1. Project Introduction
Mode Network is a modular Layer2 network focused on the DeFi track. Built on Optimism's Bedrock upgrade, it supports the rapid development and deployment of Ethereum Virtual Machine (EVM) compatible decentralized applications (DApps) and reduces transaction fees by 95%.
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Mode Network is known for its innovative revenue sharing model, which aims to empower developers and users to create an ecosystem of world-class applications and be directly rewarded through referral and contract-secured income. Rewarding developers and users by distributing sorter income not only increases the decentralization of DeFi, but also allows more people to benefit from network activities.
2. Core Mechanics
2.1 Optimistic Rollups
The Optimistic Rollups technology used by Mode Network is a Layer 2 scaling solution designed to increase the scalability of Ethereum and reduce transaction costs. This technology is implemented by running an independent execution layer on top of the Ethereum mainnet, thereby significantly increasing transaction processing speed without sacrificing security. Here's a more detailed explanation of the optimized volume technology used in Mode Network:
2.1.1 Principle and working mechanism
1. Batch processing:
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 verification independently, thereby reducing transaction costs.
2. Delayed confirmation:
In optimized volumes, transactions are confirmed immediately on Layer 2 once they are included in a batch, without waiting for confirmation on 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. Proof of Fraud:
Optimized volume relies on an "optimistic" assumption that all transactions and batches are processed honestly. If someone believes 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 associated 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 advantages
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 reducing 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 Concept of Sequencer Fees
In a Layer 2 solution using optimized volume technology, the sequencer is a key role, responsible for collecting and sequencing transactions in the network, and then submitting them to the Ethereum mainnet in batches. This process requires a fee to be paid to the Ethereum mainnet, but since transactions are processed in batches, the average cost per transaction is significantly reduced. The sequencer thus generates revenue in the network, which is primarily derived from transaction fees paid by users.
2.2.2 Cost Sharing Mechanism
1. Income distribution:
Developer Incentives: Mode Network has created a mechanism that allows developers to receive a portion of the sorter revenue by registering their smart contracts to a specific fee sharing contract. This practice encourages developers to create and maintain high-frequency trading applications because these applications can 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 referring 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 link their smart contracts to the fee sharing contract in order to benefit from it. This usually involves programming the contract to include specific code snippets to ensure transactions are tracked and rewards are distributed correctly.
3. Transparency and Automation:
The specific proportion 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.
Increased 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 can grow 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 is designed to increase the network's flexibility, scalability, and user engagement. 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 in blockchain refers to breaking down network functionality 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 needs.
2. Implementation method:
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 adjustments or upgrades to individual parts of the network without affecting other modules.
Maintainability: Each module is independent, which is easy to manage and optimize, reducing potential errors and security risks in the system.
Scalability: The capabilities of certain modules can be expanded individually as needed without having to rebuild the entire network.
2.3.2 Cooperation Model
1. Collaborative Ecosystem:
Mode Network encourages and supports collaboration among various stakeholders, including developers, users, investors, and partners, to jointly drive the development and value-added of the network.
2. Incentive mechanism:
Developer and user incentives: Incentivize developer innovation and user participation by distributing network revenue (such as sorter fee sharing), providing development funding support, and holding competitions.
Partner Incentives: Establish collaborative relationships 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 through token voting to decide on key network upgrades and policy changes.
Transparent Communication: Regularly publish project progress and financial status, and maintain transparent information and open communication channels within the ecosystem.
4. Technical cooperation and integration:
Standardized interfaces: 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 Function and working principle
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 the Mode Network. This transfer is achieved by locking assets on the mainnet and issuing a corresponding number of tokens on Layer 2, thereby maintaining a balance between the 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.
Withdrawal: When a user wants to withdraw assets from Mode Layer 2 back to the Ethereum mainnet, the corresponding Layer 2 tokens 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 users’ handling fees when conducting cross-chain fund transfers. 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 to transactions directly on the Ethereum mainnet, transfers through the bridge can be completed faster because it leverages 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 can also theoretically 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, which aims to increase Ethereum’s scalability and efficiency while reducing costs for users.
The design of its ecosystem emphasizes innovation, collaboration 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: These include airdrops, bounty programs, and referral rewards to increase the network’s appeal and user activity.
3.2 Developers and Applications
Developer Support: Mode Network provides comprehensive developer support, including documentation, development tools, and software development kits (SDKs), making it easy for developers to 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 Collaboration
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 uses a decentralized governance model that allows token holders to vote on key network updates, fund usage, and policy changes.
Transparency: Maintain transparency in the operations of the ecosystem by publishing regular updates and financial reports, enhancing community trust and engagement.
3.5 Ecological projects that have been launched
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, which allows users to re-pledge ETH or other liquid assets, 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 1:1 ratio. 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. TVL is $61 million and is backed 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 participation activities.
DeFi and Community Sponsorship: MODE tokens support integrated DeFi activities and community sponsorship, helping 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 were allocated to early investors, which were used for 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 contributions.
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 circulation supply: 1.3 billion MODE
4.3 Airdrop
4.3.1 Airdrop Overview
Total Tokens: Mode Network airdrop will distribute a total of 550 million MODE tokens, of which 400 million will be used for points airdrop
Purpose of airdrop: Encourage early participants through airdrops and motivate developers and users to contribute to the ecosystem.
4.3.2 How 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 the Mode Network, the more points are earned.
During the initial seven days of the event, you can get a 12-fold bonus on your points.
2. Invite friends:
By recommending friends to participate, you can get 16% of the points earned by the recommended users as a reward.
3. Using DApps:
You can earn 2x points by interacting with designated decentralized applications (DApps), such as Eigenlayer, RenzoProtocol, Layerbank, Ionic, and Etherfi.
These DApps may involve different interaction methods such as exchange, staking, lending, etc.
Airdrop Points Maximization Strategy
Points optimization tips: You can maximize your points earnings by performing asset operations such as staking, lending, and swapping in multiple DApps within the Mode Network.
Exchange strategy: For example, exchange ETH for EZETH on Kim Exchange, use EZETH for staking 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, with 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. He has worked as a consultant at Hashflow and has invested in Eigenlayer and Ethena.
Federico Sarquis: Technical leader, previously organized events for Ethereum Argentina, with extensive technical and community experience.
The team consists of 15 people, who work remotely, which enhances operational flexibility and global collaboration. This structure helps to quickly respond to market changes and technological advances.
Regarding financing, Mode Network completed a $9.75 million financing in October 2020. In addition, the project received a grant of up to 2 million OP tokens from the Optimistic Foundation to support user growth incentives.
In April 2024, it also completed a seed financing round of 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 top of 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 by delaying data availability verification of transactions and increases transaction throughput.
2. Decision
Introduction: Arbitrum is also a Layer 2 solution that uses optimized volume technology, which 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 polygonal 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, at $162 million, with an average daily tps of 1.62 and a median GAS of 0.001 Gwei, which is equivalent to an actual cost of less than $0.01. A total of 2.12 million transactions have occurred in the past thirty days.
6.2 Project Advantages
1. Technical advantages
Application of optimized volume technology: Mode Network uses optimized volume technology to increase transaction speed and reduce costs. This technology significantly reduces the burden on the mainnet by processing transactions on Layer 2 and submitting only batches of transaction data to the Ethereum mainnet, while ensuring the security and integrity of transactions.
Modular Architecture: Mode’s modular design allows developers to select and integrate features 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 incentivizes 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 significant reductions 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 to 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: To remain competitive, Mode Network needs to continuously innovate and improve its technology and services, which is particularly important in the rapidly changing blockchain space.
2. User and market acceptance
Speed of user adoption: While Mode Network offers significant performance benefits, 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 benefits, especially when it comes to non-technical users.
3. Economic and financing risks
Funding Dependence: Mode Network’s development and expansion is largely dependent on external financing. Market volatility or a decline in investor confidence may affect its ability to raise funds.
Token Value Fluctuation: As a platform with a native token, Mode Network’s development 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 general, 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.
As blockchain technology continues to advance and the crypto market matures, Mode Network's vision is to become a key force in driving the growth of the Ethereum ecosystem, providing 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.
