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

1. Research Highlights

1.1. Core Investment Logic

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

 Mantle Network, incubated by the well-known DAO organization BitDAO, has significant advantages in terms of technical team strength and financial support. This solid foundation enables Mantle to establish a strong position in the competitive Layer 2 landscape. Additionally, Mantle has strategically partnered with multiple top projects, facilitating its rapid integration into the Ethereum ecosystem and the aggregation of users and application scenarios. As the Ethereum ecosystem continues to grow, Mantle can further tap into a vast market space. With robust technical and financial backing, broad market prospects, and the construction of a mutually beneficial ecosystem, Mantle possesses key elements for long-term investment value. Furthermore, in terms of asset allocation, Mantle Treasury holds a large amount of mainstream digital assets, providing stronger liquidity support and market-making capabilities for the MNT token. Compared to other DAOs that only hold governance tokens, Mantle's richer asset reserves enable it to fully finance ecosystem development. Mantle can leverage its asset advantage to establish an ecosystem fund, attracting high-quality projects. This is a key support for Mantle as an important Layer 2 network with long-term development prospects.

 A sound governance mechanism is conducive to the long-term stable appreciation of the token. BitDAO, the organization behind Mantle Network, has taken various measures to enhance the long-term stability and appreciation potential of its token economic model. For example, it has adjusted the donation model of Bybit, reducing the donation amount in fixed stages to decrease token circulation. Through governance theory, it mitigates the inflation risk of treasury tokens and controls the incremental increase to not exceed 2% of the total supply, among other measures. These governance measures reflect BitDAO's strong emphasis on maintaining the token value and its ability to draw from successful case experiences, giving the MNT token better long-term appreciation potential compared to other cryptocurrencies. It is foreseeable that as the ecosystem matures, Mantle Network will continue to improve its governance mechanism and formulate more policies to enhance the token's intrinsic value based on the collective wisdom of the DAO, laying the foundation for the long-term investment prospects of MNT.

Mantle Network's various operational mechanisms provide a way to reduce the token's circulation. Unlike other L2 networks that use ETH as the gas token, MNT token serves as the gas token for the Mantle chain. As the ecosystem stabilizes and on-chain interactions become more active, MNT will be steadily consumed without the need for other artificial controls, creating a stable deflationary model. Additionally, through multiple token staking scenarios, the circulation of tokens will be effectively reduced, enhancing the token's value. The economic model design of Mantle Network provides multiple mechanisms for reducing token circulation, supporting its long-term investment value, which is a core logic for investing in MNT.

Mantle Network adopts a modular technical approach, reflecting its forward-looking technical system. The clear division of functions among Mantle's components and the use of loosely coupled design ensure the system's flexibility, allowing it 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 a monolithic architecture, Mantle's modular system is more easily updated and iterated, with higher security and stability. In the event of system issues, problems can be resolved by upgrading individual components rather than requiring a complete overhaul. Furthermore, modularity allows third parties to access or use only specific functions of the Mantle system according to their needs, expanding the system's applicability and scenarios. This design philosophy is worth emulating by other projects and is the technical foundation that gives Mantle long-term investment value.

Mantle Network achieves a level of scalability that other L2 networks find difficult to attain. By using Optimistic Rollup and an independent data availability layer, EigenLayer, Mantle can provide lower costs and faster transactions. This architecture sets Mantle apart from other Ethereum Layer 2 scaling solutions such as Cartesi, Loopring, Polygon, and Arbitrum. While Mantle is not the only L2 solution using an independent data availability layer, MantleDA is decentralized, unlike the data availability layers of other L2 networks, which often use centralized architectures. This allows Mantle to achieve true decentralization and high scalability. Through this technological innovation, Mantle is expected to offer transaction performance and cost advantages surpassing those of other L2 networks. This enhanced scalability will facilitate widespread adoption and competitive advantages for Mantle. Therefore, Mantle's high scalability is an important differentiating technological advantage and investment value proposition.

Mantle Network's security is built on Ethereum's robust consensus mechanism and set of validating nodes. Mantle's state and transactions are verified by Ethereum's validating nodes in the same manner as L1 chain transactions. In other words, the node set verifying Mantle transactions' security is consistent with Ethereum's, unlike other L2 networks that use their own consensus models. Mantle directly inherits Ethereum's strong security, and its security is no less than that of the Ethereum mainnet. This close integration with Ethereum's security model gives Mantle a unique advantage and higher reliability in terms of security compared to other L2 networks. This is a core competitive strength 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 circulating supply of 3.234 billion, and a total supply of 6.219 billion, resulting in a fully diluted market capitalization of $2.805 billion. After conducting an in-depth analysis and valuation of the Mantle Network project, it is believed that at the current stage, the $MNT token is somewhat overvalued. However, in the long term, if Mantle can fulfill its technical promises, steadily develop its ecosystem, and fully demonstrate its technical advantages, ecosystem potential, and market space, there is potential for its valuation to increase.

A detailed explanation of the valuation analysis method and basis for Mantle Network will be provided in the subsequent report (6.2 Project Valuation Level). Additionally, ongoing attention will be given to its ecosystem development dynamics to make timely adjustments to its valuation judgment.

1.3. Project Risks

The main risks currently faced by Mantle Network include competition risk in the fiercely competitive Layer 2 environment, technical security risk, early-stage development risk, negative impact of BIT token performance on MNT, and the risk of the OP Rollup technology direction no longer receiving community support. For detailed project risk specifics, please refer to section 6.3 Project Risks.

2. Project Overview

2.1. Project Scope

Mantle Network is an Ethereum Layer 2 solution designed based on the Optimism OVM architecture. It employs a modular design, aiming to utilize EigenDA as a data availability layer and Specular Network's fraud proof system to achieve transaction validity proof.

According to official information from Mantle Network, its business scope, in addition to serving as an L2 scaling solution and providing high-speed, low-cost on-chain transactions, mainly includes:

1) Mantle LSD (Upcoming)

Mantle LSD is a decentralized staking service based on Lido, allowing users to stake ETH on Ethereum 2.0 and receive mntETH as proof. Mantle LSD aims to become the preferred solution for ETH liquidity staking in the Mantle ecosystem, leveraging the synergies of the Mantle Network ecosystem. It can reduce Mantle's deposit costs and enable third-party applications to use and expand without permission. Mantle LSD also features a simple and secure system architecture, leveraging existing capabilities of the Mantle ecosystem such as community, governance, and brand influence, which is conducive to driving the development of the Mantle Network ecosystem.

2) Mantle EcoFund

Mantle EcoFund is a $200 million ecosystem fund provided by Mantle Treasury, co-invested with strategic partners at a 1:1 ratio. The main goal of EcoFund is to promote the adoption of developers and DApps on the Mantle network, while also 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 investment in potential outstanding projects at the appropriate time.

3) EduDAO

EduDAO is a decentralized autonomous organization (DAO) that connects different university ecosystems to enhance cooperation and data exchange, nurturing the next generation of blockchain and Web3 innovators. EduDAO is funded by BitDAO Treasury as an independent advisory board, allocating up to $11 million annually for project funding, 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. The goal of EduDAO is 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 a permissionless and interoperable gaming world. Game7 provides critical tools for game developers, such as an NFT marketplace, cross-chain bridging, and game DAO, among others.

Game7 and Mantle Network are both projects incubated by BitDAO, and they have a close cooperative relationship. Game7 will utilize the infrastructure provided by Mantle Network to offer high-quality user experience and ecosystem connectivity for the gaming projects it incubates and invests in.

2.2. Team Overview

2.2.1. Overall Situation

Mantle Network, as a Layer 2 network solution, is incubated and supported by the well-known DAO organization BitDAO. The initial conceptual prototype of Mantle was proposed by Ben Zhou, 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 various fields and backgrounds, working in a flat management structure.

2.2.2. Team Background

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

1) BitDAO

BitDAO was founded in 2021 by the co-founders of the Singapore-based crypto derivatives exchange Bybit, Daniel Yan and Ben Zhou. The treasury assets of BitDAO come from fundraising and donations. In June 2021, it raised $230 million in a private fundraising round, with investors including Founders Fund, Pantera Capital, Dragonfly Capital, among 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 (valued at $360 million at the time).

BitDAO is one of the largest DAO organizations to date, managing assets worth approximately $3.4 billion, primarily composed of BIT, MNT, ETH, USDC, and USDT.

The success of BitDAO is closely tied to the contributions of its major supporter, Bybit. As the largest supporter of BitDAO, Bybit has committed to donating 0.025% of its futures contract trading volume to the BitDAO treasury on a regular basis. Public data shows that from July 2021 to June 2022, Bybit donated over $1 billion worth of tokens to BitDAO. In June 2022, Bybit announced that it would continue to donate tokens to BitDAO on a regular basis for the next four years, with the donation amount gradually decreasing. Specific daily donation information and disclosures may need to be obtained through the BitDAO community's public channels.

2) Ecosystem Merger

In May 2023, BitDAO completed a merger with Mantle Network through BIP-21 proposal, unifying the brand and token as Mantle (MNT). This established a larger ecosystem, and the MANTLE ecosystem inherited BitDAO's vision, gaining its financial and community support for the operation and development of the Mantle Network. BitDAO's token BIT was also converted to MNT at a 1:1 ratio. Following the merger with BitDAO, Mantle Network's new ecosystem became the largest treasury in the crypto industry, valued at over $3 billion at the time of writing.

It is evident that Mantle has received strong support from BitDAO, with substantial financial strength and the backing of centralized exchange Bybit's exploration into decentralization, which bodes well for the future development of Mantle Network. Additionally, the unified token economy has integrated ecosystem resources, providing strong support for the project's further development.

2.2.3. Core Members

Arjun Kalsy: Ecosystem Lead at Mantle Network, responsible for project marketing and ecosystem development. He is a successful blockchain entrepreneur and advisor, having previously served as Vice President of Growth at Polygon, overseeing business development and ecosystem expansion. He has also been involved in major corporate collaborations, such as Reddit, Instagram, and Disney. Prior to this, he was a Client Relations Manager at Playment, where he helped clients train high-precision AI/machine learning computer vision models, with a focus on applications in autonomous driving and the transportation sector.

Joshua Lapidus: Strategic Advisor at 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 for NFTP, BufficornBUIDLBrigade for ETHDenver, and Public Nouns (a project forked from NounsDAO, dedicated to providing funding for public goods through creative means).

Pranjal Bhardwaj: Co-founder of Mantle Network. Pranjal has worked in the crypto field for many years, previously serving as a Senior R&D Engineer at Polygon before joining BitDAO. At BitDAO, Pranjal is responsible for the R&D team and has been involved in incubating multiple projects, 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 project's technical architecture design.

Sreeram: Co-founder and CTO of Mantle Network, and also co-founder and CTO of EigenLayer. Sreeram is an experienced software engineer and architect, having been responsible for projects in distributed systems, big data, and machine learning at companies such as Dow Jones and Cooper Midroni. He is the primary designer and developer of Mantle DA, focusing on providing an efficient and secure data availability layer.

Other Members: The Mantle Network team also includes several outstanding engineers, designers, operations personnel, marketing personnel, etc., each 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 contributed to its development and growth.

2.3. Funding Situation

As a project incubated by BitDAO, Mantle has not conducted independent public fundraising. 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 official Mantle core budget address provided by BitDAO, its current funding exceeds $18 million.

2.4. Past Development and Roadmap

2.4.1. Past Development

2.4.2. Current Progress

According to information from its official website and forums, Mantle Network is currently undertaking or planning the following major tasks:

▪ Improving and optimizing the technical architecture and functionality of Mantle Network, including EigenDA, MPC, decentralized sequencers, etc.

▪ Promoting the ecosystem development and partnerships of Mantle Network, including integration and support for Ethereum protocols, cross-chain bridges, DeFi applications, GameFi applications, etc.

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

▪ Establishing and managing the ecosystem fund and treasury of Mantle Network, including providing funding, resources, and incentives for ecosystem projects and developers.

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

2.4.3. Development Plan and Roadmap

According to information from the project's official website, the future development plan and roadmap for Mantle Network are as follows:

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

▪ October 2023: Launch of EigenLayer data availability layer, inheriting Ethereum's security and decentralization through re-collateralizing ETH.

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

▪ December 2023: Introduction of decentralized sequencer functionality, providing secure and trustless block production through the rotation of permissionless sequencer sets.

▪ January 2024: Introduction of cross-chain bridging functionality, achieving interoperability with other L2 projects and public chains.

▪ February 2024: Introduction of NFT marketplace functionality, supporting users to create, trade, and showcase NFTs on Mantle.

▪ March 2024: Introduction of DAO functionality, allowing users to participate in Mantle's governance and decision-making 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 took place in the context of rapid development in the Ethereum L2 space and increasing global regulatory scrutiny. With the continuous rise of DEXs, the trend of cryptocurrency trading volume migrating from CEXs to DEXs is evident. However, the high gas fees and low throughput of Ethereum L1 have limited the development of DEXs and DeFi. Therefore, L2 scaling solutions have become the key to addressing this pain point. The upcoming Ethereum Cancun upgrade in November 2023 will significantly reduce the storage costs of L2, further promoting innovation and competition in the L2 space.

Additionally, the wave of compliance has given rise to the efficient Layer 2 era. With regulatory agencies increasingly strict on the use of crypto assets, compliance has become an important issue in the blockchain industry. This has prompted many Layer 2 projects to adopt a model without token issuance, generating profits through gas fees and MEV income. The mainstream solutions such as Arbitrum and Optimism employ a centralized sequencer architecture. This efficient setup allows them to enjoy the benefits of Layer 2 while better meeting regulatory requirements. It can be foreseen that under the trend of compliance, lightweight Layer 2 networks will rapidly expand and form scalable applications, almost a deterministic future for the development of Layer 2. As a new generation of Layer 2 network, Mantle also faces the impact of changes in the regulatory environment, adapting to compliance will be an external situation that Mantle needs to pay attention to, and together with other Layer 2 projects, 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 challenges in terms of storage and computation costs. In addition, most existing solutions use a centralized sequencer, which can easily lead to single points of failure. As an Optimistic Rollup 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 processes, which can enhance network throughput and scalability without compromising security. This modular approach also enables Mantle to achieve more cost-effective contract development and deployment. Furthermore, to address the centralization issue of sequencers, Mantle Network plans to achieve decentralized sequencers in the future, allowing community participation in sequencer operation and governance to enhance network decentralization and resistance to attacks.

Additionally, the challenge period for OP fraud proof is 7 days, which means users need to wait for 7 days to withdraw assets from L2 to L1. This has a certain impact on user experience and liquidity. To address this issue, Mantle Network plans to implement multi-party computation (MPC) to shorten the challenge period to 1-2 days.

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 proofs to ensure the security and synchronicity between L2 and L1 networks. The basic principle of Optimistic Rollup technology is as follows:

1) Deploy a fraud proof contract on the L1 network, which receives block hashes from the L2 network and provides a mechanism for challenging and proving.

2) Run an execution layer on the L2 network, which executes transaction requests initiated by users on the L2 network and updates the state of the L2 network based on state transition rules.

3) Select a sequencer on the L2 network, responsible for collecting user transaction requests, packaging them into blocks in a certain order, and submitting block hashes to the fraud proof contract.

4) Run multiple validators on the L2 network, responsible for monitoring block hashes on the fraud proof contract and replaying transactions in the blocks based on state transition rules to 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 evidence. If the challenge is successful, the sequencer will be penalized, and the incorrect or fraudulent transactions will be rolled back. If no one initiates a challenge to the blocks submitted by the sequencer within a certain period, or if the challenge fails, the blocks will be considered valid, and the transactions within them will be finalized.

Next, let's compare the network architecture of Mantle Network:

Image Source: Mantle Network Official Website DOC

Based on the network architecture of Mantle Network, let's briefly explain its operational process:

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

2) Each block has a unique identifier called the state root, which represents the state of the L2 network after block execution. The latest state root is submitted to multi-party computation (MPC) nodes for verification. MPC nodes use threshold signature (TTS) algorithms to sign the state root to confirm its correctness. Once the state root receives MPC signatures, it is submitted to the fraud proof contract (SCC) on Ethereum L1 for storage, 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 period called the fraud proof window. This is to prevent cheating or incorrect transactions being submitted on the L2 network. If someone discovers incorrect transactions, they can initiate a challenge to the SCC contract within the window period and provide evidence. If the challenge is successful, the cheater will be penalized, and the incorrect transactions will be rolled back.

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

5) Other nodes can retrieve transaction data from Mantle DA through DTL services for verification and confirmation, enhancing the security and reliability of the L2 network.

6) If users want to transfer assets from L1 to L2, they need to complete the process through the enqueue method of the CTC (deposit contract), which places the user's assets in a queue and then transfers them to the L2 network by the sequencer.

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

The Mantle system also has other contracts and roles to achieve different functions, such as verifying states, managing permissions, upgrading systems, etc. Its key operational roles are controlled by multi-signature wallets to prevent single points of failure or malicious operations.

By comparing the principles of OP Rollup and Mantle, we can see 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 grows, this cost can account for 80-95% of the total cost, severely limiting the cost efficiency of Rollups.)

Mantle's modular design processes four key functions of the blockchain at different levels, rather than completing them on a single network layer like most single blockchains. These four functions are:

• Transaction Execution: Takes place on Mantle's EVM-compatible execution settlement layer, where Mantle's sequencer generates blocks on L2 execution layer and submits 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 broadcast to L1.

• Data Retrieval: Other nodes retrieve transaction data from Mantle DA through DTL services and verify and confirm it.

The following image shows an example of modular chain design.

Image Source: Modular Chain Design: Celestia Docs

The modular design also allows Mantle Network to easily integrate new technologies, such as replacing the consensus mechanism with zk-Rollup or zkEVM. Additionally, the modular architecture of Mantle significantly reduces transaction costs compared to the base layer, while also improving network efficiency and reducing the overall load on nodes through Optimistic Rollup.

2) EigenLayer Achieves High-Performance Data Availability

Mantle uses EigenLayer as a decentralized data availability layer solution. EigenLayer allows Ethereum verification nodes to participate in data availability assurance through re-collateralizing ETH. The Mantle data availability layer, supported by EigenDA, can store and transmit transaction data from the Mantle execution layer, allowing Mantle to inherit Ethereum's security without needing to publish all data to L1. EigenLayer also 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 resistance to censorship.

EigenLayer provides highly secure and high-performance data availability support for Mantle, making it a key technological innovation for the network. This also gives Mantle a significant competitive advantage in terms of scalability and decentralization.

3) Multi-Party Computation Mechanism Shortens Fraud Proof Time

Mantle Network uses the multi-party computation (MPC) protocol, a key technological innovation that accelerates fraud proofs and transaction speed. The network's verification nodes use a threshold signature scheme (TSS)-based multi-party computation mechanism, allowing a group of verification nodes to quickly reach consensus on transactions on Layer 2, generate state roots with multi-signatures, and then submit them to Ethereum. This pre-verification approach significantly reduces the need for fraud proofs and shortens the proof time to 1-2 days. While multi-party computation may not be as reliable as zero-knowledge proofs, with node staking and penalty mechanisms, it can ensure a certain level of security while balancing costs. Overall, Mantle's multi-party computation protocol helps achieve a better balance between transaction speed and security, making it a key innovation for achieving high throughput and low latency.

4) Decentralized Sequencer Eliminates Centralization Risks

By achieving decentralized sequencers, Mantle provides secure and trustless block production. The sequencer is responsible for collecting transactions, computing states, and generating blocks in L2 solutions, making it crucial for network security. In traditional Rollup solutions, the sequencer is often a single centralized node, susceptible to failure, manipulation, or censorship. By replacing centralized sequencers with a permissionless sequencer cluster, Mantle brings several benefits:

• Improved network availability, eliminating the risk of single points of failure and ensuring continuous network operation.
• Enhanced consensus reliability, preventing manipulation or censorship of the sequencer and ensuring fair and transparent transactions.
• Improved incentive compatibility, driving compliant behavior of sequencers through reward mechanisms and ensuring long-term network sustainability. In contrast, centralized sequencers face the tragedy of the commons.

Decentralized sequencers significantly enhance the network's resistance to attacks and trustless consensus, strengthening security and marking an important step towards complete decentralization.

In summary, decentralized sequencers are a significant advantage for Mantle compared to traditional Rollup solutions. They eliminate centralization risks and provide more efficient, reliable, and secure block generation, making the Mantle network more robust and better safeguarding user rights.

3.3. Project Network Nodes

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

1) Sequencer Nodes:

Sequencers are responsible for receiving and recording user transactions on the L2 network and packaging transactions into blocks. They are also responsible for rolling up transactions in blocks, generating batches with execution state roots, and submitting batches to the L1 network. Sequencers also need to broadcast block data to the entire network (L1 and L2). In the initial stage of Mantle Network, sequencers are operated by the Mantle core team as centralized nodes. However, according to Mantle Network's development roadmap, sequencers will gradually achieve decentralization, providing opportunities for other nodes to participate.

2) Threshold Signature Scheme (TSS) Nodes:

TSS nodes are responsible for "signing" the batches generated by sequencers to send them to the L1 network. TSS nodes need to verify the state roots generated by sequencers to ensure their correctness. State roots must be signed by TSS nodes before being sent to Ethereum for recording. In the initial stage of Mantle Network, TSS nodes are operated by a group of reputable institutions, but ultimately, they will be elected through voting without permission through Mantle Network's governance mechanism.

3) Rollup Verifiers/Replica Nodes:

Rollup verifiers/replica nodes are responsible for synchronizing Rollup data from trusted sequencers on the Mantle network and verifying the state roots submitted on the L2 network. If verifiers/replica nodes discover invalid state data, they can initiate fraud proofs to revoke incorrect 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 a data availability layer, a protocol secured by re-collateralized ETH to ensure the security and efficiency of the Mantle data availability layer. DA nodes do not need to publish data to the L1 network but instead publish it to EigenDA, secured by re-collateralized ETH. This greatly improves throughput and scalability and allows for the construction of new types of DApps.

3.4. Project Ecosystem

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

1) Ecosystem Incentives

Mantle has a strong ecosystem asset, including over $2 billion in funds, including the BitDAO treasury, and a large user base, laying a solid foundation for the development of the Mantle ecosystem. According to the latest news on August 28, the Mantle Network governance page shows that the Mantle community has recently initiated a proposal to use the Mantle Treasury to promote ecosystem development, planning to allocate $238 million to promote ecosystem development. Specific content includes providing up to $160 million in liquidity support for applications, providing up to $60 million in seed liquidity for RWA-backed stablecoins, and providing up to approximately $18 million in liquidity support for third-party cross-chain bridges.

Additionally, 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 global entry-level cryptocurrency trading platforms, has a large user base. Excellent projects in the Mantle ecosystem have the opportunity to be discovered by more investors through Bybit's recommendations and be listed for trading on the platform. Increased liquidity and broader investor recognition will benefit the long-term development of projects, and a thriving ecosystem will further enhance the value of the Mantle network. It is foreseeable that projects and assets in the Mantle ecosystem will benefit greatly from Bybit's traffic and resource advantages. This win-win situation will continue to attract more high-quality projects to join Mantle.

These measures indicate that Mantle Network will rely on its substantial 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, driving a virtuous cycle.

2) Ecosystem Applications

Mantle Network has built a rich ecosystem, currently referencing 119 projects on its ecosystem page, with a few still in the testnet stage. In terms of segmenting the field, project teams and developers mainly focus on three areas: 38 in DeFi, 27 in infrastructure, and 25 in GameFi, with the rest falling into 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 a one-stop liquidity service (LaaS). Its concept is that every token should obtain better on-chain liquidity in an efficient and sustainable manner.

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

iUSD is a USD-denominated convertible bond introduced by iZUMi, using smart contracts and transparent on-chain funds managed by a multi-signature wallet as excess collateral to support the value of iUSD.

FusionX

FusionX is a decentralized trading protocol aimed at providing secure and reliable trading services for the Mantle Network. The project was launched by a seasoned blockchain team in 2022 and is one of the early projects to join the Mantle ecosystem. FusionX adopts the AMM model, allowing users to engage in liquidity mining, trading, borrowing, and supports multiple trading pairs, including ETH/WETH, MATIC, and other ERC20 tokens, providing liquidity to users. The project features an efficient on-chain order book system to ensure immediate transactions.

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 mUSD, an algorithmic stablecoin collateralized by assets in the Mantle ecosystem. This stablecoin can be exchanged for other assets in the Mantle ecosystem. The exchange rate mechanism between mUSD and assets in the Mantle ecosystem is dynamic 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 the Ethereum ecosystem, thereby extending cryptographic economic security. For a deep report on EigenLayer by WJB, interested readers can refer to the following link: EigenLayer Deep Research Report

Pyth Network

Pyth Network is an on-chain oracle that can publish financial market data to multiple blockchains with high precision and low latency. Pyth Network's data comes from over 80 primary data providers, including some of the world's largest exchanges and market makers such as Jane Street, CBOE, Binance, OKX, and Bybit. It provides price data for various asset classes, including US stocks, commodities, and cryptocurrencies, with each price data being a summary of prices from multiple data providers and updated multiple times per second.

Biconomy

Biconomy is an open decentralized blockchain bridging platform with the main functions including:

• Cross-chain asset transfer: Supporting secure and efficient digital asset transfers between different public chains, such as ETH, BTC, etc.
• DApp interoperability: Allowing DApps to access resources on multiple chains, such as contracts, data, accounts, etc., achieving true cross-chain interoperability.
• Contract development: Providing a contract library 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 strategically to achieve victory.

Chesslers

Chesslers is a Web3-based gaming platform that allows users to play chess and earn rewards. Based on their betting protocol, Chesslers can implement 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, captivating stories, and mythological elements inspired by the legendary Dacian Kingdom (modern-day Romania). It is a third-person large-scale multiplayer online role-playing game (MMORPG) with NFT and GameFi mechanisms. Based on the historical background of the ancient Dacian Kingdom, 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 Mantle, as a high-performance Layer 2 network, can provide the necessary high throughput and low gas fees for blockchain games, which is crucial for achieving the vision of interconnected blockchain games. Inheriting a rich gaming ecosystem from BitDAO, including projects like Game7 and HyperPlay, has laid the foundation for Mantle to attract gaming users and developers. Game7 provides valuable tools and resources for game developers, such as the web3.unreal plugin, making it easier for developers to build blockchain games. HyperPlay, as a blockchain game store and asset interoperability platform, is helping to facilitate seamless circulation of in-game assets. The Mantle ecosystem has already gathered a large number of gaming projects and is rapidly growing, demonstrating its enormous potential in the gaming field.

It is evident that Mantle provides strong support for blockchain games in both technology and ecosystem, and is expected to drive the mass adoption of blockchain games.

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

Specifically, the advantages include:

• The total number of projects in the Mantle ecosystem has reached 100+, comparable to other leading L2 networks.

• Projects cover multiple domains including gaming, DeFi, infrastructure, and the ecosystem continues to grow.

• There are some unique use cases, such as direct computation.

• The ecosystem assets are strong, with a range of incentive programs.

• Good user experience, especially suitable for the gaming ecosystem.

The disadvantages mainly include:

• Compared to other L2 networks, Mantle has a shorter development time, and ecosystem construction is still relatively early stage.

• Mainstream protocols such as DApps on Ethereum have not formally integrated into the Mantle ecosystem.

• The team background and funding scale are not as advantageous as some L2 pioneers.

• The number of applications in other domains besides DeFi is relatively limited.

• The user base and TVL scale need improvement.

In general, while the number of projects in the Mantle ecosystem has reached a certain scale, it is still in the early stages, and the concentration of mainstream resources needs further observation.

3) Mantle Network's Plans in the LSD Field

From the official roadmap and network architecture of Mantle Network, it can be understood that the LSD ecosystem of Mantle Network is about to be launched and holds an important position in its network architecture.

From the Mantle treasury, it is known that Mantle has a reserve of over 220,000 ETH, which serves as its financial strength in the LSD field. The network is expected to strategically collaborate with major LSD protocols to jointly promote the research and application of LSD solutions based on the Mantle network. Specifically:

A. Launching Mantle LSD

Mantle plans to launch 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 an equivalent amount of mntETH tokens and earn staking rewards. This model can leverage the advantages of the Mantle ecosystem, including its large initial deposit scale and liquidity, as well as the diverse use cases of mntETH in the Mantle network.

B. Innovative Use of mntETH

mntETH can be directly used within the Mantle network, significantly expanding the use cases of mntETH and enhancing its stickiness in the Mantle ecosystem. The operational model of Mantle LSD can maximize the use of Mantle's established community, governance structure, brand influence, and other resources, thereby reducing operational costs and risks.

C. Efficient Overall Governance

Mantle LSD will operate within Mantle's overall governance framework to ensure its long-term competitiveness and sustainability. Additionally, the simple system architecture of Mantle LSD will reduce complexity risks, making it easy to be accessed and compatible with other applications and ecosystems.

D. Strategic Partnerships and DAO Development

Mantle Network in the LSD Field

In addition to the issuance of mntETH, Mantle will also strategically collaborate with multiple top DeFi protocols to form a strong ecological force, jointly promoting the research and application of LSD solutions based on the Mantle network. For example, Mantle has partnered with Lido Finance to establish the stETH ecosystem on the Mantle network. Mantle is also considering collaborations with protocols such as Pendle and StakeWise, which can generate synergistic network effects and optimize capital utilization. Additionally, Mantle is exploring direct staking and other yield-generating schemes, and has proposed the establishment of an Economic Committee as a sub-DAO to enhance asset management efficiency.

From these aspects, it is evident that Mantle's plans in the LSD field are systematic, innovative, and efficient. It not only enriches Mantle's DeFi ecosystem but also brings unique user stickiness and value capture capabilities to the Mantle network. Compared to other L2 solutions, Mantle has significant advantages in this regard, which will strongly drive the rapid growth and cross-chain interoperability of the Mantle network.

Project Data

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 circulating market cap of $1.454 billion, ranking 32nd among all cryptocurrencies. The majority of MNT's liquidity comes from the centralized exchange Bybit, which has strong financial backing. However, trading volume on other major exchanges is not high. Currently, MNT is not listed on mainstream large exchanges, which may affect its liquidity and exposure. Additionally, there are approximately 163,406 MNT holding addresses.

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

L2 Lockup Data

According to L2Beat's statistics, as of September 2, 2023, the total locked value of the Mantle Network is approximately $88.79 million, ranking 9th among all Layer 2 networks and accounting for 0.94% of the total market share. In terms of TVL scale, Mantle Network lags behind top projects in the L2 field such as Optimism and Arbitrum. This is mainly due to Mantle Network being a new L2 solution, with its mainnet still in the early operational stage. With the gradual enrichment of the Mantle ecosystem and the expansion of the 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.

Social Media Data

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

Token Economic Model Analysis

Token Model

The Mantle ecosystem and the $MNT token are currently undergoing governance approval processes to determine key aspects, including token addresses, token design, and initial token allocation. 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 the BIP-21 Merger Proposal

• Introduces a "one brand, one token" principle to merge the brands and tokens of BitDAO and Mantle into Mantle, simplifying the ecosystem's structure and communication.
• Authorizes a token conversion plan to convert all holders' $BIT tokens into the new Mantle token at a fixed ratio, which will have more advanced design and functionality to support Mantle's products and governance.
• Simplifies the token economic model, accelerates all contributions to BIP-20 and the lockup plan issued by BitDAO, making the circulation supply of Mantle tokens clearer and more predictable.
• Retains the existing governance and resource management processes, allowing Mantle token holders to continue voting on ecosystem direction, budget, treasury, and other matters.
• Does not affect existing sub-DAO types, community, and product categories, allowing them to independently determine their brand, governance, mission, and strategy.

2) Key Points of the MIP-22 Token Design Proposal

• Designs a new Mantle token, $MNT, with similar upgradeable and minting capabilities as $ARB and $OP tokens to support Mantle's products and governance.
• Establishes a token conversion plan to convert all holders' $BIT tokens into $MNT tokens at a 1:1 ratio, providing multiple conversion channels and flexible conversion periods.
• Establishes a temporary conversion treasury to support the token creation and conversion process, with received $BIT tokens being destroyed and sent $MNT tokens maintaining a 1:1 ratio.
• Does not change the existing governance and resource management processes, allowing $MNT token holders to continue voting on ecosystem direction, budget, treasury, and other matters.
• Authorizes the Mantle core contributors team to determine the delisting of $BIT tokens, listing of $MNT tokens, opening of conversion channels, and the best timing and sequence for the Mantle network mainnet.

Token Total Supply and Allocation

1) MNT Token Total Supply

MNT is the practical and governance token of the Mantle ecosystem. MNT holders can participate in important ecosystem decisions through voting, such as treasury management, protocol parameters, and product direction. To simplify the token economic model, MNT holders have passed the MIP-23 proposal, halving the number of MNT tokens in the treasury from 6.05 billion to 3.05 billion. At the same time, the 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. This change aims to increase the demand and scarcity of MNT, thereby enhancing its value.

2) BIT Token Economics

The $BIT token was launched on July 15, 2021, with a maximum supply of 10 billion tokens (no inflation), later changed to 6.2 billion. After the MIP-22 vote, it will be converted at a 1:1 ratio into $MNT.

3) Token Allocation

The allocation of $MNT tokens in the Mantle treasury needs to follow Mantle's governance process. Budgets, 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 regarding macro objectives or restrictions on the allocation of $MNT tokens. However, the following major categories are expected:

• User incentives: Prioritize driving user adoption of Mantle products through various strategies such as multi-season achievements, tasks, and other incentive programs. Target adoption metrics 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 in the Mantle ecosystem.
• Technical partner incentives: This category focuses on incentivizing decentralized application developers, 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, enhancing 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's success.
• 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 potential benefits to the Mantle ecosystem and alignment with project goals.
• Burn: The MNT token includes a burn function, allowing MNT tokens to be removed from circulation and total supply analysis. The burning of MNT tokens from the treasury is determined through the Mantle governance process.

4.1.3. Token Value Capture

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

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

2) As a governance token, MNT grants holders the voting rights for decisions within the Mantle ecosystem. These decisions include treasury management, protocol parameters, and product direction. These functions increase the influence and participation of MNT, thereby enhancing its value.

4.1.4. Core Token Demanders

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

2) Mantle Network Node Operators: Individuals or organizations providing infrastructure support for the Mantle network, such as validators, storers, and computors. They need to use MNT to stake as nodes and receive network rewards and fee income.

3) Mantle Ecosystem Developers: Individuals developing within the Mantle ecosystem, who need to use MNT to receive ecosystem incentives and support. As developers are incentivized, the demand for MNT will increase.

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

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 inefficient transaction speeds on the Ethereum network. Specifically, L2 scaling solutions typically involve technologies such as Optimistic Rollup, zk-Rollup, Plasma, and State Channels. Currently, the mainstream L2 scaling solutions are primarily Optimistic Rollup and zk-Rollup.

Mantle Network is an L2 solution based on Optimistic Rollup.

5.1.2. Market Size

The market size of L2 scaling solutions can be measured from several dimensions:

1) Ethereum Network Scale

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

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 L2Beat's data, as of September 2, 2023, the total locked value (TVL) of L2 scaling solutions has reached $9.48 billion, demonstrating strong momentum and user demand. Among them, Arbitrum is currently the most popular L2 scaling solution, with a TVL share of 54.99%, 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, indicating 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 the 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 to compete with or replace L1. However, from a business perspective, L2 seems to be more profitable and have better prospects.

1) From a Business Model Perspective

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

Additionally, the development and operational costs of L2 are lower. It can reuse existing solutions such as Optimistic Rollup, without the need to independently develop consensus mechanisms, making it easier to launch an L2 network.

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

① First, a consensus mechanism that is market-acceptable needs to be developed, requiring a large amount of research and development resources, time, and accumulation.

② Second, a sufficient number of nodes need to be attracted to participate in the network to ensure its security and decentralization.

③ Finally, some differentiated narratives need to be built, such as focusing on privacy or security.

Meanwhile, in a bear market environment, it is more difficult to tell a story that appeals to VCs, and retail investors are less likely to buy into it. Building a new L1 from primary to secondary markets is bound to encounter twists and turns. Instead of starting from scratch to build a distinctive public chain, which requires a large investment and slow results, it may be more advantageous to parasitize on Ethereum's L2, with lower investment and relatively faster results.

2) From a Traffic Perspective

More importantly, there is the "traffic business," i.e., where users come from. L2 can start from its own product ecosystem or the existing user base within the Ethereum ecosystem, and expand into more areas through product integration, user migration, and partnership scenarios. The entry of centralized exchanges or large wallets into L2 can bring natural user traffic. However, in any case, most projects and capital choose to start with their own product ecosystem or the existing user base within the Ethereum ecosystem, and then expand into more partnership scenarios (such as Polygon's actions in the Web2 field). In comparison, L1 needs to build its user base from scratch and faces competition from hundreds of other public chains.

3) From an External Competitive Landscape Perspective

The L1 track is already very crowded and competitive. According to DeFiLlama's data, there are nearly 200 public chains in the market, of which about 190 are L1, indicating an over-competitive L1 market. Among these public chains, only a few can occupy users' minds and market share. With recent black swan events and capital withdrawals, many once-popular public chains have lost their luster in various user activity, revenue composition, and trading volume metrics. Most L1 chains still exist conceptually, but are not thriving. Choosing to enter such a dead sea is not a wise business decision.

In contrast, the L2 track is relatively more open and favorable, with less competitive pressure, lower market concentration, and diverse technological routes. Specifically, L2Beat currently tracks 26 L2 solutions, with a competition intensity about one-seventh of L1. The top two projects in the L2 market share are Arbitrum and Optimism, with market shares of 55% and 25% respectively. The market shares of other L2 projects are relatively scattered, providing opportunities to become leading projects. Additionally, L2 adopts various technological routes, including Optimistic Rollup, ZK-Rollup, etc., providing users with more choices and offering greater development potential for L2.

With the completion of Ethereum's technical upgrades this year and subsequent upgrades, the narrative around performance will persist in the long term, providing L2 with a considerable development window. Additionally, in a bear market, narratives and tracks that can sustain heat are few, and L2 has the advantage of continued attention in an environment of attention and scarce capital. Therefore, from the perspective of competitive landscape and external environment, engaging in L2 currently seems to be a profitable business.

5.2. Track Landscape

5.2.1. Competitive Landscape

The current L2 market is at a critical stage of intense competition. With the approaching of the Cancun upgrade, L2 networks have become the hottest narrative track in the second half of 2023. Since July, the TVL of L2 networks has often remained above $10 billion, and many established public chains have announced a shift to L2 or launched their own L2 projects, receiving financing support. Additionally, native L2 networks are advancing technological innovations. According to the crypto data platform Rootdata, there are already 77 infrastructure networks related to L2. Currently, the L2 market is mainly dominated by the two mainstream scaling solutions, Optimistic Rollup and zkRollup.

1) Optimistic Rollup Series

Optimistic Rollup is currently the most mature technological route in L2 networks, with representative networks including Arbitrum, Optimism, Metis, Boba, and Mantle Network.

2) zkRollup Series

zkRollup is another promising technological route in Layer 2 networks, with representative networks including 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 core competitive factors mainly in technological advantages, ecosystem 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's total locked value consistently ranks first among all L2 solutions, and it has the most abundant ecosystem projects, with 559 projects already integrated. The Arbitrum ecosystem currently mainly consists of three subchains: Arbitrum One is the mainnet; Arbitrum Nova is for high-frequency applications; and Arbitrum Orbit is a toolkit for building L3.

Advantages of Arbitrum: Arbitrum's ecosystem scale ranks first among all major Layer 2 solutions, with over 550 ecosystem projects. Arbitrum Rollup uses a multi-round block production mechanism, providing higher block production efficiency and lower gas fees compared to the single-round mechanism of Optimistic Rollup. Additionally, Arbitrum has its own Arbitrum virtual machine, supporting a richer set of programming languages.

Disadvantages of Arbitrum: Compared to Optimistic Rollup, Arbitrum has higher transaction confirmation delays. Additionally, Arbitrum Nova uses the AnyTrust framework, which is less secure than Arbitrum One, which directly leverages 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 fully consistent with Ethereum, with transaction costs being only a small proportion on the layer. Optimism currently ranks second in TVL among L2 scaling solutions.

Advantages of Optimism: Optimism has introduced the open-source modular toolkit OP Stack, allowing developers to assemble a customized Layer 2 network using the OP Stack toolkit based on their specific needs. Many well-known blockchain projects have launched their own Layer 2 networks based on OP Stack, collectively forming Optimism's superchain kingdom, injecting richer application scenarios and network effects into the Optimism ecosystem. Additionally, through upgrades like Bedrock, Optimism has significantly reduced transaction fees and improved performance. Its gas fees have become among the lowest in Ethereum's L2 solutions.

Disadvantages of Optimism: Compared to Arbitrum, Optimism's on-chain ecosystem prosperity is slightly inferior. Additionally, its transaction speed is about 1,000 transactions per second, still with room for improvement compared to the Rollup networks using zkRollup technology.

3) zkSync:

zkSync is a well-known zkRollup-based Layer 2 scaling solution, with its core network zkSync Era adopting zkEVM design. zkSync's total locked value has reached $500 million, ranking third among all L2 solutions. zkSync is transitioning from zkSNARK to zkSTARK proof systems, which will improve the network's transaction efficiency, and has launched a community airdrop program to incentivize users.

Advantages of zkSync: Recently, zkSync has introduced the zkStack toolkit, allowing developers to build customized zkRollup-based L2 and L3 (also known as HyperChain) networks. This helps expand zkSync's technical application scenarios. Additionally, zkSync can utilize the compression characteristics of zero-knowledge proofs to pack more transactions into a single proof without waiting for a challenge period. This can increase transaction throughput and speed while ensuring security and correctness.

Disadvantages of zkSync: zkSync's ecosystem is still relatively small and needs further expansion. Additionally, a recent airdrop event reflects the need for the project to strengthen its community building. Furthermore, zkSync's technical complexity requires developers 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, which 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 is currently its main focus in research and development. Additionally, Starknet will support developers in building application chains in the future, expanding its use cases.

Disadvantages of StarkNet: Due to its current lack of EVM compatibility, Starknet's ecosystem prosperity is relatively weak. Additionally, StarkNet's technical complexity requires developers 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, achieving this goal through various solutions. Its flagship product is the Polygon PoS sidechain, currently processing 2-3 million transactions per day from 300,000-400,000 addresses.

Advantages of Polygon EVM: Polygon not only offers its own Layer 2 networks, Polygon PoS and Polygon zkEVM, but also provides modular open-source components called Supernets for building customized Layer 2 and Layer 3 networks, enriching Polygon's technical roadmap. Additionally, the recent release of Polygon 2.0 further unifies different networks, updates the native token code to POL, and introduces a new governance framework, strengthening Polygon's network effects. Furthermore, Polygon has collaborated with several Web2 enterprises, has a large user base, and its ecosystem projects are steadily growing.

Disadvantages of Polygon EVM: Polygon's ecosystem is still primarily focused on its 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 BitDAO support, focus on data availability, and potential in the gaming field. Its disadvantages mainly stem from being a newcomer in the L2 space, with core technologies such as modular architecture awaiting practical validation, and its ecosystem development still in its early stages, lacking firmly established DApps, leading to uncertainty in long-term competitiveness.

6. Preliminary Valuation

6.1. Core Issues

Which stage of operation is the project in? Is it in the mature stage or in 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 only went live in July 2023 and still requires more testing and optimization to improve its stability and reliability. Although it has 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 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, combined with community support, which may help it stand out in the competition. However, overall, these advantages need to be tested through product iterations and applications, and it faces strong competitors, with no very obvious competitive barriers formed yet. Its performance after the mainnet launch still needs to be observed.

What are the main variable factors in the project's operation? 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 address any potential vulnerabilities or defects. Technical progress can be quantified and measured through project team updates, code commits, test results, etc.

Ecosystem Development: The Mantle Network project needs to continuously expand its ecosystem partners and use cases to attract more users and funds to enter the L2 network, and provide more diverse and high-yield on-chain activities. Ecosystem development can be quantified and measured through DApp numbers, TVL, transaction volume, user numbers, etc.

Community Activity: The Mantle Network project needs to continuously incentivize and reward its community members and partners to enhance community cohesion and influence, 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 rates, proposal numbers, etc.

What is the project's management and governance approach?

Mantle adopts a relatively flexible off-chain governance mechanism. Specifically, governance topics and proposals are first raised and discussed by the Mantle core team or community members in forums. If a proposal gains enough attention and support, it becomes a formal MIP proposal, which is voted on by MNT token holders on-chain. Once a MIP proposal is approved, the core development team and contributors of Mantle are responsible for executing and overseeing project progress based on the proposal content. This governance mechanism, compared to fully automatic on-chain voting execution, offers greater flexibility. It allows Mantle to adjust execution progress based on actual circumstances without being simply led by a majority vote. However, this also means that Mantle's governance has a certain degree of centralization dependence, with a larger role for the core team in governance. This off-chain governance approach is still exploratory in the decentralized autonomous organization field, and its effectiveness still needs to be observed in its actual application in the Mantle project.

6.2. Project Valuation Level

We will conduct a horizontal comparison of the valuation of Mantle Network with other L2 solutions in the same track.

The valuation of smart contract public chains is a complex and challenging subject. DeFi protocols can use metrics such as yield multiples for valuation reference, while smart contract public chains are more akin to a country, and evaluating the current status and potential of a public chain from a "comprehensive national strength" perspective may be more appropriate.

The "comprehensive national strength index" of a public chain should consider metrics such as the number of active DApps, active users, TVL, total on-chain asset value, active developers, on-chain transaction volume, and total on-chain transaction value, and derive it through weighted processing. However, there is currently no similar index.

Therefore, we focus on comparing Mantle Network with other L2 competitors based on four dimensions: assets, user volume, network activity, and developers.

1) Asset Metrics: TVL. Users' willingness to place valuable assets on a chain indicates their comprehensive recognition of the chain's security, availability, and investment value. We use circulating market cap/TVL as the asset metric for horizontal comparison (MTV). The smaller the value of this metric, the more on-chain assets correspond to a unit of circulating market cap, resulting in a lower valuation.

2) User Metrics: Metrics such as active user count and active address count can reflect the user base and activity of a public chain. We use the 30-day average daily active address count to measure user scale and calculate the market cap/daily active address ratio as a comparison metric. A lower value of this metric indicates a larger user scale under the same circulating market cap.

3) Transaction Activity Metrics: On-chain transaction activity is an important indicator of user activity on a public chain. Traditionally, the daily dollar value of gas consumed is used to measure activity, but this metric has limitations:

① High gas prices can reduce user activity, but this metric does not reflect this.

② This metric cannot differentiate between different types of transactions, such as transfers and contract calls.

To overcome these limitations, we use two metrics to measure activity: the daily dollar value of gas consumed and the daily transaction volume, both converted to annualized data. We derive two comparison metrics:

③ Market cap/annualized gas consumption: A smaller value of this metric indicates that a unit of circulating market cap can support more business activity, resulting in a lower valuation.

④ Market cap/annualized transaction volume: A smaller value of this metric indicates that a unit of circulating market cap can support more transaction volume, resulting in a lower valuation.

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

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

① We can use the daily average number of newly deployed contracts on the official browser as the benchmark.

② Calculate the "market cap divided by daily average newly deployed contract count" metric to reflect the developer activity that a unit of market cap can support.

③ A smaller value of this metric indicates that under the same market cap, more developers can be supported, resulting in a relatively lower valuation.

By comparing with different Layer 2 networks based on these metrics, we can intuitively assess the ecosystem prosperity and valuation level of the network, and better evaluate the development potential of Layer 2. This calculation method provides a concise comparison of ecosystem activity under current conditions, compensating for the incomplete DApp statistics and more comprehensively reflecting the network's developer profit potential.

Additionally, before conducting the comparison, we 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 factor needs to be considered, which may result in a slightly lower valuation for Mantle based on this comparison method.

The results of the horizontal data comparison are as follows:

It is evident that after the completion of the ecosystem merger with BitDAO, the current valuation of Mantle is significantly overestimated. Compared to other OP Rollup track Layer 2 networks, the Mantle ecosystem is still in the early stages, with various core metrics lagging behind. However, the native token MNT already has a 50% circulation, supporting its high valuation.

Looking ahead, as the Mantle ecosystem continues to improve and thrive, its business foundation will gradually strengthen. If Mantle can maintain a moderate valuation level at this time, it has the potential to achieve greater growth in the OP Rollup track and break the current situation.

6.3. Project Risks

The project is still in the early stages: Mantle Network only launched the alpha version of its mainnet in July 2023, making it an emerging public chain still in the early stages of development in terms of both technology and commercialization. Considering the operating time of the mainnet, the network effect and technological stability still need to be tested over time. Some key governance topics, such as staking mechanism design and zkEVM technology roadmap, are also under discussion. As a new project, Mantle needs to continue technical iterations and role expansion to attract users and ecosystem, requiring the team to maintain efficient governance and development. In summary, the development of the Mantle network is still in the early stages, with key governance and technological aspects needing improvement, and the uncertainties in this development process will be potential risks for further development of Mantle.

Competition risk: Facing a fiercely competitive Layer 2 environment. As an emerging Layer 2 solution, Mantle Network faces the important risk of increasingly fierce public chain competition in its future development. Currently, several more mature projects are leading in the Layer 2 market, such as Arbitrum and Optimism. These pioneers have strong technical capabilities and a large user base. Meanwhile, various new Layer 2 projects continue to emerge, all competing for users and market resources. Additionally, Ethereum's future upgrades will also enhance its own scaling capabilities. Faced with such intense competition, Mantle needs to continuously enhance its product strength through technological innovation to break through in the competition, otherwise it may face the risk of user loss. In summary, the increasingly intense competition in public chains 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 negatively impacts MNT: Mantle Network's native token MNT is generated by converting BitDAO's token BIT. However, the market performance of the BIT token has been poor, dropping from an ICO price of $1.4 to around $0.5 currently. This continuous downward price trend may have a negative impact on MNT. On one hand, BIT holders may lack confidence in the expected value and prospects of MNT due to this, and may be unwilling to actively participate in the ecosystem development 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 historical performance of the BIT token, which is not conducive to widespread recognition and liquidity for MNT. If MNT cannot effectively change this linked expectation of BIT performance in the future, both its 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 risk: Mantle's current technical risks mainly include: 1) Fraud proof for the Mainnet Alpha version is still under development; 2) The data availability layer is not yet 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. Additionally, since data is not stored on-chain but maintained externally by the team, fraudulent behavior may not be detected, and if malicious users submit invalid state roots, users' funds may be stolen even off-chain. Furthermore, Mantle's data availability layer, MantleDA, is a forked version based on EigenDA, but it has not yet been integrated into the EigenDA mainnet, and the slashing mechanism in MantleDA is currently disabled, and the fraud proof mechanism for data availability has not been activated. As a result, users may be unable to access their funds. Additionally, if external data is tampered with, users' funds may be lost.

6.4. Reflection

From our overall analysis of Mantle Network, it is clear that Mantle is a Layer 2 solution with very obvious strengths and weaknesses. Whether it can ultimately become a mainstream Layer 2 solution depends on its ability to fulfill its technical promises and build a sufficiently secure and efficient Rollup network. We need to continue to monitor Mantle's technical development path and the progress of its ecosystem construction to comprehensively assess its future prospects. Mantle is actively exploring new paths for L2 networks, and we also hope that it can make a positive contribution to the entire Ethereum ecosystem. In the short term, there are some development opportunities we can focus on:

1) Launch of the Mantle Journey incentive program.

Mantle Network provides users with various ways to earn Mantle Journey (MJ) miles and redeem exclusive benefits in the Mantle ecosystem. Users can accumulate MJ miles by trading, providing liquidity, participating in governance, and completing specific tasks on the Mantle network. These miles can be used to mint unique Mantle Citizen NFTs, obtain NFT rare attributes, and redeem ecosystem rewards. The operation of Mantle Journey provides more incentives for users to participate in the Mantle ecosystem. It effectively aggregates users, enhances user stickiness, and provides a channel for users to monetize, which will help attract more users to join Mantle. From a project opportunity perspective, Mantle Journey provides a new mechanism for users to receive rewards, pioneering a new model for Web3 community building, which is worth learning from for other public chains, and also demonstrates Mantle's community operation capabilities.

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

Mantle is actively building the LSD ecosystem and collaborating with other innovative DeFi protocols. This provides users with multiple ways to earn returns through staking, trading, and portfolio investment. With the increasing number of ecosystem protocols, users can focus on potential high-quality applications, choose to participate in their IDO or provide liquidity at the right time to earn higher returns. As the ecosystem matures, its network effects will further amplify, allowing users to closely follow the development trends of the ecosystem, seize emerging hot directions for participation, and gain additional returns.

7. References

• Mantle Network Official Website
• BitDAO Economic Model
• Mantle Network Official Twitter
• Mantle Network Official Discord
• Mantle Network Official Medium
• Mantle Network Official Proposal Center
• Mantle Network Official Documentation
• Mantle Network Token Information
• Tokenterminal
• L2beat

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