If the main lines of the first two cycles were DeFi and NFT, then the keyword of the current cycle is undoubtedly Bitcoin Layer 2.
As the price of Bitcoin broke through the $69,000 mark, setting a new all-time high, the Inscription Track entered a new round of cooling-off period. During this period, the community began to realize that the Bitcoin ecosystem still lacked richer and advanced infrastructure. In order to meet the growing demand, the Bitcoin ecosystem has begun to move towards a more "moving away from virtuality to reality" development path, including Bitcoin Layer 2, Bitcoin DeFi and Bitcoin cross-chain technology, which together constitute the BTCFi ecosystem. In these areas, it can be said that Bitcoin Layer 2 plays the most important role.
At present, competition in the Bitcoin Layer 2 field is becoming increasingly fierce, and the number of projects on the market has reached no less than fifty. The competition among various projects in terms of total locked value (TVL), the superposition of concepts, and even the fifty-fold increase in one day have made Bitcoin Layer 2 one of the hottest fields currently. For the Merlin chain headed by Merlin, the current TVL has exceeded 3.8 billion US dollars. This number far exceeds the TVL of ETH head side chains and second layers such as Polygon, Avalanche, Blast and Arbitrum.
How the Mirror protocol redefines L2 security
In this Layer 2 “gold rush”, rather than building a Bitcoin Layer 2 project, Mirror Staking Protocol chooses to sell “safety hats” on the side to provide security for the new round of “gold diggers”.
Since there are many open source versions, it is easy to implement and has the lowest implementation cost. Therefore, the solution currently used by most Bitcoin Layer 2 is to combine multi-signature (Multi-signature) and Ethereum Virtual Machine (EVM), whether it is using multi-party computing (MPC)'s multi-signature scheme, threshold signature scheme, Hash Lock, or discrete logarithm contract (DLC), etc., the core of which revolves around multi-signature and EVM. This method allows users to cross-chain Bitcoin to a multi-signature address and generate new Bitcoin tokens on the EVM chain, making it compatible with the functions of EVM smart contracts.
In order to do business in this round of Bitcoin ecosystem, many Bitcoin Layer 2 projects are not willing to discuss the security issues of Bitcoin Layer 2 pledged funds, and even deliberately conceal their own security risks. But in fact, the security of Bitcoin Layer 2 is a crucial topic. For the Bitcoin Layer 2 project itself, security can be said to be the key to the project's survival. For users, the security of Bitcoin Layer 2 projects is directly related to the security and liquidity risks of their pledged assets. Any security breach may lead to significant financial losses.
In this context, Mirror Staking Protocol (Mirror Protocol for short) redefines Layer 2 security with its unique security solution.
The Mirror Protocol is a truly decentralized and trustless Bitcoin staking protocol. The protocol provides a truly decentralized and secure Bitcoin staking solution for numerous BTC Layer 2 projects. The test network has been deployed and is about to enter the public beta stage. Audited by SlowMist and Certik.
Currently, the Mirror Protocol has been branded as Mirror Staking Protocol, hoping to focus more on providing a truly decentralized and secure BTC staking solution for BTC Layer 2 projects, Mirror L2. This protocol achieves true decentralization and trustlessness by The Bitcoin staking mechanism has attracted widespread attention from the community and sparked heated discussions on social media.
Overlapping Multi-Signature Group (MSG) Algorithm
The core innovation of the Mirror protocol is the overlapping multi-signature group (MSG) algorithm, which is how it ensures the security of Bitcoin Layer 2 projects.
This algorithm is based on the top paper " Decentralized Asset Custody Scheme with Security against Rational Adversary " published by the Mirror team. The Chinese translation is "Decentralized Asset Custody Scheme with Security against Rational Adversary". This paper has been published by the famous network and Internet economy (WINE) conference included.
This paper proposes a decentralized asset custody framework that can safely manage customer assets held by a large number of custodians, totaling several times the margin. The framework reduces management costs and increases activity by allocating custodians and assets into multiple custodial groups, with each group having full control over a small portion of the assigned assets. Certification of each hosting group requires the consent of a sufficient number of group members, which can be achieved through voting or threshold signatures. Under this framework, transactions can be processed more efficiently within a very small number of group members because computational and communication costs are significantly reduced. Liveness and robustness are also improved, as even a single active escrow group can process transactions. Please refer to the original article for more details.
In terms of specific implementation, Mirror groups nodes at the Multi-Signature Groups level. Each group consists of any 5 nodes, and 3 of these 5 nodes can control the entry and exit of assets through multi-signatures. Each node is also required to stake 1 mBTC as a penalty for malfeasance.
For Overlapping Groups, each node can be grouped with any other 4 nodes to form an overlapping group. If there are 1000 nodes, it can produce 10,000 groups. If the TVL is 10,000 BTC, each group can be allocated 1 BTC. Three nodes must do evil to take away 1 BTC, but the cost of their illegal behavior is the 3 mBTC they pledged, ensuring safety.
This unique design of the Mirror protocol is not only suitable for cross-chain asset mapping, such as Bitcoin to Ethereum mapping, but also effectively reduces the capital cost of custody services. The rational opponent model ensures that even if the custodian is partially corrupt, It can also protect a large amount of customer assets that exceed the margin.
Through its innovative algorithm and rigorous design, the Mirror protocol provides a new pledge and security mechanism for Bitcoin Layer 2 projects. This not only helps expand the pledged assets of the Bitcoin Layer 2 project to hundreds or thousands of nodes for joint custody, but also strikes a balance between Bitcoin pledge rate, security and decentralization.
In addition, the algorithm practice of the Mirror protocol also embodies the concept of modular blockchain design, achieving compatibility with EVM by generating mBTC anchored 1:1 with Bitcoin. This mechanism also supports restaking, allowing users to re-stake mBTC on mainstream EVM DApps, further enhancing its application potential in the decentralized finance (DeFi) ecosystem.
Financing and team background
Being able to implement new asset custody algorithm solutions, the background of the Mirror protocol team is also one of the important guarantees for its success.
The team is composed of elites from top institutions and companies such as Microsoft, Google, MIT, Yao Class of Tsinghua University, Samsung, Hyundai, Conflux, Decus, etc. The top paper authors mentioned in the previous article, namely Ph.D Zhaohua Chen who graduated from Peking University and Guang Yang from Conflux, their research results were recognized by the Network and Internet Economy (WINE) conference, demonstrating the team’s progress in the blockchain Deep strength in blockchain technology and security. After WINE included the paper, the official account of Peking University Computing Frontier Center (CFCS) also posted a message to express its congratulations.
In terms of financing background, although the specific amount has not yet been disclosed, the Mirror protocol's seed round received investment from UTXO (BTC Magazine investment arm), Conflux and IMO Ventures. It is worth mentioning that Bitcoin Magazine, founded in 2012, can be said to be one of the oldest and most mature sources of information focusing on Bitcoin. It has also done a lot of research on Bitcoin Layer 2. Some time ago, they conducted research on Bitcoin Layer 2. The definition of 2 has generated considerable discussion.
Related reading: " Bitcoin Layer 2 Chaos Is Actually a Good Thing "
Decentralized node multi-signature
How to elect nodes?
As part of the overlapping multi-signature group (MSG) algorithm design, the Mirror protocol introduces a more decentralized and decentralized node election process and strategy.
The process of node election is as follows:
1. Officially announce your participation in the Mirror protocol node election on Twitter, and the node election committee and the Mirror team will confirm the node candidates.
2. During the voting period, community members can vote under Mirror's Twitter account. The top 100 nodes with the most votes will be automatically elected. Once elected, the technical team will help set up the nodes.
In this way, Mirror was able to generate hundreds of nodes and grant them the right to subscribe for MIRR tokens, allowing users to choose who becomes MIRROR's node investors. Nodes will receive subscription rights of up to US$120,000. The project now involves 300 to 500 influential node investors elected by users. Whether it is an individual KOL, an institution, a media entity or a project, anyone can become a node investor.
The node election process of Mirror Staking Protocol is divided into four rounds, gradually increasing the number of nodes, which are 100, 300, 600 and 1000 respectively. 100 nodes will be selected in the first round of elections.
To ensure security, nodes must stake at least 1 mBTC to the Mirror Staking Protocol and act as decentralized custodians for 12 months. The winner of the node election will receive a special reward, namely a call option of 1 million MIRR (Mirror's governance token) at an exercise price of $0.12. For nodes elected after the first place, the call options they receive will be based on the provisions in the table below. The exercise price for the first round is also set at $0.12. In subsequent rounds, the exercise price will be gradually adjusted based on the market price. The above is the relevant information about the Mirror Staking Protocol node election process and the responsibilities and rights of the elected nodes.
As of the time of writing, according to the latest official announcement, since the node election was launched on March 5, 2024, Mirror Staking Protocol has attracted more than 200 KOLs and more than 50 project institutions in less than 3 weeks on social networks such as X Candidates in the media. At the same time, more than 50,000 users have participated in voting in this election, with the total number of votes exceeding 3 million.
Roadmap and Token Economics
In March 2024, the test network of the Mirror Staking Protocol was launched, using overlapping multi-signature groups to bridge the mortgaged BTC L1 assets to the EVM POS network and generate EVM-compatible mBTC. At the same time, the first round of elections for 100 nodes will be completed by March 2024.
The Mirror Staking Protocol mainnet will be launched in May 2024, allowing staking of BTC L1 assets and bridging to the BTC Layer 2 network. Partner with other BTC Layer 2 projects to provide them with truly decentralized and secure Bitcoin staking services. Build TVL and ecosystem together with other BTC Layer 2, and carry out "one mortgage, double income" activities.
Continue to expand the ecosystem application of mBTC on BTC Layer 2, launch the ecosystem fund, support various builders and developers to jointly build the BTC ecosystem with BTC Layer 2, and realize the re-mortgage of mBTC.
In terms of token economics, MIRR is the governance token of the Mirror Staking Protocol. The total supply of MIRR governance tokens is 1 billion.
24% is for nodes: there are four election rounds (100, 300, 600 and 1000 nodes). In the first round there are 100 nodes. The subscription rights for each node are detailed in Table 1, with an exercise price of $0.12. Tokens will be distributed within 12 months. The node ranked first will receive 1 million subscription rights, and this allocation will decrease in order to the node ranked 20th, as shown in Table 1.
26% is used for users: users receive airdrop subscription rights; distributed over 10 quarters, with 10 million released in the first quarter. The strike price is also $0.12. Tokens will also be distributed over 12 months. User allocation is based on user points, including the TVL of BTC mortgage and the ratio of inviting friends. Each user is assigned a unique invitation code, and the TVL of directly invited friends is counted as 50%, and the TVL of secondary friends is counted as 20%.
Additionally, 14% goes to investors: seed investors unlock within 12 months and institutional investors within 24 months. 18% for project teams and consultants: this allocation is unlocked over four years and allocated monthly. 6% for Foundation Finance: This allocation is unlocked over four years and distributed monthly. 12% is used for Layer 2 ecosystem development reserve: this allocation is unlocked within four years and allocated monthly.
Summarize
How to allow hundreds of nodes to multi-sign BTC pledges to reshape the future of Bitcoin Layer 2 upstream, the Mirror protocol's solution is the innovative overlapping multi-signature group (MSG) algorithm and decentralized node multi-signing.
Through its carefully designed overlapping multi-signature group (MSG) algorithm and decentralized node multi-signature mechanism, the Mirror protocol has successfully opened up a new world for the Bitcoin staking track and laid a solid foundation for the future of Layer 2 upstream. This innovation not only enhances security, but also increases the degree of decentralization and solves key issues in the asset pledge process, thus providing solid support for the widespread application and development of Bitcoin Layer 2 projects.
It can be said that Mirror is the upstream supplier of the layer2 project, providing a truly decentralized and secure BTC staking solution for the BTC Layer 2 project. If the BTC Layer 2 project is an electric vehicle manufacturer, the Mirror Protocol is a battery pack supplier; if the BTC Layer 2 project is a large-scale language model (LLMs), the Mirror Protocol is a GPU cloud computing center.
From a longer-term perspective, Mirror not only further opens the door to DeFi for the Bitcoin ecosystem, but also opens up the ceiling and upstream future of the Bitcoin staking track. The modular and scalable design of the Mirror protocol also means that it is not limited to Bitcoin, and its underlying principles and technical framework can be applied to cross-chain operations and staking security of other blockchain assets, enhancing the interoperability between different blockchain ecosystems. The interoperability also creates more new usage scenarios.
