[DRAFT ] SIP-00XX: Mintlayer Token Sale via Origins

SIP-00XX: Mintlayer Token Sale via Origins

Introduction

I hereby submit this SIP to leverage the upcoming Sovryn Origins platform as a launchpad to do the Token Sale of Mintlayer MLT governance token. The intention of putting forth this SIP for a Bitocracy vote is to permit Mintlayer’s use of the Origins platform to perform the sale.

Reasoning

Mintlayer could be a game-changing innovation for the Bitcoin ecosystem. We would like to invite the Sovryn Bitocracy to imagine a future where you can directly exchange native Bitcoin (not rBTC) for any token, with atomic swaps and even using the Lightning Network.

By building Mintlayer side by side with the Sovryn community, we are not just hoping to capture a like-minded ecosystem of future users who share our vision and values, but most importantly we want to tap into this community for feedback during the coming months, which will be crucial for Mintlayer’s early development.

Background

Mintlayer is a Bitcoin sidechain dedicated to asset tokenization and decentralized exchanges. Currently, there are a few tokenization systems created on top of Bitcoin like Omni(Bolt) and RGB. They have the same disadvantage: their transactions compete for the same space as the Bitcoin transactions, polluting the Bitcoin blockchain and leading to higher fees. The first version of Tether was issued on Omni, which moved to Ethereum to avoid the high fees on the Bitcoin blockchain (and then moved again to Tron because of even higher ETH fees).

For this reason, the concept of “sidechains”, with onchain space dedicated to asset tokenization and pegged-tokens, has been put to the test. Rootstock is an example, but its architecture is very close to Ethereum and merged mining creates security concerns: Bitcoin miners have governance power over Rootstock without any stake (cost and effort required) in the chain.

Liquid sidechain is an alternative, but its governance is centralized in the hands of the companies that have contracts with Blockstream. In contrast, Mintlayer’s governance is community-driven: the protocol introduces Dynamic Slot Allotment (DSA), a refined Proof-of-Stake consensus mechanism with Bitcoin anchoring. For both Rootstock and Liquid, bitcoins on the sidechain are used in a peg-in system managed by a federation of few entities, while Mintlayer is focused on the direct atomic swap between the tokens built on Mintlayer and the bitcoins on the mainchain. In fact, a Mintlayer DEX transaction allows p2p exchanges of tokens issued on Mintlayer with each other (intra-chain atomic swap) and also between Mintlayer and Bitcoin (inter-chain atomic swap).

Check also these introductory videos about Mintlayer (about 1:30m each): Mintlayer - YouTube

Mintlayer features:

  • Bitcoin interoperability: an entire ecosystem of tokens issued on the new layer can be p2p traded for bitcoins through atomic swap or Lightning Network swaps. The atomic swap is secure even in case of chain reorganization, since Mintlayer blocks are anchored to the Bitcoin blockchain (a Bitcoin reorg affects both the chains).

  • Scalable DEX: there are no on-chain order books in the form of smart contracts, since trade intentions are communicated through a distributed hash table that is separated from the blockchain. This helps keep lower throughput and fees when compared to Ethereum DEXs like Uniswap. Also, arbitrage transactions can be made through Lightning Network channels between CEX and DEXs’ liquidity providers. As a result, the blockchain space won’t be over-exploited. It is worth noting that DeFi dedicated blockchains get clogged mainly because of DEX contracts, arbitrage transactions and pyramidal schemes (see Glassnode analysis).

  • Access Control List: ACL rules are optionally enforceable for securities issued on Mintlayer (such as stock tokens), allowing compliance with company policies or other regulators and making fully compliant security token DEXs a possibility, by moving the burden of compliance to token issuers. This feature is something missing on Bitcoin, but possible with Ethereum. Unlike Ethereum, Mintlayer doesn’t require Turing completeness, but just a few OP_CODES for a higher versatility of Bitcoin scripting language, while retaining its reliability and efficiency. By not including Turing complete functionality, Mintlayer reduces risk of unpredicted outcomes that can occur with increased smart contract complexity.

  • Optional confidentiality: due to the trade-off between privacy and scalability, Mintlayer introduces distinct tokenization standards to address all needs. MLS-01 transactions take up less space and enable procedures like batching with BLS signature aggregation, to shrink the space consumed even more. MLS-02 on the other hand has confidential transactions, which are greater in size but provide more privacy.

  • Integrated Wallet: a Mintlayer wallet is a Bitcoin wallet too (real BTC, not the pegged version!) and Mintlayer full nodes can be considered as an “add-on” to Bitcoin full nodes.

  • No native gas token: Any MLS-01 or MLS-02 token can be selected by users to pay for fees for any Mintlayer transaction. Block validators in turn choose which gas tokens they will support and push into the mempool, creating a free market for gas tokens, and allowing builders to promote their ecosystem by subsidising gas.

Tokenomics

MLT is the governance token of the Mintlayer sidechain. A token is necessary because it’s technically unfeasible to build a secure and decentralized architecture based on a pegged version of Bitcoin, given the downsides of every peg-in/out system envisioned so far. Not even the Blockstream Liquid sidechain could implement a governance based on pegged bitcoins, and relied instead on federated entities that signed a contract. For decentralized governance, it is necessary to introduce a POS-like system with a governance token. Mintlayer’s DSA Consensus mechanism prevents nothing-at-stake long range attacks, without needing hard-coded checkpoints, thanks to the protocol’s built-in dynamic checkpoint system, which anchors Mintlayer to the Bitcoin mainchain.

Staking at least 40,000 MLT tokens, participants have the chance to be selected as blocksigners by the protocol algorithm and earn network fees of the blocks created.

For more info about Mintlayer Mintlayer tokenomics: Mintlayer - MLT

Token sale

MLT tokens will initially be released as Rootstock and ERC-20 tokens until mainnet, when they will be ported 1:1 to the Mintlayer blockchain. We propose a capped initial token sale of 5,000,000 MLT (Roostock version) on Sovryn.

  • Tokens for sale: 5,000,000 MLT (1.000.000$)
  • MLT price: around $0.20 (price will be defined in sats at a specific day)
  • Percent of supply: 11.6% of Initial Circulating Supply
  • Vesting: 30% on TGE (3.8% of ICS) plus 10% unlocked monthly over 7 Months
  • Accepting: rBTC

Airdrops

  • Bitocracy: 300,000 MLT to Bitocracy Stakers, with a 12 month vesting period

A week after the token sale, any Bitocracy user possessing at least 1,000 MLT for the entire vesting period (12 months) will be eligible for an airdrop of 1,000 MLT. Funds for this initiative are limited to a maximum of 300,000 MLT, so a maximum of 300 Bitocracy users will receive the airdrop.

  • Liquidity mining: 300,000 MLT to the rBTC/rMLT pool, with a 4 month vesting

A week after the token sale, any Liquidity provider of the rBTC/rMLT pool will receive airdropped MLT tokens according to the quota the Liquidity provider committed in the pool. For example, assume that there are 100,000 MLT tokens in the pool and a Liquidity provider called Paperinik participates with 30,000 MLT. Then, the 30% of the MLT allocated for this initiative - which amounts to 90,000 MLT - will be airdropped to Paperinik.

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May I just say: I love the thoughtfulness of this Bitocracy. Instead of a dozen immediate off the cuff responses, the members are taking time to research in order to thoughtfully reply to this SIP. Great community to be a part of!

Very nicely composed SIP as well.

Now back to my own research…

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Yes, very interesting. DYOR’ing now…

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Mintlayer seems to be an important step towards a second-layer solution for instant confirmed and limitless transactions.

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Yes, I am following here with much delight and curiosity! Thank you for the SIP, Mintlayer!

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When will the SIP be finalized? I’d love to vote on it!

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The forum is for discussion which will be taken into consideration when considering a finalized version of the SIP, which then goes up for vote. :slight_smile:

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I’m curious if with the initial token sales we should be basically shaping the type of tokens we should be launching here, unless the expectation is that this is always permissionless and any project can launch

Origin Sale platform could primarily be focused on projects that will help the ecosystem where Sovryn plays (RSK, Rollups etc) instead of creating another ecosystem to migrate to that also plans to have DEX and others. I don’t think we should be afraid of competition as competition is good but at least having here things that make sense to accelerate the ecosystem where Sov plays.

The other question is whether we should focus on projects that go the Sovryn/Moc way, where there is something tangible first and then a token, vs the ICO model where you get the token hoping that one day there is something tangible?. I checked in the roadmap and I observed that the idea was just borned last year and the first step is the token sale… as testnet is not yet available.

Mintlayer pitch starts saying that: RSK is not secure, that Lightning/RGB are polluting bitcoin blockchain and that a Proof of Stake solution is best…so I hope that is not the pitch once launching then saying that Sov is implemented in a network that is not secure?

So yes, it may end up being a great idea and I’m happy to see more people thinking of building stuff on bitcoin… My question is if there is any expectation on how this Origin platform should be used for.

If there is anything that I missunderstood and this can indeed help the ecosystem where RSK plays then happy to hear feedback

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Thanks @nbourbon - your comments resonate with me. While I do not necessarily think token sales as a kick starter method are inherently problematic - the internal logic stated in the SIP is giving me pause. If the goal is to collapse the platform to allow direct interaction with BTC - I thought I heard @yago already walk through that roadmap on some VLOGS. If Bitcoin merge mining is inherently not secure, then why launch on this platform? Is it only to gain leverage and then attack it? I would suppose that a truly open platform would not close its doors to any legitimate use case that did not directly cross some core principle. Not sure that is the case here.

I am less familiar with the tokenomics but from a broad view, it seems possible that the growing rep of SOVRYN - not just its platform - may be leveraged here for sale of the token and the community may want to consider the precedent. Again - pretty new so I will limit my comments to the above but I would love to see some additional SOVRYN community support out of the event. Reserve for Bounties or Hackathons to improve platform accessibility and features perhaps?

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While It feel weird that Mintlayer going to compete with RSK and ETH. It’s normal that many other coin which supposed to be on DOT network launched on Uniswap first. You can even trade $sushi on Uniswap.

SOV can be better than Uniswap and can be home for many other project.
It’s depend on community vote though.

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Interesting point of view! :argentina:

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Looking through the SOVRYN blackpaper - this seems in line with founding principles. Again - just need to consider the tokenomics here for the platform and community

The lock-up period for team and advisors is quite short. Any reason for this?

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Interesting vision and team. I appreciate the SIP proposal. And the implicit criticism of RSK’s federated sidechain structure is nicely provocative.

For such a long-term oriented project, lock-ups seem on the short side indeed. And that goes for the 13.65% seed sale tokens too. I would like to know what the seed sale price was, considering seed sale tokens will be the majority of circulating tokens in the first months (assuming the Marketing&Listing tokens are used wisely). Couldn’t find that data online. But it’s a crucial metric to be able to properly assess the offering price of $0.20 for MLT and project any price development.

Two other questions:

1.)

Airdrops

  • Bitocracy: 300,000 MLT to Bitocracy Stakers, with a 12 month vesting period

A week after the token sale, any Bitocracy user possessing at least 1,000 MLT for the entire vesting period (12 months) will be eligible for an airdrop of 1,000 MLT. Funds for this initiative are limited to a maximum of 300,000 MLT, so a maximum of 300 Bitocracy users will receive the airdrop.

This is confusing to me. The ‘A week after the token sale,’ introductory part seems to make no sense. Do I understand this correctly: SOV Stakers will have to buy at least 1000 MLT tokens to qualify, which will be unlocked over 7 months. But they have to hold them for 12 months, to qualify for an additional 1000 MLT airdrop. And those airdropped tokens will again have a 12 month vesting period (with monthly unlock?).

Also, how can the maximum be applied? if 400 SOV stakers qualify: what then?

2.)

Regarding the Liquidity mining: will the rBTC/rMLT pool be single sided, or require both rBTC and rMLT?

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i edited the title of this post to reflect that it is only a proposal, and has not yet moved to SIP status, when it will be assigned a number.

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Questions to MintLayer:

  • What makes this built “on Bitcoin”. It’s technically a separate blockchain, there is no merge-mining and the base unit is not Bitcoin nor a pegged Bitcoin? I am not sure how it’s associated with Bitcoin?

  • Can you plan an AMA Call?

  • Does any value accrue to the actual MLT token, aside from being a PoS validator? For example $SOV in theory will earn participatory revenue share that can justify it’s value. I’m curious if MLT token has any value proposition aside from being needed as a PoS consensus token?

  • How did you determine 300,000 for airdrop? At $0.20 per token, only offering 300,000 tokens is $60K to Sovryn stakers. That also is 300,000 airdrop / 600,000,000 fully diluted supply which is .05%. For reference, our other Origins SIP proposal is air-dropping 1% of total supply. So over 20X of what is offered here. Sovryn definitely is not entitled to any amount of Airdrop but I do wonder if this is even sufficient to really show our incentives are aligned.

  • How did you determine $0.20 value. This puts market cap at $80,000,000 non-fully diluted at 400,000,000 out of 600,000,000 for a product which does not have a testnet.

Questions/Comments to Sovryns:

Keep in mind, MintLayer is semi-competitive to Sovryn as a DEX. On one hand, we should embrace and welcome competition and projects. On the other hand, I genuinely ask what value does approving this SIP do for us? The Airdrop is quite small (imo) so it doesn’t add a ton of value. If the SIP gets approved, the MLT team has made it clear the intention is to port it off RSK to their own token standard once their chain is ready, so the long term token is not bound to stay on RSK/Origins. Further, stakers do not currently earn revenue off swaps, so having another token on the DEX just for the sake of having another token does not add any revenue to us. By promoting this project we do risk taking away investments from Sovryn into a competing DEX and what do we gain?

So my questions are:

  • Does this platform add value to Sovryn?

  • If it doesn’t add value (or very little) does that matter, as we want to be an open and non-exclusionary platform?

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I would love to hear from @Talyght on this. Some interesting points and questions.

My own thought is, to give a short answer: if Mintlayer becomes better than RSK, Sovryn can migrate there.

Apart from that, all SOV stakers should get an airdrop relative to the size of their stake, in my opinion.

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It’s not a SIP…just a proposal.

Yes- it is a proposal which, as I understand it, is intended to clarify the questions asked, initiate dialogue, raise awareness, and move forward if there is consensus/ support. So far, people have raised some great questions. It would be great to get answers if this is to move forward from a proposal status - no?

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@Talyght, could you and your colleagues please clarify some of the questions that have been raised in the coming days…? That would be very welcome.