Mode Network: Driving Ethereum Layer 2 Innovation

  1. Project Introduction

Mode Network is a modular Layer2 network focused on the DeFi track, built on Optimism's Bedrock upgrade, which supports the rapid development and deployment of Ethereum Virtual Machine (EVM) compatible decentralized applications (DApp) and reduces transaction fees by 95%.

Mode Network is known for its innovative revenue sharing model, which aims to empower developers and users to create a world-class application ecosystem and be directly rewarded through referrals and contract-secured income. Rewarding developers and users by distributing sorter revenue not only improves the decentralization of DeFi, but also allows more people to benefit from network activities. Optimistic Rollups The optimized rollups technology (Optimistic Rollups) used by Mode Network is a Layer 2 2 expansion plan, which aims to increase the scalability of Ethereum and reduce transaction costs. This technology is achieved by running an independent execution layer on top of the Ethereum mainnet, which significantly improves the transaction processing speed without sacrificing security. The following is a more detailed explanation of the optimized volume technology used in Mode Network:

2.1.1 Principle and working mechanism

1. Batch processing:

The optimized volume technology combines multiple transactions into a batch and then submits the data of these transactions to the Ethereum mainnet at one time. This approach reduces the need for each transaction to undergo state transitions and verifications independently, thereby reducing transaction costs.

2. Delayed confirmation:

In the optimized volume, once a transaction is included in the batch, it is immediately confirmed on Layer 2 without waiting for confirmation from the Ethereum mainnet. This provides a fast transaction experience. However, the final validity of these transactions still depends on subsequent verification on the mainnet.

3. Fraud Proof:

Optimized volumes rely on an "optimistic" assumption that all transactions and batch processing are performed honestly. If someone believes that a batch contains fraud, they can submit a fraud proof to challenge the batch. If the challenge is successful, the fraudulent batch will be revoked and the related transactions will be rolled back.

4. Rollback and Security:

Optimized volumes provide an additional layer of security because any transaction must ultimately be settled on the Ethereum mainnet. This means that even if errors or malicious behavior occur on Layer 2, they can be corrected on the mainnet, ensuring the safety of funds.

2.1.2 Features and Benefits

• Scalability: By executing transactions on Layer 2 and sending only batches of data to the mainnet, optimized volumes significantly reduce the demand on Ethereum mainnet resources and improve the overall scalability of the network.

• Cost Efficiency: Reducing the number of transactions that must be conducted directly on the Ethereum mainnet significantly reduces transaction fees for users.

• User Experience: Provides near-instant transaction confirmation, improving user experience, especially for applications that require fast transaction confirmation such as exchanges or games.

• Compatibility: Optimized Volume technology supports the Ethereum Virtual Machine (EVM), allowing developers to seamlessly migrate existing Ethereum applications to Mode Network.

  2.2 Sorter Fee Sharing

Mode Network’s sorter fee sharing mechanism is an important part of the network’s core economic model, designed to incentivize developers to create and maintain applications on the platform while increasing user engagement.

This mechanism is achieved through the following key features:

2.2.1 The concept of sequencer fees

In Layer 2 solutions using optimized volume technology, the sequencer is a key role responsible for collecting and sorting transactions in the network and then submitting them in batches to the Ethereum mainnet. This process requires a handling fee to be paid to the Ethereum mainnet, but because transactions are processed in batches, the average cost of each transaction is significantly reduced. The sequencer therefore generates income in the network, which mainly comes from transaction fees paid by users.

2.2.2 Fee Sharing Mechanism

1. Revenue Distribution:

• Developer Incentives: Mode Network has created a mechanism that allows developers to obtain a portion of the sorter revenue by registering their smart contracts to specific fee sharing contracts. This practice encourages developers to create and maintain high-frequency trading applications because these applications are able to generate more transactions, thereby bringing more sorter revenue.

• User Rewards: Part of the sorter revenue is also used to reward network users, especially those who join the network by recommending new users. This referral mechanism encourages existing users to promote the network, helping the network increase its user base and activity.

2. Contract Registration:

Developers must associate their smart contracts with fee sharing contracts to benefit from them. This usually involves including specific code snippets when programming contracts to ensure that transactions can be correctly tracked and rewards are distributed.

3. Transparency and Automation:

The specific proportions and distribution rules of fee sharing are transparent on Mode Network and automatically executed through smart contracts, ensuring the fairness and transparency of operations. This automated distribution mechanism reduces potential disputes and enhances the trust of the network.

2.2.3 Advantages and Impact

• Incentivize Innovation: By providing financial incentives to developers, Mode Network encourages more developers to participate and innovate, bringing more and more diverse applications.

• Increase Activity: The user reward mechanism increases user participation, making users more inclined to use and recommend Mode Network, thereby enhancing the activity and expansion speed of the network.

• Ecosystem Growth: With the emergence of more high-quality applications and the increase in the user base, the entire ecosystem has grown rapidly, enhancing the overall value and attractiveness of the network.

2.3 Modularity and Cooperation Model

Mode Network's modularity and cooperation model are core components of its blockchain architecture and operational strategy, which are designed to increase the flexibility, scalability and user engagement of the network. By implementing these strategies, Mode Network aims to build a versatile and efficient ecosystem that supports diverse application development and promotes cooperation among stakeholders. The following is a detailed introduction to Mode Network's modularity and cooperation:

2.3.1 Modular Architecture

1. Definition and Purpose:

Modularity on the blockchain refers to the decomposition of network functions into independent components or modules, each of which is responsible for handling specific tasks. This design allows for more flexible development and maintenance, while also enabling the network to better adapt to changing technology and market demands.

2. Implementation:

• Consensus layer: Mode Network may use independent modules to handle transaction verification and consensus mechanisms to ensure the security and integrity of the network.

• Execution layer: A modular layer that executes smart contracts and processes transactions, which can optimize resource usage and increase processing speed.

• Data layer: Independently handles data storage and access to improve efficiency and scalability.

• Interaction layer: Responsible for interfaces with users and external systems, such as APIs and front-end interfaces, to ensure a good user experience and system interoperability.

3. Advantages:

• Flexibility: Modularity allows for quick adjustment or upgrade of individual parts of the network without affecting other modules.

• Maintainability: Each module is independent, easy to manage and optimize, and reduces potential errors and security risks in the system.

• Scalability: The capabilities of certain modules can be expanded individually as needed without having to reconstruct the entire network.

2.3.2 Cooperation Mode

1. Cooperation Ecosystem:

Mode Network encourages and supports cooperation among various stakeholders (including developers, users, investors, and partners) to jointly promote the development and value-added of the network.

2. Incentive Mechanism:

• Developer and User Incentives: Encourage developer innovation and user participation by allocating network revenue (such as sorter fee sharing), providing development funding support, and holding competitions.

• Partner Incentives: Establish partnerships with industry partners to jointly develop solutions and share resources and market opportunities.

3. Governance Model:

• Decentralized Governance: Mode Network may adopt a decentralized governance model that enables network users and developers to participate in the decision-making process, such as deciding key network upgrades and policy changes through token voting.

• Transparent communication: Regularly publish project progress and financial status, maintain information transparency and open communication channels within the ecosystem.

4. Technical cooperation and integration:

• Standardized interface: Provide standardized programming interfaces (APIs) to allow third-party applications and services to be easily integrated into Mode Network.

• Cross-chain interoperability: Develop functions that support interoperability with other blockchain technologies to expand the application scope and market acceptance of Mode Network.

  2.4 Mode Network Bridge

Mode Network Bridge is a key component provided by Mode Network in its Layer 2 solution, which allows users to efficiently and securely transfer assets between the Ethereum mainnet and the Mode Layer 2 network. The main purpose of this bridge is to simplify cross-chain operations for users while maintaining a high level of security and low transaction costs.

The following is a detailed introduction to Mode Network Bridge:

2.4.1 Functions and Working Principles

1. Asset Transfer:

Mode Network Bridge enables users to transfer cryptocurrencies such as Ethereum (ETH) and other ERC-20 tokens from the Ethereum mainnet to Mode Network. This transfer is achieved by locking assets in the mainnet and issuing a corresponding number of tokens on Layer 2, thereby maintaining a balance of assets on both sides.

2. Two-stage operation:

• Deposit: The user first deposits the asset from the Ethereum mainnet into the bridge's smart contract. Once the asset is confirmed to be deposited, an equal number of tokens will be minted on Mode Layer 2 for the user to use.

• Withdraw: When the user wants to withdraw assets from Mode Layer 2 back to the Ethereum mainnet, the corresponding Layer 2 token will be burned, and the smart contract on the mainnet will release an equal amount of assets to the user.

3. Optimize transaction costs:

By centrally processing cross-chain transactions, Mode Network Bridge can significantly reduce the fees for users when transferring funds across chains. This is achieved by batching transaction confirmations on Layer 2 and using optimized volume technology to reduce the demand on Ethereum mainnet resources.

2.4.2 Security Features

• Smart Contract Security: Mode Network Bridge uses fully tested and audited smart contracts to handle the locking and releasing of assets, ensuring the security of transactions and the safety of funds.

• Distributed Trust: Although the bridge itself relies on smart contracts, Mode Network may adopt additional security measures, such as multi-signature or distributed trust mechanisms, to further strengthen the security of cross-chain transactions.

2.4.3 User Experience

• Simplified Interface: Mode Network Bridge is designed with a user-friendly interface, making cross-chain operations simple and intuitive, even for non-technical users.

• Fast Transfers: Compared with transactions directly on the Ethereum mainnet, transfers through the bridge can be completed faster because it takes advantage of the efficient processing power of Layer 2.

2.4.4 Application Scenarios

• DeFi Integration: Users can use Mode Network Bridge to quickly transfer assets to Mode Network and participate in various DeFi applications such as lending, trading, and liquidity mining.

• Cross-chain interoperability: The bridge not only serves between Ethereum and Mode Network, but in theory can also be extended to connect other compatible blockchain networks, enhancing the interconnectivity of the entire ecosystem.

  3. Ecosystem

Mode Network's ecosystem is built around its Layer 2 solution, designed to improve the scalability and efficiency of Ethereum while reducing costs for users.

The design of its ecosystem emphasizes innovation, cooperation and user participation, and includes several key elements:

  3.1 Economic Model

• Fee Sharing Mechanism: Through the sorter fee sharing mechanism, the network distributes part of the transaction fees to developers and users. This mechanism not only encourages developers to create and maintain applications on the platform, but also incentivizes users to recommend new users to join the network.

• Incentives: Includes airdrops, bounty programs, and referral rewards to increase the attractiveness of the network and the activity of users.

  3.2 Developers and Applications

• Developer Support: Mode Network provides comprehensive developer support, including documentation, development tools, and software development kits (SDKs), allowing developers to easily build and deploy applications on the network.

• DApps Ecosystem: DApps that already exist or are being developed within the ecosystem include decentralized exchanges (DEXs), lending platforms, games, and other financial tools. These applications take advantage of Mode's low cost and high efficiency to provide users with a variety of services.

  3.3 Community and Cooperation

• Community-driven: Mode Network strongly promotes a community-driven development model, enabling users to directly participate in network governance and decision-making through community voting and feedback mechanisms.

• Partnerships: Establish partnerships with other blockchain projects, development teams and enterprises to jointly expand the functionality and service scope of the ecosystem.

  3.4 Governance

• Decentralized Governance: Mode Network adopts a decentralized governance model that allows token holders to vote on key network updates, fund usage, and policy changes.

• Transparency: Maintain transparency in the operation of the ecosystem and enhance community trust and participation by publishing regular updates and financial reports.

  3.5 Live Ecosystem Projects

Mode Network's ecosystem is expanding rapidly, especially in the DeFi field. Some key projects on the platform have been launched, each demonstrating its unique features and market positioning. These projects include:

• Ether.fi: A liquidity re-pledge protocol based on Ethereum that allows users to re-pledge ETH or other liquid assets to generate lrt tokens and obtain eETH. It is in a leading position in the liquidity re-pledge track, with a TVL of US$2.67 billion.

• Renzo: Another liquidity re-pledge protocol, which also supports users to re-pledge assets to obtain lrt tokens and exchange them for ezETH at a ratio of 1:1. It ranks third in the same track with a TVL of US$990 million.

• IONIC: A lending protocol that aims to provide the best lending rates and design an economic model that is conducive to balancing the interests of both borrowers and lenders. With a TVL of US$61 million, it is supported by MetaCartel Ventures, Ohm and Mode.

  4. MODE Token

  4.1 Purpose and Function

• Governance: MODE tokens allow holders to participate in the governance of the network and vote on key network upgrades and governance proposals.

• Incentive Program: Used to encourage users and developers to participate in various activities of Mode Network, such as development competitions and user engagement activities.

• DeFi and Community Sponsorship: MODE tokens support integrated DeFi activities and community sponsorship to help the development of projects and community activities within the network.

• Ecosystem Development: MODE tokens are used to support the expansion and enhancement of the entire Mode ecosystem, including funding new projects and partnerships.

  4.2 Supply/Allocation Ratio

• Airdrop: 35% of MODE tokens are allocated to airdrop activities for users and developers to encourage community participation and contribution.

• Investors: 19% of MODE tokens are allocated to early investors, and these funds are used for the initial capital and development support of the project.

• Core Team: 19% of MODE tokens are allocated to the core contributors and team members of the project to incentivize their continued work and contribution.

• On-chain Platform and Treasury: 27% of MODE tokens are retained in the on-chain platform and treasury to support the long-term development and operation of the project, as well as possible future financing needs.

• Total Supply: 10 billion MODE

• Initial Circulating Supply: 1.3 billion MODE

  4.3 Airdrop

4.3.1 Airdrop Overview

• Total Tokens: The Mode Network airdrop will distribute a total of 550 million MODE tokens, of which 400 million will be used for points airdrop

• 4.3.2 Methods to earn airdrop points

  1. Bridge assets:

  • Bridge assets such as ETH, USDT, USDC or WBTC from the Ethereum mainnet to Mode Network.

  

  • The longer the bridged assets remain on Mode Network, the more points you earn.

  • Bridge within the first seven days of the event can get 12 times the points bonus.

  2. Invite friends:

  • By recommending friends to participate, you can get 16% of the points earned by the recommended users as a reward.

  3. Use DApps:

  • By interacting with designated decentralized applications (DApps), such as Eigenlayer, RenzoProtocol, Layerbank, Ionic, and Etherfi, you can earn 2 times the points.

  

  • These DApps may involve different interaction methods such as exchange, pledge, lending, etc.

  Airdrop Points Maximization Strategy

  • Points Optimization Tips: By performing asset operations such as pledge, lending, and exchange in multiple DApps within Mode Network, you can maximize your points income.

  • Exchange Strategy: For example, exchange ETH for EZETH on Kim Exchange, then use EZETH for pledge and lending on Layerbank, and finally deposit EZETH on Ionic to get more points.

    5. Team/Financing

  Mode Network's team is led by two key leaders, James Ross and Federico Sarquis, who have deep industry experience and extensive network resources.

  • James Ross: Founder, graduated from the University of Sussex in the UK with a degree in economics and philosophy, worked as a consultant at Hashflow, and invested in Eigenlayer and Ethena.

  • Federico Sarquis: Head of Technology, has organized events for Ethereum Argentina and has rich technical and community experience.

  • The team has 15 members, and adopts a remote working mode, which enhances the flexibility of operations and global collaboration. This structure helps to respond quickly to market changes and technological advances.

  Regarding financing, in October 2020, Mode Network completed a financing of US$9.75 million. In addition, the project also received a grant of up to 2 million OP tokens from the Optimistic Foundation to support user growth incentives.

  A round of seed financing was also completed in April 2024, with an unknown amount, led by KR1.

    6. Project Evaluation

    6.1 Track Analysis

  Mode Network belongs to the Layer 2 solution track, focusing on increasing transaction speed and reducing costs by building a second-layer network on Ethereum, while maintaining security and compatibility with the Ethereum mainnet.

  Here are some similar projects on the same track as Mode Network:

  1. Optimism

  • Introduction: Optimism is a Layer 2 expansion solution that uses Optimistic Rollups technology to improve Ethereum's scalability and reduce transaction fees.

  • Features: It reduces fees and increases transaction throughput by delaying data availability verification of transactions.

  2. Arbitrum

  • Introduction: Arbitrum is also a Layer 2 solution that uses Optimistic Rollups technology. It reduces fees by executing transactions off-chain and submitting only the resulting data to the Ethereum mainnet.

  • Features: Arbitrum emphasizes the efficiency and security of its optimized volume implementation, especially when dealing with large-scale applications.

  3. Polygon

  • Introduction: Polygon (formerly known as Matic Network) is a polygon-architecture Layer 2 solution that provides a multi-chain system designed to solve Ethereum's scalability issues.

  • Features: Polygon provides a variety of Layer 2 solutions (such as side chains, zk volumes, and optimized volumes), supporting developers to choose the most suitable expansion solution according to their needs.

  

  TVL has been growing steadily since the launch of the autonomous network. As of March 19, 2024, TVL ranked 13th among all Layer2 networks, with a total of US$162 million, an average daily tps of 1.62, and a median GAS of 0.001Gwei, which is converted into actual costs of less than US$0.01. A total of 2.12 million transactions have occurred in the past thirty days.

  

    6.2 Project Advantages

  1. Technical Advantages

  • Optimized Volume Technology Application: Mode Network uses optimized volume technology to increase transaction speed and reduce costs. This technology significantly reduces the burden on the main network by processing transactions on Layer 2 and submitting only batch transaction data to the Ethereum main network, while ensuring the security and integrity of transactions.

  • Modular architecture: Mode's modular design allows developers to choose and integrate functions as needed. This flexibility makes Mode Network suitable for a variety of applications, from simple payment systems to complex financial products.

  2. Ecosystem and community incentives

  • Strong ecosystem incentives: Mode Network actively encourages community participation and ecosystem expansion through its token economic model and airdrop activities. For example, its airdrop program aims to promote community growth and activity by distributing tokens to early users and participants.

  • Developer support: Mode Network provides strong developer support and funding to encourage developers to innovate and develop applications on its platform. This includes providing funding, tools and resources to reduce development difficulty and accelerate time to market.

  3. Performance and cost efficiency

  • Reduced transaction costs: By achieving a significant reduction in transaction fees, Mode Network provides users with a cost-effective trading platform, especially for applications that require high-frequency trading, such as DeFi and games.

  • Enhanced transaction processing capabilities: Compared with the traditional Ethereum network, Mode Network is able to handle higher transaction volumes, reduce transaction delays, and improve user experience.

    6.3 Project Disadvantages & Challenges

  1. Competitive Pressure

  • Fierce market competition: Mode Network is not without competition in the field of Layer 2 solutions. It needs to compete with other mature solutions such as Polygon, Arbitrum, Optimism and zkSync, which already have a solid user base and wider market recognition.

  • Continuous need for innovation: In order to remain competitive, Mode Network needs to continuously innovate and improve its technology and services, which is particularly important in the rapidly changing blockchain field.

  2. User and market acceptance

  • Speed ​​of user adoption: While Mode Network offers significant performance advantages, the speed of user migration and adoption may be affected by existing habits and platform dependencies. Users may need time to evaluate and adapt to the new platform.

  • Market education: The market needs to be educated to increase understanding of Mode Network and its advantages, especially when facing non-technical users.

  3. Economic and financing risks

  • Funding dependence: Mode Network's development and expansion are largely dependent on external financing. Market volatility or declining investor confidence may affect its ability to raise funds.

  • Token Value Fluctuation: As a platform with a native token, the development of Mode Network may be affected by the market performance of its token. Fluctuations in the value of the token may affect the stability and attractiveness of the project.

    7. Conclusion

  In summary, Mode Network, as an innovative Layer 2 solution, aims to greatly improve Ethereum's transaction efficiency and scalability through its optimized volume technology. By introducing a modular architecture and incentive-rich token economics, Mode Network is not only committed to reducing transaction costs for users, but also actively encourages community participation and ecosystem development through airdrops and other incentives.

  With the continuous advancement of blockchain technology and the increasing maturity of the crypto market, Mode Network's vision is to become a key force in driving the growth of the Ethereum ecosystem and provide users and developers with a faster, more economical and more scalable platform. With its technological advantages and market strategies, Mode Network is expected to play an important role in the future development of blockchain and drive the entire industry forward.