Bitcoin is the oldest and most popular cryptocurrency in the world, which has tremendous value and security. However, Bitcoin also has some limitations, such as low bandwidth, high fees, lack of smart contracts and interoperability with other networks. These restrictions make it difficult for Bitcoin to tap into the growing world of decentralized finance (DeFi), which offers a variety of services and applications for crypto users.

To overcome these problems, various L2 solutions have been developed for Bitcoin, which aim to improve its scalability, functionality and interoperability. L2 solutions are independent networks that connect to Bitcoin’s main network via two-way bridges, enabling faster, cheaper, and more complex Bitcoin transactions. Some examples of L2 solutions for Bitcoin are Lightning Network, Liquid Network, Rootstock and Mintlayer.

In this post, we will focus on Mintlayer, one of the latest and most innovative L2 solutions for Bitcoin, which aims to enable smart contracts, DeFi, tokenization and decentralized exchange on the Bitcoin network. Mintlayer is a Bitcoin sidechain that launched on January 29, 2024, after a successful seed funding round that raised $5.2 million. Mintlayer is developed by RBB Labs, a San Marino company that has received support from various investors and partners.

Main features and benefits of Mintlayer

Mintlayer differs from other Bitcoin L2 solutions in several key aspects, which make it unique and valuable to the Bitcoin and DeFi community. Some of those aspects are:

• Incomplete Smart Contracts: Mintlayer uses incomplete smart contracts, which are actually scripts that run on the Mintlayer network, not the Bitcoin network. These smart contracts are incomplete in the sense that they cannot perform all types of operations, only those that are allowed and secure for Bitcoin. Incomplete smart contracts reduce the possibility of omissions and facilitate the audit process, as they can be easily verified and tested.

• Atomic swaps: Mintlayer uses atomic swaps as the core mechanism for token interoperability on Bitcoin. Atomic swaps are a way to exchange cryptocurrencies without the need for intermediaries or third parties. They allow a direct and secure exchange of tokens and Bitcoins, without the risk of fraud or loss of funds. Mintlayer avoids the use of bridges and wrapped tokens, which are actually copies of original tokens on another network, and which are prone to security risks, technical problems and high costs.

• Unique Consensus Mechanism: Mintlayer uses a unique consensus mechanism that combines Proof of Work (PoW) and Proof of Stake (PoS), thereby increasing security and participation in the network. Proof of work is a method by which miners solve complex mathematical puzzles to create new blocks and be rewarded in ML tokens. Proof of Stake is a method by which miners invest a certain amount of ML tokens into PoS nodes, which validate transactions and vote on the state of the network. Mintlayer uses a different proof-of-work algorithm that is more resilient to specialized mining equipment, such as ASIC chips. Mintlayer also uses dynamic puzzle difficulty adjustment, which adjusts to the number of active miners and block creation rate.

• Support for different types of asset tokenization: Mintlayer will support different types of asset tokenization, such as NFTs, stable tokens, synthetic tokens and others. NFTs are unique and non-fungible tokens that represent digital or physical assets, such as artwork, collectibles, games, and more. Stable tokens are tokens that have a stable value in relation to some reference currency, such as the dollar, euro, gold and others. Synthetic tokens are tokens that mimic the behavior of some other asset, such as stocks, indices, commodities, and more. Mintlayer allows users to create, trade and use these types of tokens on the Bitcoin network, without the need for centralized intermediaries or regulators.

ML Token: The native token of the Mintlayer network

The ML token is a native token of the Mintlayer network, which has multiple roles and functions. The ML token is used for:

• Payment of transaction fees on Mintlayer. Users can choose any token to pay fees, but if they use ML token, they get a discount.

• Participation in consensus and network security. Mintlayer uses a hybrid consensus that combines Proof of Work (PoW) and Proof of Stake (PoS). Users holding ML tokens can invest them in PoS nodes and receive rewards for validating transactions.

• Voting on network development and management. The ML token gives users the right to vote on priorities, features and other aspects of the Mintlayer protocol.

• Access to various DeFi services and applications on Mintlayer. The ML token can be used for trading, lending, insurance, liquidity and other DeFi activities on Mintlayer.

The ML token was available as an ERC-20 and Rootstock token prior to the launch of the Mintlayer mainnet, but is now available on the Mintlayer network. Users can buy, sell and store ML tokens on different platforms and wallets, such as Mojito Wallet, Uniswap, RSK Swap and others.

And on this occasion, I think it is very useful to state a few sentences about the Mojito wallet, i.e. the Mojito wallet is one of the wallets that supports Mintlayer and ML token. The Mojito wallet is designed to be simple, secure and customizable for users who want to use Mintlayer’s functionalities and DeFi services. Mojito Wallet allows users to:

• They store and manage their ML tokens and other tokens on Mintlayer.

• They perform atomic swaps between tokens and Bitcoins without intermediaries or bridges.

• Access various DeFi applications on Mintlayer, such as decentralized exchanges, peer-to-peer trading and asset tokenization.

• Adjust their preferences and wallet settings, such as language, theme, security and privacy.

Conclusion

Mintlayer is one of the most innovative projects in the world of cryptocurrencies, which aims to expand the possibilities and use of Bitcoin in the decentralized financial market. Mintlayer uses incomplete smart contracts, atomic swaps, a unique consensus mechanism, and support for various types of asset tokenization, to enable secure, efficient, and interoperable asset tokenization on Bitcoin.