Mintlayer is a long-term, secure solution for scaling and accelerating the future of decentralized finance. To make it easy to imagine, we can understand Mintlayer as Layer 2 of Bitcoin, but not connected to bitcoin. Mintlayer builds its blockchain network on the Proof of Stake mechanism and uses Bitcoin’s hash function as a parameter for the random selection of validators. This consensus structure is called Dynamic Slot Allotments (DSA).
Blockchain Mintlayer is pegged to Bitcoin
Every Mintlayer block has a reference to a Bitcoin block. In each Mintlayer round, which spans 1008 Bitcoin blocks, participants are selected from among stakers to collaborate on creating the blocks of the chain.
Users who decide to actively participate in network consensus need to run a node and stake enough MLT coins to cross the minimum threshold. Each round, an election is automatically executed by the algorithm, where users can be selected as participants. The higher the stake when staking the token, the higher the chance of being selected.
The selection mechanism uses the hash of Bitcoin blocks as a source of randomness to ensure an unbiased selection of the participants and to establish a random order in which they will follow when generating and validating blocks.
At a specific point in each round, every participant is required to build and propagate a block from which all transaction fees will be collected.
The long-term security of the Mintlayer chain is ensured by a checkpoint system on the Bitcoin blockchain.
Mintlayer is designed to allow anyone to run a node and validate blocks with minimal hardware requirements: block size limit set to 1mb, utreexo reduce merge UTXO set to 1KB, so that the node can slice safely drop the blockchain thanks to checkpoints on Bitcoin.
Confirmation times have the same speed as Bitcoin due to the use of block size limits and the FIBER network.
Each node communicates with other nodes to perform atomic swaps allowing for a completely decentralized exchange (DEX).
The network’s token standard
The acronym MLS-01 stands for Mintlayer Standard version 0.1. It represents the basic standard specification for the Mintlayer token, which has a typical list of rules that must be implemented in order to be properly processed by the Mintlayer wallet. Thanks to the standard, any MLS-01 can be received, sent or stored in any Mintlayer multi-token wallet. Once the wallet is installed, any exchange or service will be ready to accept any coin issued on Mintlayer.
If the token has confidential trading enabled, it is labeled as MLS-02, while the NFT token is labeled as MLS-03.
Decentralized Finance (DeFi)
Smart contracts on blockchain mainly include specific conditions for locking and unlocking coins. There are three common approaches to smart contracts in the crypto ecosystem: script-based mainly used in Bitcoin, Solidity contracts used in the Ethereum Virtual Machine (EVM), and more recently Web Assembly Virtual Machine (WASM), seen in projects like EOS or Polkadot.
Both EVM and WASM are Turing-complete, meaning the system can handle any set of rules for data manipulation, opening up almost limitless possibilities for developers to create smart contracts. Instead, Mintlayer uses a script-based approach like Bitcoin: it is not Turing complete and is therefore limited by a certain set of rules to be followed. This approach sacrifices some flexibility in exchange for greater security, durability, and authentication speed.
In general, script-based smart contracts tend to generate less network pollution and execute faster than Turing complete contracts, thus ensuring a more manageable environment for developers. On the contrary, complex architectures on blockchain will cause more problems than benefits: there are countless possibilities that can clog servers, while at its core, a Turing complete system not even required by most blockchain applications.
Any exchange has two main components: the Messaging system and the trading engine. Messaging system collects transaction intents (orders) from users and sends them to a trading engine that checks orders and executes them. In the current DeFi ecosystem – mostly built on top of Ethereum – messaging systems typically use protocols like 0x protocol, while the transaction engine is a smart contract. A DEX may not achieve censorship resistance because of two separate conditions.
In this regard, Mintlayer users and developers can choose between six different types of DEX interactions, depending on their needs for decentralization, privacy, and censorship resistance: from a decentralized solution. entirely in both trading tools and messaging systems to softer solutions that introduce intermediaries in communication to increase the range of possible transactions.