Welcome to the alpha please newsletter.
gm friends, today we are talking about Mantle.
Gabe is the DeFi Growth Lead at Mantle and he’s answering some questions today.
The L2 space is brutally competitive. You have to stand out to get traction, and I believe Mantle really do. They are doing things a little bit differently to everyone else.
They are the only L2 to have built their own liquid staking protocol, and mETH (great ticker) has become the fourth largest LST now. They have one of the largest treasuries in all of crypto and they are wielding it very well to the benefit of their users.
Some of the best yield opportunities lie on Mantle right now and it’s leading to a flywheel of growth. I’ve been a Mantle ambassador for about 5 months and have been very impressed with what the team have shipped and how they’ve executed.
Mantle alpha below.
TLDR on Mantle
• Mantle Network has been built with a modular architecture that combines an optimistic rollup protocol with an innovative data availability solution (Eigen DA). This allows Mantle Network to inherit security from Ethereum AND offer cheaper and more accessible data availability.
• Mantle has ~200M in TVL at time of writing.
• Mantle Staked ETH (mETH) is now at 1.5B in TVL.
• Mantle have ~1B in ETH and stablecoins in their treasury currently.
What is your crypto origin story?
I first interacted with crypto back in 2013, so pretty early days. I think Bitcoin was around like $300 back then at its peak. I was really interested to get ahead and get my hands on Bitcoin. But there was no real way for me to buy it back then. So, I tried mining a little bit using my home PC, didn't really get anywhere, and I sort of left the space, as often happens.
I came back in like 2020-2021, that's when the COVID boom started. I got really involved in the Terra ecosystem back then. That was one of my biggest bets. I made it big on Terra, lost a lot from Terra as well as I didn't really take enough profits at the top.
How I got directly involved in the space was that I started tweeting a lot about Terra and posting my thesis and research on crypto Twitter, and sort of got noticed along the way. I then joined Delphi Digital after their CTO reached out to me. I was there for a couple of months, and then I joined Bybit after that, mostly working in DeFi research and blog writing. Fast forward from there, I then went on to work at Spartan Labs which is the venture studio of Spartan Group, mostly dealing with product research.
Fast forward to today, I currently lead DeFi growth at Mantle! I’m very much focused on the day-to-day conversations with DeFi projects that are interested in building on Mantle. My main focus is generally to grow the ecosystem and fill any gaps in the Mantle DeFi ecosystem. And yeah, just trying to create a DeFi paradise on Mantle!
Can you give us the elevator pitch for Mantle?
At a high level, Mantle is essentially an Ethereum Layer 2 optimistic rollup where we aim to provide developers with a very familiar experience especially if you're coming from EVM chains. It's fully EVM compatible; you can deploy whatever you've built on Ethereum directly onto Mantle.
The reason for doing this is that Mantle offers a very cheap and fast chain that's super scalable. We're the first EVM Layer 2 utilizing EigenLayer, specifically MantleDA powered by EigenDA, which powers Mantle by essentially separating the chain’s data availability layer. This separation allows us to significantly reduce gas fees, as a lot of the chain's call data is offloaded to another layer, which typically occupies about 80% of the block space on a conventional chain. Compared to other Layer 2 solutions, we're about 50% to 60% cheaper, and this scalability is expected to improve further with the next Ethereum EIP4844 upgrade.
On the ecosystem side, Mantle has a lot going for it. We have very close ties with Bybit exchange, one of the largest CEXs alongside Binance and OKX. We also boast one of the largest on-chain treasuries in the world, excluding our own token, with a significant portion in Ethereum, USDC, and USDT. Moreover, we're the first Ethereum Layer 2 to introduce our own native liquid staking protocol, which we'll probably delve into more later.
So, it's very much a multi-pronged approach. The ecosystem is backed by a large treasury, a world-renowned centralized exchange, and offers full EVM compatibility, providing a familiar experience for developers. This makes it easy for developers to onboard and super accessible for users to use, being very cheap and fast.
Why was Mantle created?
Personally, I see Mantle existing because I believe we have numerous fundamentals that can drive innovation, especially in various sectors like DeFi, gaming, and NFTs. Our ability to leverage our treasury in a way that supports developers and projects with both grant funding and liquidity support is key. Often, projects approach us with their main challenges being a lack of funding and initial liquidity, which are crucial for overcoming the cold start problem. By providing this support, we can help projects scale from zero to one, then from one to ten, and eventually from ten to a hundred. So, it's very much about fostering an ecosystem that encourages innovation, given the resources and support we can offer.
Could you expand on this a bit more? What is Mantle’s strategy for growing organic activity and TVL on the chain?
To answer this question, I think we really have to go back and see what the typical playbook has been in the past. Most ecosystems offer their own token as incentives, but this approach is not the most sustainable, given that it involves inflating the token supply and diluting the value for existing token holders. Our growth strategy aims to use our Treasury in a sustainable way to incentivize users and developers to come to Mantle, build on Mantle, and also use the applications on Mantle.
How this works is, given our luxury of holding a lot of hard assets like Ethereum, USDC, and USDT, a significant portion is deposited into yield-bearing positions. This is one of the main reasons we created Mantle's liquid staking protocol, to effectively generate yield on the Treasury's assets. Imagine nine figures in US dollars worth of Ethereum generating yield, and much of this yield can be redirected back to grow the ecosystem or to incentivize us as a company. The same applies to our USDC and USDT holdings.
That's why we are working closely with entities like Ondo and Aave. For context, Ondo is among the leading platforms in real-world asset stablecoins like USDY, allowing users on our network to take advantage of this by holding mUSD or USDY to generate around 5% yield just by holding it. We've also allocated a substantial amount of our assets to these platforms to generate yield on our stablecoins, allowing us to grow the Treasury instead of merely spending it on growth strategies.
People really seem to like your liquid staking product mETH. How would you assess its success so far?
Yeah, I think mETH has been a really big hit lately, especially in the past two months. We launched mETH back in December of 2023, and now it's the fourth biggest liquid staking protocol in the industry. That's a really huge milestone for us, being just right behind Binance ETH.
The overall strategy was quite interesting, given our unique situation of having the Treasury. What we did was deposit a huge amount of our ETH into our own liquid staking protocol, forgoing a lot of that ETH staking yield to effectively boost the APY of mETH staking for users, who are now getting about 7.2% in APY.
Why stake your ETH elsewhere when you can stake it with Mantle for 7.2%, especially when the average rate is around 3 to 4%?
How will you be thinking about restaking in regards to mETH?
So, if we zoom out a bit mETH is, funnily enough, the gateway drug to Mantle. And the restaking mETH is sort of counterintuitive to the growth of the Mantle ecosystem, especially considering a lot of the ETH is locked up on the Layer 1. What we aim to do is bring a lot of the users and mETH to Layer 2, to Mantle, so that users can bridge over their mETH and utilize it in various different strategies.
That's why we're running this campaign where we use the Mantle treasury to stake 100k mETH into EigenLayer, and we're redistributing those points and rewards back to the mETH holders on Mantle Layer 2. This incentivizes users to come to Mantle, use the chain, get a feel for it, and hopefully, they like it and decide to stay around.
Have you seen a trend in users sticking around yet?
I think we're seeing a lot of stickiness, actually. Users who bridge into Mantle often stay within Mantle, and that's very apparent from the TVL growth we've seen just in the past two to three months. Two months ago, we were at around 100 million in TVL, and now we've seen that double to around 230 million.
A lot of that growth comes from mETH, with users going to DeFi protocols to generate yield. Generally, users tend to stick around. We're trying to build out more use cases for mETH on Layer 2, providing more interesting protocols for users to utilize. Our goal is to create a DeFi paradise, attracting people to Mantle with mETH acting as the gateway drug.
What is Mantle’s strategy for attracting developers to build native apps?
We have a couple of ways to incentivize and attract developers. One way is through our innovation grants program, which offers small grants to get small teams going and support interesting ideas in less explored areas. Another, more substantial way we support projects is through the Mantle EcoFund. To elaborate, the Mantle EcoFund is a $200 million capitalized fund, with half of the funding coming from the Mantle treasury and the other half from a number of strategic venture partners, including notable names like Dragonfly, Spartan Group, and others. This fund is primarily used for venture-side investments, such as seed rounds, pre-seed rounds, and early-stage investments, with the goal of backing good founders and reputable teams that have the potential to build something truly innovative.
Those are the two main ways. We also previously had the Mantle Journey program, which is sort of a retroactive ecosystem incentive program. It effectively means that projects built on Mantle can get incentivized for the growth and contributions they provide to the Mantle ecosystem, especially in terms of on-chain metrics like transactions and TVL. Users get rewarded for interacting with these dApps, and the protocol teams get rewarded for their performance on-chain.
Could you talk a little more on Mantle Journey? What did you learn from the first season?
Mantle Journey was essentially like a community analytics platform, where we aimed to incentivize both users and protocols. Users could come to the platform to explore the ecosystem, see which applications were included in the program, and understand the types of interactions available. This also provided exposure for the protocols, as users could explore the ecosystem from a single dashboard. Moreover, the protocols were rewarded based on their performance in terms of transactions and TVL, with a leaderboard for both metrics to ensure transparency and fairness in recognizing who was performing well. So, it functioned very much like a community hub.
I think it was a really big success. There were quite a lot of learnings from that as well. But it was essentially points before it was cool, right? We called them miles. From the analytics we gathered throughout the program, we saw a significant uptick in users transacting on-chain, and many of those users stuck around as well. So, to us, that was pretty successful. We had a couple of days where user activity spiked significantly, reaching maybe 100k DAUs on one day and 50k on another, but on average, there was a very high number of daily active users. I would say it was quite successful. However, there were key learnings, such as the program perhaps being a bit too long, leading to some users growing tired of it. These insights from Season Alpha will definitely be applied to Season Beta or the next season of the Mantle Journey. We will see where we can optimize, but overall, it was both a success and a learning experience.
If we zoom out and look at 2024, what does the Mantle roadmap look like?
Yeah, I think this year will be a pretty interesting one. Definitely more growth and utility for mETH, especially on Layer 2, as we aim to bring a lot of that TVL over. We have a bunch of major ecosystem-backed dApps launching, which should be quite interesting. We already have the base layer of DeFi applications set in place, but we still lack a few of those killer apps that users will associate exclusively with our chain. We're also looking forward to the launch of Mantle V2, which is a significant network upgrade since Mantle was built on an older version of the OP stack and wasn't based on the Bedrock version. This upgrade will include EIP-1559, improving gas estimation and overall user experience, leading to potentially huge reductions in gas fees, making transactions even cheaper and faster.
We’ve also got MIP 28, which was approved a few months ago, allowing the Treasury to deploy over a billion dollars worth of assets to support Mantle dApps in the ecosystem. This includes around $300 million worth of stablecoins, 250k ETH, 2000 BTC, and 400 million in MNT tokens. So, we've got several big things coming up, and also some stuff we're working on internally that we're not quite ready to share yet. But overall, it's shaping up to be an exciting year for us.
What are the apps that people should go and check out on Mantle?
There's quite a number of really interesting apps on Mantle. I think one main one that I really liked is Init Capital.
INIT Capital is essentially a money market, which has siloed positions. It is like the Uniswap V4 of lending markets; they have liquidity hooks, but for lending. Other protocols can then tap into the supply side and borrowing side liquidity through the liquidity hooks and run various new farming strategies. I think the team at Init Capital is really capable and could shake up the lending market. For the past couple of years, we haven't seen too many changes in the existing money market design. With Aave still on top, followed by Compound and all the other forks, Init Capital stands a huge chance to bring something new to that ecosystem.
And other than Init, I also really like One Delta. One Delta is essentially a margin trading platform that taps into existing DEX liquidity. They don't have to push around liquidity but are essentially pulling lending liquidity from other lending markets, and also trading pairs on the existing DEXes. They also have their own Mantle-native DEX, which seems to be pretty efficient.
IntentX is an intent based perpetuals trading platform where they essentially gather liquidity through intents. On the backend, when you're trading, the liquidity is matched and actually pulled from a market maker. I believe intent-based applications are really the future of where DeFi applications need to go to improve the user experience overall. Abstracting away all the technicalities of DeFi and crypto is essential to the next step of adoption. The Mantle Ecofund invested in IntentX and we’re definitely keen to see them deploy on mantle.
Could you tell us a bit more about the MNT token? What value does it provide to the Mantle ecosystem?
The MNT token right now is effectively a governance token. So, holders of MNT can vote on where the Treasury eventually uses its assets. What this means is holding MNT effectively controls how the Treasury operates and where it deploys its resources as a weapon. I think that in itself is already a huge use case. But, of course, users are looking towards more rewarding opportunities as well. We have previously shared that we are building a sort of MNT staking hub. It’s still pretty early days, but what we want to do is essentially draw value from all over the ecosystem towards Mantle token holders. I can’t really share more than that right now..
Any more alpha to share before you go?
The biggest alpha has already been shared by the team which is: bridge your mETH over to Mantle! You’re not just helping the Mantle ecosystem grow in terms of TVL and DAU, you also get rewarded by the treasury giving up a portion of its Eigen Layer points. We are constantly taking snapshots, so if you have your mETH on the layer 2 you will be included.
I think you should just try out the ecosystem, deposit your mETH into various different protocols, and you will still get those Eigen points on top of whatever you're already generating from those DeFi protocols. So, go to INIT Capital and deposit your mETH, go to Lendle, go to Merchant Moe, go to Fusion X, and all the other DeFi protocols. And yeah, just have fun with mETH.
And that’s your alpha.
Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Crypto currencies are very risky assets and you can lose all of your money. Do your own research.