they need to wait for a certain period of time called the fraud proof window. This is to prevent the sequencer or others from cheating or submitting incorrect transactions on the L2 network. If someone discovers an incorrect transaction, they can challenge the SCC contract during the window period and provide evidence. If the challenge is successful, the cheater will be punished and the incorrect transaction will be revoked.

4) In addition to the state root, each block also contains specific data of the transactions, called CallData. While the state root is being verified, the CallData will be compressed and submitted to a data layer on L1 network called Mantle DA for storing transaction data of the L2 network. The data availability nodes of Mantle DA will sign the transaction data and put the signature certificate on the chain.

5) Other nodes can obtain transaction data from Mantle DA through the DTL service and verify and confirm it. This enhances the security and reliability of the L2 network.

6) If users want to transfer assets from the L1 network to the L2 network, they need to use the enqueue method of the CTC (Deposit Contract) to put their assets into a queue, and then the sequencer will transfer them to the L2 network.

7) When users want to transfer funds from L2 to L1, they need to go through a message mechanism and be verified and executed by L1.

Mantle system also has other contracts and roles for different functions, such as verifying states, managing permissions, and upgrading the system. Moreover, its key operational roles are controlled by a multi-signature wallet to prevent single-point failures or malicious operations.

By comparing the operation principles of OP Rollup and Mantle, we can find that Mantle has made a series of innovations and optimizations based on OP Rollup technology, mainly in the following aspects:

1) Modular design significantly reduces transaction costs

Mantle adopts a modular network design, combining Optimistic Rollup with an independent data availability layer, which avoids the high Calldata cost generated by submitting all transaction data to Ethereum. (As transaction volume increases, this cost can account for 80-95% of the total cost, severely limiting the cost efficiency of Rollups.)

The modular design of Mantle handles the four key functions of the blockchain at different levels, instead of completing them on a single network layer like most single blockchains. These four functions are:

▪ Transaction execution: carried out on the EVM-compatible execution settlement layer of Mantle, the sorter of Mantle generates blocks on the L2 execution layer and submits the state root data to the main blockchain.

▪ Consensus and settlement: handled by the Ethereum L1 network.

▪ Data availability: achieved with the help of EigenDA technology, which is a data availability layer built on EigenLayer, used to store callback data that is usually broadcasted to L1.

▪ Data retrieval: other nodes retrieve transaction data from Mantle DA through DTL services and perform verification and confirmation.

The diagram below shows an example of modular chain design.

Image Source: Modular Chain Design: Celestia Docs

The modular design also makes it easier for Mantle Network to adopt new technologies, such as replacing the consensus mechanism with zk-Rollup or zkEVM. At the same time, compared to the base layer, the modular architecture of Mantle significantly reduces transaction costs and improves network efficiency due to its layered advantages. Through Optimistic Rollup, it also reduces the overall load on nodes.

2) EigenLayer achieves high-performance data availability

Mantle uses EigenLayer as a decentralized data availability layer solution. EigenLayer allows Ethereum validating nodes to participate in data availability assurance by re-mortgaging ETH. The Mantle data availability layer is a data layer supported by EigenDA, which can store and transmit transaction data on the Mantle execution layer. This allows Mantle to inherit the security of Ethereum without having to publish all the data to L1. At the same time, EigenLayer provides high throughput at the level of 1TB per second. Compared to other L2 networks that rely solely on centralized storage, this design significantly enhances Mantle’s data availability and censorship resistance.

EigenLayer provides Mantle with highly secure and high-performance support for data availability, which is one of the key technological innovations of the Mantle Network. This also gives Mantle a significant competitive advantage in scalability and decentralization.

3) Multi-Party Computation shortens fraud proof time

Mantle Network uses Multi-Party Computation (MPC) protocol, which is a key technological innovation to accelerate fraud proof and improve transaction speed. The validation node network of Mantle adopts a Multi-Party Computation mechanism based on Threshold Signature Scheme (TSS), which allows a group of validating nodes to quickly reach consensus on transactions on Layer 2, generate state root information with multi-signatures, and then submit it to Ethereum. Compared to directly submitting transaction batches to Ethereum, this multi-party pre-validation approach can significantly reduce the need for fraud proof and shorten the proof time to 1-2 days. Although multi-party computation is not as reliable as zero-knowledge proof, with the setting of node staking and punishment mechanisms, a certain level of security can be ensured while balancing costs. Overall, Mantle’s multi-party computation protocol mechanism helps achieve a better balance between transaction speed and security, and is one of the key innovations for achieving high throughput and low latency.

4) Decentralized Sequencer Eliminates Centralization Risks

Decentralizing the sequencer provides secure and trustless block production in L2 solutions. The sequencer is responsible for collecting transactions, computing states, and generating blocks in the network, and it is crucial for network security. In traditional Rollup solutions, the sequencer is usually a single centralized node, which is vulnerable to failures, manipulation, or censorship. Mantle replaces the centralized sequencer with a permissionless sequencer cluster, bringing the following benefits:

▪ Improves network availability by eliminating the risk of a single point of failure and ensuring continuous operation.

▪ Enhances network consensus reliability, preventing manipulation or censorship of the sequencer and ensuring fair and transparent transactions.

▪ Improves network incentive compatibility by driving compliant behavior of the sequencer through reward mechanisms, ensuring the network’s long-term sustainability. In contrast, centralized sequencers face the tragedy of the commons.

▪ Decentralized sequencers themselves enhance resilience to attacks, and their trustless consensus strengthens security. This is also an important step towards complete decentralization.

In conclusion, the decentralized sequencer is one of the significant advantages of Mantle compared to traditional Rollup. It eliminates centralization risks and provides more efficient, reliable, and secure block generation. This makes the Mantle network more robust and better safeguards user rights.

3.3. Project Network Nodes

In the Mantle Network, there are currently four types of node roles: sequencer nodes, threshold signature scheme (TSS) nodes, Rollup verification/replica nodes, and data availability (DA) nodes. They each have different responsibilities:

1) Sequencer Nodes:

The sequencer is responsible for receiving and recording transactions sent by users on the L2 network and packaging them into blocks. The sequencer also performs Rollup on the transactions in the block, generates batches containing the execution state root, and submits the batches to the L1 network. The sequencer also needs to broadcast block data to the entire network (L1 and L2). In the initial stage of the Mantle Network, the sequencer is operated by the Mantle core team and is a centralized node. However, in the development roadmap of the Mantle Network, the sequencer will gradually achieve decentralization and provide opportunities for other nodes to participate.

2) Threshold Signature Scheme (TSS) Nodes:

TSS nodes are responsible for “signing” the batches generated by the sequencer so that they can be sent to the L1 network. TSS nodes need to verify the state root generated by the sequencer to ensure its correctness. The state root must be signed by TSS nodes before it can be recorded on Ethereum. In the initial stage of the Mantle Network, TSS nodes are operated by a set of reputable institutions, but eventually, they will be elected through the governance mechanism of the Mantle Network without permission.

3) Rollup Verifiers/Replica Nodes:

Rollup verifiers/replica nodes are responsible for synchronizing Rollup data from the trusted sequencer of the Mantle network and validating the state roots submitted on the L2 network. If a verifier/replica node discovers invalid state data, they can initiate fraud proofs to revoke erroneous transactions. Verifiers/replica nodes are also responsible for providing Rollup data to users.

4) Data Availability (DA) Nodes:

DA nodes are responsible for storing and transmitting transaction data on the Mantle network and providing data availability services. DA nodes use EigenLayer as the data availability layer, which is a protocol based on ETH re-collateralization that ensures the security and efficiency of the Mantle data availability layer. DA nodes do not need to publish data to the L1 network, but rather publish it to EigenDA, which is secured by re-collateralized ETH. This greatly improves throughput and scalability and allows for the development of new types of DApps.

3.4. Project Ecosystem

The Mantle Network ecosystem is mainly reflected in ecosystem incentives, ecosystem applications, and its planning in the LSD field.

1) Ecosystem Incentives

Mantle has strong ecosystem assets, including over 2 billion USD funds including the BitDAO treasury and a large user base, which provides a solid foundation for the development of the Mantle ecosystem. At the same time, according to the latest news on August 28th, the Mantle Network governance page shows that the Mantle community has recently initiated a proposal to use the Mantle Treasury to promote ecosystem development, with a planned allocation of 238 million USD to promote ecosystem development. The specific content includes providing up to 160 million USD liquidity support for applications, providing up to 60 million USD seed liquidity for RWA-backed stablecoins, and providing up to approximately 18 million USD liquidity support for third-party cross-chain bridges.

At the same time, the special relationship between Mantle Network and Bybit will strongly promote high-quality projects within the Mantle ecosystem to gain a wider user base and liquidity. Bybit, as one of the world’s leading entry-level cryptocurrency trading platforms, has a large user base. Excellent projects within the Mantle ecosystem have the opportunity to be discovered by more investors through Bybit’s recommendations and list on the platform for trading. Obtaining higher liquidity and wider recognition from investors will benefit their long-term development, and a thriving ecosystem will further enhance the value of the Mantle network. It can be foreseen that with the help of Bybit’s traffic and resource advantages, projects and assets in the Mantle ecosystem will benefit greatly. This win-win situation will continue to attract more high-quality projects to join Mantle.

These initiatives indicate that Mantle Network will rely on its abundant treasury resources to strongly support the prosperous development of the ecosystem. Through liquidity incentives and ecosystem funds, Mantle will attract more high-quality applications to join its network and promote a virtuous cycle.

2) Ecosystem Applications

Mantle Network has built a rich ecosystem, currently citing 119 projects on its ecosystem page, with a few still in the testnet stage. In terms of segmentation, project teams and developers mainly focus on three categories: 38 DeFi projects, 27 infrastructure projects, and 25 GameFi projects, with the remaining being other categories such as social, entertainment, and tools. Here are some representative projects in the Mantle Network ecosystem:

A. DEFI Track

iZUMi Finance

iZUMi Finance is a multi-chain DeFi protocol that provides one-stop liquidity services (LaaS). Its concept is that every token should obtain better on-chain liquidity in an efficient and sustainable manner.

UMi currently offers three on-chain liquidity products: LiquidBox, iZiSwap, and iUSD.

iUSD is a USD-denominated convertible bond launched by iZUMi. It uses transparent on-chain funds managed by smart contracts and multi-signature wallets as excess collateral to support the value of iUSD.

FusionX

FusionX is a decentralized trading protocol designed to provide secure and reliable trading services for Mantle Network. The project was launched in 2022 by a senior blockchain team and is one of the early projects to join the Mantle ecosystem. FusionX adopts the AMM model, and users can perform operations such as liquidity mining, trading, and lending. It supports multiple trading pairs, including ETH/WETH, MATIC, and other ERC20 tokens, to provide liquidity for users. The project features an efficient on-chain order book system that ensures real-time trading.

 Symbiosis

Symbiosis is a cross-chain AMM DEX that aggregates liquidity from different networks, including L1 and L2, EVM and non-EVM. Through Symbiosis, users can easily exchange any tokens between different networks. Symbiosis has issued an algorithmic stablecoin mUSD collateralized by Mantle ecosystem assets, which can be exchanged for other assets in the Mantle ecosystem. The exchange rate between mUSD and Mantle ecosystem assets adopts a dynamic interest rate mechanism to stabilize the price of mUSD.

B. Infrastructure

EigenLayer

EigenLayer is an Ethereum-based protocol that introduces a new cryptographic economic security primitive called restaking. Restaking allows ETH stakers in the consensus layer to choose to validate new software modules built on top of the Ethereum ecosystem, thereby extending cryptographic economic security (WJB has a in-depth research report on EigenLayer, interested readers can refer to it). The link is as follows:

https://www.panewslab.com/zh/articledetails/5402965u1dvj.html

Pyth Network

Pyth Network is an oracle on the blockchain that can publish financial market data to multiple blockchains with high precision and low latency. The data source of Pyth Network comes from more than 80 first-hand data providers, including some of the world’s largest exchanges and market makers, such as Jane Street, CBOE, Binance, OKX, and Bybit. At the same time, it provides price data for various asset categories such as US stocks, commodities, and cryptocurrencies. Each price data is a summary of prices from multiple data providers and can be updated multiple times per second.

Biconomy

Biconomy is an open decentralized blockchain bridging platform. Its main functions include:

Cross-chain asset transfer: Supports secure and efficient transfer of digital assets between different public chains, such as ETH, BTC, etc.

DApp interoperability: Allows DApps to access resources on multiple chains, such as contracts, data, accounts, etc., enabling true cross-chain interoperability.

Smart contract development: Provides a library of contracts for cross-chain interaction, allowing developers to easily add cross-chain capabilities to their DApps.

C. Gamefi

Roboworld

Roboworld is a free card game where players can collect unique robots and trade them as NFTs, using them to battle opponents. Players must strategically choose and use robot-themed cards to outsmart their opponents and achieve victory.

Chesslers

Chesslers is a Web3-based gaming platform that allows users to play chess and earn rewards. Based on their staking protocol, Chesslers enables a Web3 economic model on existing Web2 games. Users can bet and play high-quality skill-based games with real money or Chesslers tokens.

Age of Zalmoxis

Age of Zalmoxis is a game that combines historical authenticity, immersive storytelling, and mythical elements inspired by the legendary kingdom of Dacia (modern-day Romania). It is a third-person massively multiplayer online role-playing game (MMORPG) with NFT and GameFi mechanics. It is based on the historical background of the ancient kingdom of Dacia, which successfully resisted the invasion of the Roman Empire until it was eventually conquered by Emperor Trajan in two bloody wars.

It is worth noting that for the Mantle Network chain gaming ecosystem, Mantle, as a high-performance Layer 2 network, can provide the necessary high throughput and low gas fees for chain games, which is crucial for realizing the vision of interconnected blockchain games. Mantle inherits rich gaming ecosystem resources from BitDAO, including projects like Game7 and HyperPlay, which lay the foundation for attracting gaming users and developers to Mantle. Game7 provides many valuable tools and resources for chain game developers, such as the web3.unreal plugin, which helps developers build blockchain games more conveniently. HyperPlay serves as a blockchain game store and asset interoperability platform, also helping to facilitate seamless circulation of in-game assets. The Mantle ecosystem has already gathered a large number of gaming projects and is still growing rapidly, demonstrating its huge potential in the gaming field.

We can see that Mantle provides strong support for blockchain games in both technology and ecosystem, and is expected to drive the scale application of blockchain games.

Overall, the Mantle Network ecosystem has obvious advantages and disadvantages.

Specifically, the advantages include:

▪ The total number of Mantle ecosystem projects has reached 100+, which can compete with other leading L2 networks.

▪ The projects cover multiple fields such as gaming, DeFi, infrastructure, and the ecosystem continues to grow.

▪ There are some unique application scenarios, such as direct computation.

▪ The ecosystem has strong assets and a series of incentive plans.

▪ Good user experience, especially suitable for the development of gaming ecosystem.

The disadvantages are mainly:

▪ Compared to other L2 solutions, Mantle has a shorter development time and the ecosystem construction is still at an early stage.

▪ Mainstream protocols such as DApps on Ethereum have not formally connected to the Mantle ecosystem.

▪ The team background and financing scale are not as prominent as some L2 pioneers.

▪ Except for DeFi, the number of applications in other fields is relatively limited.

▪ The user base and TVL scale need to be improved.

Overall, the number of projects in the Mantle ecosystem has reached a certain scale, but it is still in the early stage, and the concentration of mainstream resources still needs to be observed.

3) Mantle Network’s Plan in the LSD Field

From the official website and network architecture of Mantle Network, it can be understood that the LSD ecosystem of Mantle Network is about to go online and occupies an important position in its network architecture.

From the Mantle Treasury, it can be known that Mantle has a reserve of more than 220,000 ETH, which serves as its financial strength in the LSD field. The network is expected to cooperate strategically with major top-level LSD protocols to jointly promote the research and application of LSD solutions based on the Mantle network. Specifically:

A. Release of Mantle LSD

Mantle plans to release a liquidity ETH deposit protocol called Mantle LSD, which will be a decentralized protocol based on the Ethereum mainnet. Users can deposit ETH into the protocol to obtain equivalent mntETH tokens and earn mortgage income. This model can leverage the advantages of the Mantle ecosystem, including its large initial deposit scale and liquidity, as well as the diverse usage scenarios of mntETH in the Mantle network.

B. Innovative use of mntETH

mntETH can be directly used in the Mantle network, which will greatly enhance the usage scenarios of mntETH and strengthen its stickiness in the Mantle ecosystem. The operation mode of Mantle LSD can maximize the use of Mantle’s established community, governance structure, brand influence, and other resources, thereby reducing operating costs and risks.

C. Efficient overall governance

Mantle LSD will operate under Mantle’s overall governance framework to ensure its long-term competitiveness and sustainability. At the same time, the simple system architecture of Mantle LSD will reduce complexity risks and make it easy to be accessed and compatible with other applications and ecosystems.

D. Strategic Cooperation and DAO Construction

In addition to the issuance of mntETH, Mantle will also establish strategic partnerships with multiple top DeFi protocols to form a strong ecological synergy and jointly promote the research and application of the LSD solution based on the Mantle network. For example, Mantle has already partnered with Lido Finance to establish the stETH ecosystem on the Mantle network. Mantle also considers collaborating with protocols such as Pendle and StakeWise, which can not only generate synergistic network effects but also optimize capital utilization. In addition, Mantle is exploring profit-sharing schemes such as direct mortgage and proposing the establishment of an Economic Committee as a sub-DAO to enhance asset management efficiency.

From these aspects, we can see that Mantle’s planning in the LSD field is systematic, innovative, and efficient. It not only enriches Mantle’s DeFi ecosystem but also brings more unique user stickiness and value capturing capabilities to the Mantle network. Compared to other L2 solutions, Mantle has significant advantages in this regard, which will strongly promote the rapid growth and cross-chain interconnection of the Mantle network.

3.5. Project Data

3.6.1. Project-related Data

• Token-related Data

According to Coingecko, the native token of the Mantle Network is MNT. As of September 2, 2023, the price of MNT is $0.45, with a market capitalization of $1.454 billion, ranking 32nd among all cryptocurrencies. In terms of trading volume, MNT’s liquidity mainly comes from Bybit, a centralized exchange with strong funding. However, on other mainstream exchanges, MNT’s trading volume is not high. Currently, MNT has not been listed on major exchanges, which may affect its liquidity and exposure. In addition, according to on-chain data, the number of MNT holder addresses is approximately 163,406.

Overall, the liquidity of the MNT token still heavily depends on the Bybit exchange, and there is room for further expansion in terms of value transmission channels on external mainstream exchanges and within the blockchain community. The number of holder addresses also has room for growth. With the gradual enrichment of the ecosystem, the external liquidity and distribution of MNT are expected to become more balanced.

• L2 Lock-up Data

According to the statistics from L2Beat, as of September 2, 2023, the total locked value of Mantle Network is approximately $88.79 million, ranking ninth among all Layer 2 networks, accounting for 0.94% of the total market share.

In terms of TVL scale, Mantle Network lags behind top projects in the current L2 field, such as Optimism and Arbitrum. This is mainly because Mantle Network is still in the early stage of its mainnet operation as an emerging L2 solution.

With the gradual enrichment of the Mantle ecosystem and the expansion of its user base, its TVL scale is expected to continue to grow. Proper incentive mechanism design and user cultivation will also help Mantle Network further enhance its influence and competitiveness in the L2 field.

3.6.2. Social Media Data

As of September 2, 2023, Mantle Network has performed well on social media platforms, indicating a high level of project popularity. The main channels currently operated by the project include Twitter, Discord, Telegram, and Medium. Currently, Mantle’s Discord account has attracted nearly 320,000 followers, with over 9,000 people online daily, making it one of the most popular channels. At the same time, there is frequent interaction on Twitter. The specific data for each platform is as follows:

4. Token Economy Model Analysis

4.1.1. Token Model

The Mantle ecosystem and $MNT token are currently undergoing governance approval processes to determine key aspects, including token address, token design, and initial token distribution. This process involves key proposals and discussions, such as the BIP-21 merger proposal and the MIP-22 token design proposal.

1) Key Points of BIP-21 Merger Proposal

▪ Proposed a “one brand, one token” principle to merge the BitDAO and Mantle brands and tokens into Mantle, simplifying the structure and dissemination of the ecosystem.

▪ Authorized a token conversion plan to convert all holders’ $BIT tokens at a fixed ratio into the new Mantle token, which will have more advanced design and functionality to support Mantle’s products and governance.

▪ Simplified the token economy model, accelerated the lock-up plan for all BIP-20 contributions and BitDAO issuances, making the circulation supply of Mantle tokens clearer and more predictable.

▪ Retained the existing governance and resource management processes, allowing Mantle token holders to still vote on the direction, budget, treasury, and other matters of the ecosystem.

▪ Does not affect existing sub-DAO types, communities, and product categories, as they can still independently decide their own brand, governance, mission, and strategy.

2) Key Points of MIP-22 Token Design Proposal

▪ Designed a new Mantle token, $MNT, which should have similar upgradability and minting functions as $ARB and $OP tokens to support Mantle’s products and governance.

▪ Determined a token conversion plan to convert all holders’ $BIT tokens at a 1:1 ratio into $MNT tokens, providing multiple conversion channels and flexible conversion deadlines.

▪ Established a temporary conversion vault to support the token creation and conversion process, with received $BIT tokens being burned and sent $MNT tokens maintaining a 1:1 ratio.

▪ Does not change the existing governance and resource management processes, allowing $MNT token holders to still vote on the direction, budget, treasury, and other matters of the ecosystem.

▪ The Mantle core contributors team will be authorized to determine the best time and order for delisting the $BIT token, listing the $MNT token, opening conversion channels, and launching the Mantle network mainnet.

4.1.2. Token Supply and Allocation

1) MNT Token Supply

MNT is the utility and governance token of the Mantle ecosystem. MNT holders can participate in important ecosystem decisions through voting, such as treasury management, protocol parameters, product direction, etc. To simplify the token economic model, MNT holders have passed the MIP-23 proposal to halve the number of MNT tokens in the treasury from 6.05 billion to 3.05 billion. At the same time, this proposal maintains the circulating supply of MNT at 3.17 billion and reduces the fully diluted supply from 9.2 billion to 6.2 billion. As a result, the proportion of tokens in the treasury has decreased from the original 65.6% to 49%, and the proportion of circulating supply has increased from the original 34.4% to 51%. This change aims to increase the demand and scarcity of MNT, thereby enhancing its value.

2) Token Economics of BIT

On July 15, 2021, the $BIT token was launched with a maximum supply of 10 billion tokens (no inflation), which was later changed to 6.2 billion.

After the MIP-22 vote, it will be converted to $MNT at a ratio of 1:1.

3) Token Allocation

The allocation of $MNT tokens in the Mantle treasury needs to follow the governance process of Mantle. The budget, fundraising, and allocation processes all follow strict procedures, such as BIP-19 Mantle Network Budget. As of August 2023, there have been no formal discussions on macro objectives or restrictions on the distribution of $MNT tokens. However, there are expected to be several main categories:

▪ User incentives: Prioritize driving user adoption of Mantle products through various strategies such as implementing multi-season achievements, tasks, and other incentive programs. The target metrics for user adoption include daily active users, total transactions and protocol fees, total value locked (TVL), and other relevant product adoption metrics. These incentives aim to attract and retain users of the Mantle ecosystem.

▪ Technical partner incentives: This category focuses on incentivizing decentralized applications, infrastructure service providers, and core protocol technology partners who contribute to the growth and development of the Mantle ecosystem. By providing incentives to these partners, Mantle aims to promote collaboration and partnerships within the ecosystem, improving overall ecosystem efficiency and scalability.

▪ Core contributors team and advisors: This category also needs to follow the same budget proposal process to ensure transparency and accountability in allocating resources to teams and advisors who make positive contributions to the project.

▪ Other Opportunities: This category includes potential opportunities such as acquisitions, token swaps, treasury sales, and other transactions. Each opportunity will be evaluated based on its specific circumstances, considering their potential benefits to the Mantle ecosystem and their consistency with project goals.

▪ Destruction: The MNT token includes a destruction function that allows MNT tokens to be removed from circulation and total supply analysis. The destruction of MNT tokens from the treasury is determined through the Mantle governance process.

4.1.3. Token Value Capture

The value of MNT token comes from its utility and governance within the Mantle ecosystem.

1) As a utility token, MNT can be used to pay for gas fees in the Mantle network and can be used as collateral for node operators. These functions increase the demand and scarcity of MNT, thereby enhancing its value. In the long run, when the Mantle ecosystem is engaged in the LSD track or Restaking business, $MNT can also be used independently or paired with LP as collateral.

2) As a governance token, MNT grants holders the right to vote on decisions regarding the Mantle ecosystem. These decisions include treasury management, protocol parameters, product direction, etc. These functions increase the influence and participation of MNT, thereby enhancing its value.

4.1.4. Core Token Demand

1) Mantle users: They need to use MNT to pay for gas fees in the network and participate in network governance.

2) Mantle network node operators: Individuals or organizations that provide infrastructure support for the Mantle network, such as validators, storers, and computators. They need to use MNT to stake as nodes and receive network rewards and fee income.

3) Mantle ecosystem developers: Personnel who develop the ecosystem on Mantle, they need to use MNT to obtain ecosystem incentives and support, develop on-chain DApps, and as developer incentives. The demand for MNT will increase with the growth of developers.

4) Of course, the planned LSD platform will also use MNT as the main LP staking token.

5. Industry Space and Potential

5.1. Industry Overview

5.1.1. Project Classification

Mantle Network belongs to the category of Layer 2 scaling solutions, aiming to address issues such as congestion, high gas fees, and slow transaction speeds on the Ethereum network. In detail, L2 scaling solutions typically involve technologies such as Optimistic Rollup, zk-Rollup, Plasma, State Channels, etc. Currently, the mainstream L2 scaling solutions are mainly Optimistic Rollup and zk-Rollup.

Mantle Network is based on Optimistic Rollup as an L2 solution.

5.1.2. Market Size

The market size of L2 scaling solutions can be measured from the following perspectives:

1) Scale of the Ethereum Network

The Ethereum network is currently the largest public chain platform, with over 1.6 million active addresses, over 62 million smart contracts, over 4,200 DApps, and a market capitalization of nearly $200 billion. The scale and activity of the Ethereum network determine the demand and potential for L2 scaling solutions, providing a huge potential user base for L2 scaling.

2) Scale of L2 Scaling Solutions

Currently, there are multiple L2 scaling solutions in operation or under development in the market, each adopting different technological approaches. According to data from L2Beat, as of September 2, 2023, the total value locked (TVL) in L2 scaling solutions has reached $9.48 billion, indicating strong development momentum and user demand. Among them, Arbitrum is currently the most popular L2 scaling solution, accounting for 54.99% of the TVL, followed by Optimism at 25.21%, and zkSync at 4.3%. It is worth noting that in the past six months, despite the overall market downturn, the total TVL of L2 scaling solutions has nearly doubled, demonstrating the advantages and potential of L2 scaling solutions in improving user experience and reducing transaction costs. This provides market opportunities for projects like Mantle Network.

5.1.3. Industry Development Background

L2 is a scaling solution built on top of Ethereum L1, aiming to improve transaction speed and efficiency, and reduce user costs and friction. The emergence of L2 is to solve existing problems and create value, rather than compete with or replace L1. However, from a business perspective, L2 seems to be more profitable and has greater development prospects.

1) From a business model perspective

L2 can provide equivalent functionality to the Ethereum mainnet, but with lower gas fees and faster transactions, which can attract DApps and users to join and increase on-chain transactions, generating income. L2 only needs to pay gas fees for periodically bundling transactions to L1, and can profit from the difference between income and expenses. Its business model has significant advantages.

At the same time, the R&D and operational costs of L2 are lower. It can reuse existing solutions like Optimistic Rollup, without the need for independent research and development of consensus mechanisms, making it easier to launch an L2 network.

In comparison, building a competitive L1 requires significant time and resource investment.

① Firstly, it requires the development of a consensus mechanism that is acceptable to the market, which requires a lot of R&D resources, time, and accumulation;

② Secondly, it requires attracting a sufficient number of nodes to participate in the network to ensure security and decentralization;

③ Finally, it is necessary to build some differentiated narratives, such as emphasizing privacy or security.

At the same time, in a bear market environment, it is more difficult to raise funds by telling stories to venture capitalists, and it is more difficult to convince retail investors. Building a new L1 chain from the primary market to the secondary market is bound to encounter difficulties. Instead of starting from scratch to develop a unique public chain, which requires a large investment and slow results, it is better to parasitize on Ethereum’s L2. This requires a smaller investment and can achieve relatively fast results.

2) From the perspective of traffic

More importantly, it is about “traffic business”, that is, where users come from. L2 can start from its own product ecosystem or the existing user base in the Ethereum ecosystem, and expand into more areas through product integration, user migration, and cooperative scenarios. The entry of centralized exchanges or large wallets into L2 can bring natural user traffic. However, regardless of the project and capital, most of them choose to start with their own product ecosystem or the existing user base in the Ethereum ecosystem, and then expand into more cooperative scenarios (such as Polygon’s actions in the Web2 field). Relatively speaking, L1 needs to build a user base from scratch and face competition from hundreds of other public chains.

3) From the perspective of external competition

The L1 track is already very crowded and fierce. According to DeFiLlama data, there are currently nearly 200 public chains in the market, of which about 190 are L1 chains, which means that there is excessive competition in the L1 market. Among these public chains, only a few can occupy user mindshare and market share. With the recent black swan events and capital withdrawal in recent years, many once popular public chains have lost their luster in various indicators such as user activity, revenue composition, and transaction volume. Most L1 chains still exist as concepts, but they lack vitality. Choosing to enter such a dead sea is not a wise choice from a business perspective.

In contrast, the L2 track is relatively relaxed and advantageous, with less competitive pressure, lower market concentration, and diverse technical routes. Specifically, there are currently 26 L2 projects that L2Beat can track, and the competition intensity is about one-seventh of L1. The top two projects in terms of market share in the L2 market are Arbitrum and Optimism, with market shares of 55% and 25% respectively. The market shares of other L2 projects are relatively scattered, which means they still have the opportunity to become leading projects. At the same time, L2 adopts various technical routes, including Optimistic Rollup, ZK-Rollup, etc., which provide users with more choices and provide greater space for the development of L2.

 

With the completion of Ethereum’s technological upgrades this year and subsequent upgrades, narratives revolving around performance will continue to exist for a long time, and L2 still has a considerable development window. At the same time, there are not many narratives and tracks that can maintain popularity in a bear market. In the environment of scarce attention and funds, L2 also has the advantage of continuous attention. Therefore, from the perspective of competition and external environment, doing L2 seems to be a profitable business at the moment.

5.2. Track Layout

5.2.1. Competitive Landscape

The current L2 market is in a fiercely competitive stage. With the approaching of the London hard fork, L2 networks have become the hottest narrative track in the second half of 2023. Since July, the TVL of L2 layer has often remained above $10 billion, and many well-established public chains have announced their shift to L2 or launched their own L2 projects, receiving financing support. At the same time, native L2 networks are also advancing technological innovation. According to the encrypted data platform Rootdata, there are already 77 L2-related network infrastructures included. Currently, the L2 market is mainly dominated by two mainstream scaling solutions: Optimistic Rollup and zkRollup.

1) Optimistic Rollup

Optimistic Rollup is the most mature technical route in the current L2 networks. Representative networks include Arbitrum, Optimism, Metis, Boba, and Mantle Network.

2) zkRollup

zkRollup is another potential technical route in Layer 2 networks. Representative networks include zkSync, StarkNet, Polygon zkEVM, Linea, Scroll, and Taiko.

3) Simple Comparison

5.2.2. Competitive Projects

The Mantle Network project faces fierce competition from other L2 scaling solution projects, with the main competition factors being technological advantages, ecological prosperity, and user experience. Here are some of the main competing projects:

1) Arbitrum:

Arbitrum is a Layer 2 scaling solution built on Arbitrum Rollup (an improved version of Optimistic Rollup) technology, which went live on the mainnet in August 2021. Arbitrum has the highest total locked value among all L2s and the richest ecosystem, with 559 projects already integrated. The Arbitrum ecosystem currently consists of three sub-chains: Arbitrum One is the mainnet; Arbitrum Nova focuses on high-frequency applications; Arbitrum Orbit is a toolkit for building L3.

Advantages of Arbitrum: Arbitrum’s ecosystem size ranks first among major Layer 2s, with over 550 ecosystem projects. Arbitrum Rollup adopts a multi-round block production mechanism, which provides higher block production efficiency and lower gas fees compared to the single-round mechanism of Optimistic Rollup. In addition, Arbitrum has its own Arbitrum virtual machine, supporting a richer programming language.

Disadvantages of Arbitrum: Compared to Optimistic Rollup, Arbitrum has higher transaction confirmation latency. Also, Arbitrum Nova adopts the AnyTrust framework, which has lower security than Arbitrum One that directly utilizes the security of Ethereum.

2) Optimism:

Optimism is an Ethereum Layer 2 scaling solution built on Optimistic Rollup, which went live on the mainnet in August 2021. Optimism aims to provide an interaction experience that is fully consistent with Ethereum, but with only a small proportion of transaction costs compared to Layer 1. Currently, Optimism is the second highest TVL project in the L2 scaling solution category.

Advantages of Optimism: Optimism has launched an open-source modular toolkit called OP Stack, which allows developers to assemble a customized Layer 2 network based on their specific needs. Many well-known blockchain projects have launched their own Layer 2 networks based on OP Stack, forming Optimism’s superchain kingdom and injecting richer application scenarios and network effects into the Optimism ecosystem. In addition, Optimism has significantly reduced transaction fees and improved performance through optimization measures such as the Bedrock upgrade. Its gas fees have become one of the lowest among Ethereum L2 solutions.

Disadvantages of Optimism: Compared to Arbitrum, Optimism’s on-chain ecosystem is slightly less prosperous, and its transaction speed is about 1,000 transactions per second. There is still room for improvement compared to Rollup networks using zkRollup technology.

3) zkSync:

zkSync is a well-known zkRollup-based Layer 2 scaling solution, and its core network, zkSync Era, adopts zkEVM design. zkSync has a total locked value of $500 million, ranking third among various Layer 2 solutions. zkSync is currently transitioning from zkSNARK to zkSTARK proof system, which will improve the transaction efficiency of the network. It has also launched a community airdrop program to incentivize users.

Advantages of zkSync: Recently, zkSync has launched the zkStack toolkit, which allows developers to build customized zkRollup-based Layer 2 and Layer 3 networks (also known as HyperChains). This helps expand the technical application scenarios of zkSync. Meanwhile, zkSync can utilize the compression feature of zero-knowledge proofs to pack more transactions into one proof without waiting for the challenge period. This improves transaction throughput and speed while ensuring security and correctness.

Disadvantages of zkSync: The zkSync ecosystem is still relatively small and needs further expansion. The recent airdrop event also reflects the need for stronger community building. Moreover, zkSync has a high level of technical complexity, and developers need to have a certain technical foundation to build applications on the zkSync network.

4) Starknet

StarkNet is a zkRollup-based scaling network developed by StarkWare and launched its mainnet in November 2021. StarkNet is currently the second-ranked zkRollup-based network in terms of TVL.

Advantages of StarkNet: StarkNet is gradually achieving compatibility with Ethereum’s EVM through projects like Kakarot and Warp, which are currently the focus of StarkNet’s development. In the future, StarkNet will also support developers in building application chains, expanding its use cases.

Disadvantages of StarkNet: Due to its current lack of EVM compatibility, the ecosystem prosperity of StarkNet is relatively weak. Additionally, StarkNet has a high level of technical complexity, and developers need to have a certain technical foundation to build applications on the StarkNet network, making it less developer-friendly.

5) Polygon EVM

Polygon is a blockchain dedicated to enhancing Ethereum’s scalability by utilizing different solutions. Their flagship product is the Polygon PoS sidechain, which currently processes 300,000-400,000 addresses and 2-3 million transactions per day.

The advantages of Polygon EVM: Polygon not only provides its own Layer 2 networks, Polygon PoS and Polygon zkEVM, but also offers modular open-source components called Supernets for building custom Layer 2 and Layer 3 networks, enriching the technical roadmap of Polygon. In addition, the recently released Polygon 2.0 further unifies different networks, updates the native token code to POL, and introduces a new governance framework, forming a multi-chain interoperable ecosystem, enhancing the network effects of Polygon. Furthermore, Polygon has collaborated with multiple Web2 enterprises and has a large user base, with its ecosystem projects steadily growing.

The disadvantages of Polygon EVM: Polygon’s ecosystem is still primarily focused on its own sidechains and subchains, with limited interoperability with the Ethereum mainnet, and there is room for improvement in its governance mechanism.

Overall, compared to other L2 networks, Mantle Network’s advantages mainly lie in its modular design, strong support from BitDAO, focus on data availability, and improving user experience, making it promising in the gaming industry. Its disadvantages mainly stem from being a newcomer in the L2 space, with core technologies such as modular architecture yet to be validated through practice, and ecosystem development still in its early stages, lacking established DApps, leading to uncertainty in long-term competitiveness.

6. Preliminary Valuation

6.1. Core Questions

At which stage of the business cycle is the project currently in? Is it in the mature stage or the early to mid-stage of development?

Mantle Network is currently in the early to mid-stage of development. It is a new project founded in 2021 and has not yet formed a complete and mature ecosystem. The mainnet is also scheduled to launch in July 2023 and will require further testing and optimization to enhance its stability and reliability. Although it has already attracted some high-quality partners and applications, such as EigenLayer and Biconomy, its user base and market share are still relatively low, and it needs to attract more developers and users to join its platform to increase its influence and competitiveness.

Does the project have reliable competitive advantages? Where do these competitive advantages come from?

Mantle has some potential differentiating advantages, such as its modular architecture, and with community support, it has the potential to stand out in the competition. However, overall, these advantages still need to be validated and tested through product iterations and applications, and it faces strong competitors. It has not yet formed very obvious competitive barriers, so the performance after the mainnet launch needs to be observed.

What are the main variable factors in the project’s operations? Are these factors easy to quantify and measure?

Technical progress: The Mantle Network project needs to continuously develop and improve its technical solutions to enhance network performance and security, and to fix any potential vulnerabilities or defects. Technical progress can be quantified and measured through updates, code commits, test results, and other information released by the project team.

Ecosystem development: The Mantle Network project needs to constantly expand its ecosystem partners and use cases to attract more users and funds to enter the L2 network, and to provide more diversified and high-yield on-chain activities. Ecosystem development can be quantified and measured through metrics such as the number of DApps, total value locked (TVL), trading volume, and user count.

Community Activity: The Mantle Network project needs to constantly motivate and reward its community members and partners to enhance the cohesion and influence of the community, and provide support and feedback for project governance and decision-making. Community activity can be quantified and measured through social media followers, community members, voting participation rate, proposal quantity, etc.

What is the management and governance method of the project?

Mantle adopts a relatively flexible off-chain governance mechanism. Specifically, governance issues and proposals are first raised and discussed by the Mantle core team or community members in the forum. If a proposal receives enough attention and support, it will form a formal MIP proposal, which will be voted on by MNT token holders on-chain. Once the MIP proposal is approved, the core development team and contributors of Mantle will be responsible for implementing and monitoring the project progress according to the proposal content. This governance mechanism has higher flexibility compared to fully automated on-chain voting. It allows Mantle to adjust the execution progress based on actual situations without being simply led by a majority vote. However, this also means that there is a certain degree of centralization dependency in Mantle’s governance, and the role of the core team is more significant in governance. This off-chain governance method is still being explored in the field of decentralized autonomy, and its effectiveness needs to be observed in the actual application of the Mantle project.

6.2. Project Valuation Level

We use horizontal comparison to evaluate the valuation of Mantle Network in the same L2 track.

The valuation of smart contract public chains is a complex and difficult issue. DeFi protocols can use multiples of revenue as a valuation reference, while smart contract public chains are more similar to a country, and evaluating the status and potential of public chains from the perspective of “comprehensive national strength” may be more appropriate.

The “comprehensive national strength index” of a public chain should consider data such as the number of active DApps, the number of active users, TVL, the total value of on-chain assets, the number of active developers, the number of on-chain transfers, the total value of on-chain transfers, etc., and derive it through certain weighted processing. However, there is currently no similar index.

Therefore, we focus on selecting indicators from the dimensions of assets, user volume, network activity, and developers, and compare Mantle Network with other L2 competitors.

1) Asset Indicator: TVL. Users’ willingness to place valuable assets on a chain indicates their comprehensive recognition of the security, usability, and investment value of the chain. We use market cap/TVL as the asset indicator for horizontal comparison (MTV). The smaller the value of this indicator, the more on-chain assets are corresponding to each unit of market cap, and the lower the valuation.

2) User Indicator: Indicators such as the number of active users and active addresses can reflect the user base and activity of the public chain. We choose the average daily active address number in the past 30 days to measure the user scale, and use the market cap/daily active addresses ratio, that is, market cap/ daily active addresses, as the comparison indicator. A lower value of this indicator represents a larger user scale under the same market cap.

3) Transaction Activity Indicator: The transaction activity on the blockchain is an important indicator for measuring the user activity of a public chain. Traditionally, the daily value of Gas consumption in dollars is used to measure activity, but this indicator has certain limitations:

① High Gas prices can lead to a decrease in user activity, but this indicator cannot reflect this.

② This indicator cannot differentiate between different types of transactions, such as transfer transactions, contract invocations, etc.

To overcome these limitations, we use two indicators to measure activity: the daily value of Gas consumption in dollars and the daily transaction volume. Specifically, we convert the dollar value of Gas consumption in the past 30 days and the transaction volume in the past 30 days into annualized data, resulting in two indicators that can be compared:

③ Market Cap / Annualized Gas Consumption: The smaller this indicator, the more business activity the circulating market value of the chain can support, and the lower the valuation.

④ Market Cap / Annualized Transaction Volume: The smaller this indicator, the more transaction volume the circulating market value of the chain can support, and the lower the valuation.

These two indicators can more comprehensively reflect the transaction activity on the chain and effectively overcome the limitations of traditional indicators.

4) Developer Metrics: The number of active developers and the number of on-chain verified contracts can reflect the developer ecosystem of a public chain. The number of active DApps is an important indicator for evaluating the prosperity of Layer 2 networks, but reliable statistics on active DApps are currently lacking. We can use the following methods to measure the developer activity of a Layer 2 network:

① The daily average number of newly deployed contracts on the official browser can be selected as the judging criteria.

② Calculate the indicator “Market Cap divided by the daily average number of newly deployed contracts” to reflect the developer activity that the unit market value can support.

③ The smaller this indicator, the more developers can be supported at the same market value, and the relative valuation is lower.

By comparing this indicator with different Layer 2 networks, we can intuitively judge the level of ecological prosperity and valuation of the network, and better evaluate the development potential of Layer 2. This calculation method can provide a concise comparison of ecological activity under current conditions, compensating for the incomplete statistics of direct DApp data and more comprehensively reflecting the profit space for developers on the network.

In addition, before making comparisons, we also need to note that unlike other L2 networks that use ETH as the Gas token, the MNT token is used as the Gas token for the Mantle chain. When comparing with other L2 networks, this needs to be taken into consideration, which means that based on this comparison method, the valuation of Mantle will be slightly lower.

The results of the horizontal data comparison are as follows:

We can clearly see that after the completion of the merger of Mantle and BitDAO, the current valuation is significantly overvalued. Compared with other Layer 2 networks in the OP Rollup track, the ecosystem of Mantle is still in an early stage, and all key indicators are somewhat lagging, but the native token MNT of Mantle has already had 50% circulation, which supports its high valuation.

In the future, with the continuous improvement and prosperity of the Mantle ecosystem, its business foundation will gradually strengthen. At this time, if Mantle can maintain a moderate valuation level, it is expected to achieve greater growth in the OP Rollup track and break the current situation.

6.3. Project Risks

Early stage of project development: Mantle Network launched its mainnet alpha version in July 2023, so as an emerging public chain, its technology and commercial implementation are still in an early stage of development. From the perspective of mainnet operation time, network effects and technical stability still need to withstand the test of time. Some key governance topics, such as staking mechanism design and zkEVM technical roadmap, are still under discussion. As a new project, Mantle also needs to continue with technical iterations and role expansion to attract users and ecosystem, which requires the team to maintain efficient governance and development. In summary, the development of the Mantle network is still in an early stage, and key governance and technical aspects still need improvement. The uncertainties in this development process will become potential risks for the further development of Mantle.

Competition risks: Facing fierce Layer 2 competition. As an emerging Layer 2 solution, Mantle Network faces an important risk of increasingly fierce competition in the future. Currently, there are several more mature projects in a leading position in the Layer 2 market, such as Arbitrum, Optimism, etc. These pioneers have strong technical strength and a large user base. At the same time, various new Layer 2 projects are emerging, and these new projects are competing for users and market resources. Moreover, the future upgrade of Ethereum will also enhance its own scalability. In the face of such a competitive environment, Mantle needs to continuously enhance its product strength through technological innovation in order to stand out in the competition, otherwise it may face the risk of user loss. In summary, the increasingly intense competition in the public chain is one of the risks that Mantle Network needs to prioritize and address. How to stand out in the competition is a key consideration for the Mantle project team.

Poor performance of BIT token has a negative impact on MNT. Mantle Network’s native token MNT is generated through the conversion of BitDAO’s token BIT. The market performance of BIT token has been poor, falling from the ICO price of $1.4 to around $0.5 currently. This continuous downward price trend may have a negative impact on MNT. On the one hand, BIT holders may lack confidence in the expected value and prospects of MNT and are unwilling to actively participate in the ecological construction of MNT. On the other hand, external investors and users may also have doubts about the value and appreciation potential of MNT due to the price history of BIT token. This is not conducive to the widespread recognition and liquidity of MNT. If MNT cannot effectively change this linkage expectation of BIT performance in the future, its own token demand and price may face certain downward pressure. This is a risk factor that Mantle Network needs to focus on in token design and operation.

Technical Security Risks: The current technical risks of Mantle are mainly: 1) The fraud proof of the current Mainnet Alpha version is still under development; 2) The data availability layer is not online. Mantle plans to use fraud proof to ensure the correctness of the state, but this feature is still under development, allowing invalid state roots in the system. Moreover, since the data is not stored on the chain but maintained by an external team, fraudulent behavior may not be detected, and if malicious users submit invalid state roots even off-chain, users’ funds may be stolen. At the same time, Mantle’s data availability layer, MantleDA, is a forked version based on EigenDA, but it has not been integrated into the EigenDA mainnet yet. Additionally, the slashing mechanism in MantleDA is currently disabled, and the fraud proof mechanism for data availability has not been activated. As a result, users will be unable to access their funds. Furthermore, if external data is tampered with, users’ funds may be lost.

6.4. Reflection

From our overall analysis of Mantle Network, Mantle is an L2 solution with both advantages and disadvantages. Whether it can ultimately become a mainstream L2 solution depends on its ability to fulfill its technical commitments and build a secure and efficient Rollup network. We need to continue to pay attention to the technical evolution of Mantle and the progress of its ecosystem construction in order to make a comprehensive judgment about its future prospects. Mantle is striving to explore new paths for L2 networks, and we also look forward to its positive contributions to the entire Ethereum ecosystem. From its development plan, there are some development opportunities in the short term that we can focus on:

1) The launch of the Mantle Journey incentive program.

Mantle Network provides users with various ways to earn Mantle Journey (MJ) mileage and exchange exclusive benefits in the Mantle ecosystem. Users can accumulate MJ mileage by trading on the Mantle network, providing liquidity, participating in governance, and completing specific tasks. These mileage can be used to forge unique Mantle Citizen NFTs, obtain rare attributes of NFTs, and redeem ecosystem rewards, etc. The operation of Mantle Journey provides users with more incentives to participate in the construction of the Mantle ecosystem. It effectively aggregates users, enhances user stickiness, and provides users with a channel for monetization, which will help attract more users to join Mantle. From a project opportunity perspective, Mantle Journey provides users with a new mechanism for returns and opens up a new model for Web3 community construction, which is worth learning and emulating by other public chains. This also reflects Mantle’s community operation capabilities.

2) Mantle Network is in a period of rapid growth, and there are multiple profit opportunities in its ecosystem.

Mantle is actively building the LSD ecosystem and collaborating with other innovative DeFi protocols. This provides users with various ways to earn profits through participation in staking, trading, and portfolio management, etc. As the number of protocols in the ecosystem increases, users can pay attention to potential high-quality applications, choose to join their IDOs or provide liquidity at the right time to obtain higher returns. After the Mantle ecosystem reaches a relatively mature stage, its network effect will be further amplified, and users can closely follow the development trends of the ecosystem, seize emerging hot directions to participate and gain additional profits.

7. References

https://www.mantle.xyz/en Mantle Network official website

https://docs.bitdao.io/litePaper-1/tokenomics BitDAO economic model

https://twitter.com/0xMantle Mantle Network official Twitter

https://discord.com/invite/0xMantle Mantle Network official Discord

https://medium.com/0xmantle Mantle Network official Medium

https://snapshot.org/#/bitdao.eth Mantle Network official proposal center

https://docs.mantle.xyz/governance/introduction/overview Mantle Network official D O C

https://www.coingecko.com/en/coins/mantle Mantle Network token information

https://tokenterminal.com/terminal Tokenterminal

https://l2beat.com/ L2beat

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