Mantle Deep Research Report Can BitDAO’s new Layer2, incubated with modular technology and a solid foundation, stand out?


As an L2 public chain, Mantle faces fierce competition in the field. Established “Four Heavenly Kings” such as Optimism and Arbitrum, which use fraud proofs, as well as Zksync and Starknet, which use Zk proofs, are all well-established players. Even the new players have strong backgrounds, such as Base built on the OP Stack by Coinbase, Linea, an EVM-compatible chain launched by Consensys, and Zk-EVM launched by Polygon. How can Mantle stand out among the many L2 public chains?

Mantle’s core is built using Optimistic rollup, and it combines with the DA layer using modular components in EigerLayer. It introduces MPC multi-party computation and a more decentralized sequencer to improve TPS and reduce fees. These features not only enhance Mantle’s security but also improve scalability, helping the network achieve faster speeds and lower-cost transactions.

Mantle was initially incubated by BitDAO, which has a treasury with over 3 billion US dollars, making Mantle financially abundant. However, due to the close ties between BitDAO and the centralized exchange Bybit, there are some concerns about the decentralization and independence of Mantle.

As a public chain, how does Mantle ensure its independence through technology and better utilize its financial advantages to build its ecosystem? This article will explore Mantle’s historical background, technical characteristics, current operations, and plans.

01 Mantle’s Historical Background

Mantle is an L2 network incubated and managed by the original BitDAO. Mantle’s founding background, resources, vision, and BitDAO are closely linked. To understand Mantle’s historical background, we need to start with BitDAO.

BitDAO is one of the largest DAO organizations to date, with its DAO treasury managing assets worth about 3.5 billion US dollars, mainly composed of BIT, MNT, ETH, USDC, and USDT. BitDAO was created in 2021 by Bybit, a large cryptocurrency derivatives exchange based in Singapore, with treasury assets coming from fundraising and donations. In June 2021, BitDAO raised $230 million in its first financing round, with supporters including the cryptocurrency exchange Bybit, venture capitalists Peter Thiel, Dragonfly, LianGuaintera Capital, and Polygon. In August of the same year, BitDAO completed an auction through the BIT-ETH crowdfunding pool on SushiSwap’s MISO platform, issuing 200 million BIT tokens and raising 112,670 ETH (worth $360 million at the time).

As the largest supporter of BitDAO, Bybit has pledged to donate 0.025% of its futures contract trading volume to the BitDAO treasury on a regular basis. According to estimates provided by Bybit in 2021, the annual donation will exceed $1 billion. A governance proposal in March 2023 showed that Bybit has donated over $600 million worth of USDC/USDT and 177,000 ETH (currently valued at $325 million) to the BitDAO treasury.

BitDAO gains investment income by exchanging treasury assets for investment project tokens. From this perspective, Mantle is the largest “investment” of BitDAO, inheriting BitDAO’s substantial assets and carrying almost all of BitDAO’s development vision. The initial conceptual prototype of Mantle was proposed by Ben Zhou, the CEO of Bybit, and other well-known members of the crypto community, including Sreeram from EigenLayer, Dow Jones, and Cooper Midroni. Mantle was initially funded by Bybit and later changed to be funded by the Mantle budget managed by BitDAO after the BIP-19 proposal was approved.

In May this year, BitDAO upgraded its brand to MANTLE ecosystem through the BIP-21 proposal, and the BitDAO token BIT was exchanged for the MNT token. MANTLE ecosystem will inherit BitDAO’s vision and provide support for the development, operation, and ecology of the Mantle network.

From a historical background, Mantle is backed by a DAO treasury with a large capital base, carrying BitDAO’s vision of supporting DeFi and decentralized tokenized economies. Behind it is Bybit, a centralized exchange exploring decentralization, with strong motivation and resources.

02 Why are major platforms competing for L2?

This year, platforms with a large number of users have all made layouts in L2: Binance’s opBNB, Coinbase’s Base, Mantle supported by Bybit, and Linea by Metamask.

With the rise of DEX, the trend of cryptocurrency trading volume shifting from CEX to DEX is obvious. Coinbase’s Q2 financial report also confirms this, as its non-trading revenue exceeded trading revenue for the first time, and both YoY and MoM trading revenue began to decline. Base, as the L2 launched by Coinbase, is a manifestation of its product moving towards decentralization. Binance’s L2 layout is more of a strategic intention. In order for the L2 network to remain active, there needs to be enough users to use and contribute liquidity. Binance has the largest user base globally, and BNBchain has a high level of user activity. It can utilize its large user base to forcibly or incentivize them to use their own Layer 2, thereby helping the network grow rapidly. Users are the moat for the current development of blockchain networks.

L2 itself is also rapidly developing and iterating. The Ethereum Cancun upgrade planned for November will significantly reduce the storage cost of L2. Lower transaction fees and faster user experience will undoubtedly promote richer application scenarios.

On the other hand, compliance is also an important issue in the current crypto world. The SEC has debated multiple times on whether cryptocurrencies are securities, which may be the reason why both Base and Linea teams have stated that they have no plans to issue tokens. In fact, L2 can operate without issuing tokens, and its sources of profit can be simply summarized as Gas and MEV income, which are executed by the L2 sequencer. The two largest L2 solutions, Arbitrum and OP, both use an official centralized operating mode, and the profits naturally go to the treasury. In addition, with modular OP Stack and other infrastructure, L2 can be rapidly deployed under compliance conditions. It can be said that L2 is almost a deterministic future.

Returning to Mantle, as global regulations become stricter, cryptocurrency derivatives trading platforms are facing transformation: one is to follow the compliance path to cater to regulations, and the other is to take the decentralized path through DAO. Binance chose the former, while Bybit chose the latter. According to Decrypt, Bybit CEO expressed his favor for decentralized trading and DAO: “We are really powerless when it comes to regulation, but this also shows the importance of decentralized trading. If we want to turn our business from billions to trillions, we cannot exist as a company, but as a ‘social phenomenon’.” It is in this context that BitDAO emerged, and developing its own L2 network and ecosystem is a step forward for BitDAO.

03 The Dilemma of Layer 2 and the Mantle Technology Architecture

The two major technical solutions for Rollup, OP Fraud Proof and ZK Zero Knowledge Proof, each have their own advantages and challenges. OP’s CallData storage cost is high, while ZK’s computational cost is high. In addition, the current mainstream solutions use centralized sequencers, which have a certain risk of single point failure. Mantle is a protocol based on Optimistic Rollup, and what sets it apart from other Rollups is its modular architecture, which can improve performance in computing, execution, and other aspects. The transaction execution, data availability, and transaction confirmation in the Mantle network all use independent modules, which can effectively improve data availability without compromising network security, optimize the Mantle network’s itinerary, and allow developers to deploy contracts in a relatively low-cost and more efficient ecosystem.

3.1 Mantle introduces a modular data availability layer, significantly reducing transaction costs

In the current blockchain architecture, Optimistic Rollup needs to submit a large amount of transaction data to the data availability layer of Ethereum at a high cost of CallData. As transaction volume increases, this cost accounts for 80-95% of the total cost, severely restricting the cost efficiency of Rollups.

As an emerging Layer 2 solution, Mantle has successfully reduced operational costs by introducing a modular EigenLayer as an independent data availability layer. EigenLayer is a low-cost, efficient off-chain data availability network that allows Mantle to only submit necessary state roots to the Ethereum mainnet, while storing a large amount of transaction data in EigenLayer.

As the first data availability module, EigenLayer is organically integrated with Ethereum, allowing Mantle to ensure both security and extremely low transaction costs. This breakthroughs the technical challenge of “high security and low scalability” faced by current Layer 2 solutions. EigenLayer also outputs the security of Ethereum’s collateral assets to external protocols through the mechanism of “repeatedly staking ETH”, which can provide Mantle with security guarantees on the scale of tens of billions of dollars. This significantly reduces the threshold and cost for Layer 2 solutions like Mantle to establish their own security models. Overall, the modular data availability layer of EigenLayer can separate the high cost of Layer 2 storage and data submission from the Ethereum mainnet. With guaranteed security, the transaction costs of Mantle are expected to decrease by several orders of magnitude, and the throughput can increase by several hundred times.

In addition, EigenLayer supports double staking, allowing $MNT and $ETH to operate as staking tokens together. Through double staking, $MNT can be used by validators as collateral to provide security and data availability for the network, while also serving as gas.

3.2 Mantle shortens fraud proof time and improves transaction speed through MPC nodes

For the OP solution, improving the finality of transactions and the speed of proving fraud is key to achieving low latency and high throughput. The validation nodes in Mantle use the Multi-Party Computation (MPC) technology. MPC nodes need to stake MNT tokens, and violations will be punished by deducting tokens. This ensures the compliance of the nodes.

Mantle does not directly submit transaction batches to Ethereum like traditional Optimistic Rollup. Instead, it first reaches consensus among MPC nodes, generates a state root with multiple signatures, and then submits it to Ethereum. This effectively shortens the time for fraud proof:

  1. MPC nodes validate transactions, avoiding erroneous transactions from entering the Rollup and reducing the number of fraud proofs.

  2. MPC consensus mechanism reduces the challenge time for erroneous transactions in the Rollup to 1-2 days, significantly improving the finality.

Although MPC validation is not as reliable as zero-knowledge proofs, it has lower barriers and is suitable as a transitional solution for Layer 2. It uses staking and punishment mechanisms of nodes to ensure transaction correctness to some extent. Compared to traditional Rollup, Mantle better balances security, speed, and cost, significantly improving the throughput and transaction confirmation speed of the Ethereum ecosystem.

3.3 Benefits brought by the decentralized sorter of Mantle

In Layer 2 solutions, the sorter is responsible for collecting transactions, calculating states, and generating blocks, which is crucial for the overall network security. Mantle replaces the single centralized sorter in traditional Rollup with a decentralized sorter cluster, which brings the following benefits:

  1. Improved availability: The decentralized sorter eliminates the single point risk caused by the failure of a central node. Mantle can continue to operate efficiently without the risk of chain stoppage caused by the failure of a centralized sorter.

  2. More reliable consensus: Centralized sorters are susceptible to manipulation and scrutiny by operators. Mantle greatly reduces this risk through a permissionless decentralized sorter cluster, providing a more fair and trustworthy consensus.

  3. Stronger incentive compatibility: Decentralized sorters are driven by rewards, ensuring their long-term sustainability. In contrast, centralized sorters face the dilemma of transitioning into public goods.

  4. System-level security improvement: The decentralized sorter itself increases the difficulty of attacking the system. At the same time, its consensus process does not require trust, further enhancing overall security.

  5. Evolution towards complete decentralization: The decentralized sorter is an important step for Mantle to evolve towards a fully decentralized network in the future. It provides the possibility for community autonomy and promotes the development direction of blockchain.

Overall, the decentralized sorter eliminates centralized risks, provides more efficient, reliable, and secure block generation. This is one of the significant advantages of Mantle compared to traditional Rollup and will also be an important direction for the evolution of blockchain technology. It brings a more robust network and provides better guarantees for users.

04 Mantle Current Status and Roadmap

4.1 Mantle’s Ecological Incentives

Mantle has a strong ecological asset, including over 2 billion US dollars in funds, including the BitDAO treasury, and a large user base, which lays a solid foundation for the development of the Mantle ecosystem.

To better incentivize ecological development, Mantle has launched a series of ecological incentive programs. The first is a $200 million ecological fund. The four main goals of this fund are to attract developers to join the Mantle ecosystem, promote venture capital, support the prosperity of the ecosystem, and achieve investment returns. Sufficient ecological funds can attract a large number of high-quality projects to choose Mantle for deployment, enriching its L2 ecosystem. The second is the partnership with the exchange Bybit. High-quality projects in the Mantle ecosystem have the opportunity to be recommended for listing on Bybit, thus gaining a wider user base and liquidity, which provides strong driving force for the long-term development of the projects.

4.2 Mantle’s Plans in the LSD Field

Mantle’s treasury holds reserves of over 270,000 ETH, providing strong financial strength for its presence in the LSD field. Based on such a strong financial backing, Mantle will carry out strategic cooperation with multiple top LSD protocols to form a strong ecological force, jointly promote the research and application of LSD solutions based on the Mantle network, and significantly increase the user scale and asset scale of the Mantle network. This ecological force can not only generate synergistic network effects but also optimize capital utilization efficiency. This will significantly increase the adoption rate and influence of the Mantle network.

First, 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 and receive mntETH tokens with equivalent returns. The token still retains the price and liquidity of ETH, while earning collateral income. Mantle LSD can leverage the unique advantages of the Mantle ecosystem. First, the Mantle treasury currently holds about 270,000 ETH, providing Mantle LSD with a huge initial deposit scale and liquidity advantage. It is expected that the total market value of mntETH after issuance can reach billions of dollars, which is expected to quickly become one of the top three protocols in the decentralized LSD field. This not only brings scale effects to Mantle LSD itself but also provides positive incentives for the use and circulation of mntETH on the second-level network Mantle.

Second, mntETH can be directly used in the Mantle network, and can even serve as the ETH version of the network. This will greatly enhance the use cases of mntETH and enhance its stickiness in the Mantle ecosystem. Compared to other LSD projects, this is a unique advantage that can enhance user stickiness to the Mantle network. Furthermore, Mantle LSD can maximize the reuse of resources invested in the Mantle community, governance structure, brand influence, etc., thereby greatly reducing operating costs and risks, and optimizing capital utilization efficiency. At the same time, Mantle LSD will operate under Mantle’s overall governance framework to ensure its long-term competitiveness and sustainability. Finally, from a technical perspective, Mantle LSD adopts a simple system architecture, reducing complexity risks and making it easy to be accessed and compatible with other applications and ecosystems, laying the foundation for cross-chain interoperability and ecosystem expansion.

In addition to issuing mntETH, Mantle will also establish strategic partnerships with top DeFi protocols. It has already partnered with Lido Finance to build the stETH ecosystem on the Mantle Layer 2. Mantle is also considering collaborations with Pendle and StakeWise protocols. Furthermore, Mantle is exploring yield-generating solutions such as direct collateralization and proposing the establishment of an Economic Committee as a sub-DAO to enhance asset management efficiency.

By issuing mntETH, forming strategic partnerships with high-quality ecosystem resources, and leveraging its own capital and governance advantages, Mantle has developed a systematic LSD (Liquidity, Staking, and DeFi) strategic plan. This not only enriches its DeFi ecosystem but also brings more unique user stickiness 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 interoperability of the Mantle network.

Currently, Mantle has achieved a TVL (Total Value Locked) of $40 million. With the launch of ecosystem incentives and LSD strategic partnerships, Mantle’s ecosystem projects and TVL are expected to grow rapidly.

05 Token Economics

5.1 Token Overview

The $MNT token in the future Mantle ecosystem will have dual roles: it will serve as both a governance token and a utility token. This means that $MNT holders can participate in ecosystem governance by holding the token and also use the token for various interactions within the ecosystem.

The predecessor of the $MNT token was $BIT. After the governance proposal for brand unification as Mantle was passed, $BIT tokens were exchanged for $MNT tokens at a 1:1 ratio. The total supply of $BIT was 10 billion tokens, and they have all been issued. According to the 1:1 exchange ratio, the total supply of $MNT should also be 10 billion tokens. However, in the approved MIP-23 proposal, 3 billion $BIT tokens from the Mantle Treasury will not be exchanged and will be directly transferred to a burn address. Therefore, the theoretical total supply of $MNT tokens is now 7 billion tokens.

Initial Token Allocation Structure

The distribution of $BIT as the governance token of BitDAO is as follows:

  • 60% reserved for Bybit (45% released according to a vesting schedule)

  • 30% allocated to the BitDAO Treasury

  • 5% allocated to launch partners

  • 5% allocated through sales

Currently, with the approval of BIP-21 (brand unification as Mantle) and MIP-22 ($BIT to $MNT 1:1 conversion), $MNT has become the new governance token of BitDAO. Subsequently, the approved MIP-23 announced that the 3 billion $BIT held by the Mantle Treasury will not be converted into $MNT and will be sent to a designated burn address, resulting in a direct deflation of 30% in the issuance of $MNT tokens (reducing the original 10 billion tokens to 7 billion tokens).

According to the official initial allocation snapshot provided on 2023-07-07, the distribution of $MNT is as follows:

From the distribution chart, it can be seen that Mantle Treasury holds almost half of the $MNT tokens. The official project documentation also explains this: the $MNT held by Mantle Treasury can be considered “non-circulating”. The distribution of $MNT tokens in Mantle Treasury must comply with the Mantle governance process, and the budget, fundraising, and distribution processes follow strict procedures.

After the initial allocation, the sources of $MNT in Mantle Treasury include:

  • Periodic donations from Bybit

  • Gas fees collected on the Mantle mainnet

According to the official documentation, the $MNT in Mantle Treasury is expected to be primarily used for:

  • User incentives

    Various strategies such as implementing multi-season achievements, tasks, and other incentive programs to drive user adoption of Mantle products. The target metrics for user adoption include daily active users, total transactions and protocol fees, total locked value (TVL), and other relevant product adoption metrics. These incentive measures aim to attract and engage users within the Mantle ecosystem.

  • Technical partner incentives

    Key incentives for dApps, infrastructure service providers, and core protocol technical 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, thereby enhancing the entire ecosystem and expanding its capabilities.

  • Core contributor team and advisors

    Transparency and accountability in allocating resources to teams and advisor resources that make positive contributions to the success of the project, following the same budget proposal process.

  • Others

    When situations such as acquisitions, token swaps, inventory sales, and other transactions arise, they will be evaluated based on specific circumstances, taking into account their potential benefits to the Mantle ecosystem and their alignment with project goals.

5.2 Token Functions

Currently, $MNT is expected to have two functions:

  • Governance token

    As a governance token, each $MNT token is given equal voting weight, allowing users to participate in the project’s governance decision-making process by holding tokens and influence proposal decisions based on the amount of tokens held. The community hopes to actively involve token holders in community governance in order to ensure decentralization and shape the future of the Mantle ecosystem through community-driven means.

  • Utility token

    As a utility token, $MNT will serve as the Gas token on the Mantle network, meaning that all gas fees incurred by user interactions on the Mantle network will need to be paid with $MNT.

    In addition, $MNT tokens can be used as collateral for Mantle network nodes, further incentivizing participation and contribution to the security and stability of the network. In the long run, when the Mantle ecosystem expands into the LSD track or Restaking business, $MNT can also be used independently or paired with LP as collateral.

5.3 Valuation Analysis

Due to the fact that the Mantle mainnet is still in the Alpha stage and the infrastructure and application ecosystem are still under development, there is insufficient data to conduct a valuation analysis. The following is a qualitative valuation analysis based on token circulation.

  • The mainstream high-quality assets in the Mantle DAO treasury can provide strong market-making support.

From the figure below (the top ten DAO organizations with the most funds), it can be seen that although the funds in the treasury rank third among all DAOs, Mantle has obvious advantages compared to the top two DAOs (Arbitrum DAO and Uniswap). The treasury of Arbitrum and Optimism consists almost entirely of their own governance tokens, while ETH, USDC, and USDT account for 22.1% of the BitDAO treasury. This determines that Mantle DAO will have stronger market-making capabilities than other DAOs and will have more high-quality assets to support ecosystem development. These factors provide a more solid foundation for the valuation of the MNT token.

  • The operation of the Mantle network involves multiple token staking scenarios, which will effectively reduce the token circulation.

    Unlike other L2 solutions that use ETH as the gas token, the MNT token is used as the gas token for the Mantle chain. As long as the ecosystem develops steadily and the on-chain interactions are active, MNT will be stably consumed without the need for other artificial controls.

    There are multiple scenarios in the operation of the Mantle network that can reduce the circulation of MNT:

    • Staking MNT tokens to become a Mantle DA node.

    • Staking MNT tokens to become a sequencer node.

    • Staking MNT tokens to become a multi-party computation (MPC) validator.

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

  • Mantle DAO has a long-term plan for the stability and appreciation mechanism of the MNT token.

    In April of this year, BitDAO passed the BIP-20 proposal, which modified the donation method of Bybit. Instead of donating a floating amount of BIT according to the exchange rate, a fixed amount of BIT is donated each month, and this amount is halved every 12 months, lasting for 48 months. The donated BIT is retained in the DAO treasury and can be destroyed through proposals when necessary. This way, the circulation of BIT becomes more predictable and further reduces the concentration of BIT holdings, reducing the tendency of the market to view BIT as the token of Bybit exchange.

    From the BIP-22 proposal, it can be seen that the DAO has been considering the stability and appreciation mechanism of the MNT token. Some regulatory measures include:

    • Possibly controlling potential inflation by destroying MNT tokens in the treasury.

    • Referring to the ARB token model, controlling the annual newly minted MNT tokens to not exceed 2% of the total supply.

06 Risk Warning

  • Centralization Risk

    From the distribution of token holdings, both the initial $BIT and the current $MNT have a high degree of concentration, which is a common concern in the market. From the proposal, it can be seen that MantleDAO is actively addressing market concerns. The BIP-20 proposal clearly states the “donation amount of BIT by Bybit in the next 4 years” (BIT has been converted to MNT), and the donated BIT tokens by Bybit are in a state of pending destruction and are considered non-circulating. This will gradually reduce Bybit’s token holding proportion. In terms of the number of token holders, the MNT token holding addresses have reached 70,000 (including L1 and L2). In terms of liquidity, MNT is listed on multiple DEXs such as Uniswap and has tens of millions of dollars in liquidity, providing sufficient liquidity options for MNT holders.

  • Community Governance Risk

    Currently, Mantle Treasury holds approximately 49% of the total $MNT tokens, and the official documentation states: “These tokens can be considered non-circulating” and “These tokens will be used to support the development of the ecosystem and the construction of ecological applications.” In the latest approved MIP-24 and 25 proposals, the DAO has established a dedicated Economic Committee and LSD strategy proposal, indicating the DAO’s efforts in optimizing community governance.

    At the same time, according to information from the official source, the Mantle Treasury is managed by Mantle Governance and is currently part of the DAO’s asset management. The use decisions are established and proposed by the DAO. The Mantle Treasury is currently not participating in Mantle governance voting.

  • Technical Security Risk

    Mantle is an L2 protocol based on Optimistic Verification. The current Mainnet Alpha version of Optimistic Verification is still under development.

    The data availability layer, MantleDA, is a core technical component of the Mantle Network. MantleDA is a rewrite of EigenDA through Fork EigenDA. Currently, MantleDA is a version of Mantle before integration with the EigenDA mainnet. It will be migrated to EigenDA after the EigenDA mainnet is launched.

    The Mainnet Alpha stage has implemented a threshold signature scheme (TSS) with a slashing mechanism. There are clear provisions for two types of misbehavior: node validation absence and malicious signature. These behaviors will be recorded by the TSS administrator. When the number of node validation absences increases, the TSS administrator will submit a proposal. With the agreement of the majority of other nodes (based on the staking ratio), the staked portion of the node will be slashed. Similarly, when a TSS node submits fraudulent data to the network, it will be recorded and reported to the TSS administrator by other nodes. The TSS administrator will then submit a punishment proposal. With the agreement of the majority of other nodes (based on the staking ratio), the staked portion of the node will be slashed.

However, according to L2Beat, the fraud-proof system in the Mantle network is currently disabled, and the slashing conditions in Mantle DA are also disabled.


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