Mina is the world’s first cryptocurrency with a lightweight, participant-powered, constant-sized blockchain. Its size will always be about 22kb, making it easily accessible with a smartphone. In the following, we will examine how Mina Protocol may be able to change the way we operate blockchains fundamentally. We will also discuss how Mina is able to outperform other blockchains with a size of 300gb that are weighted down by terabytes of private user data and network congestion. Let’s have an in-depth look at Mina Protocol!
In the very first section, we will give you an overview about what the project is all about. Later on, we will have a close look at the technical components and potential use cases.
Mina, formerly known as Coda Protocol, is spearheaded by O(1) Labs and aims to solve blockchain’s immense decentralization problem. The protocol seeks to enable a level of scalability never seen in the blockchain ecosystem. By utilizing recursive zk-SNARKs, Mina ensures that the size of the blockchain remains constant at 22 kb. Doing so will allow Mina to foster widespread adoption of a Web3.0 ecosystem powered by Snapps (SNARK-powered decentralized apps).
In October 2020, O(1) Labs has raised a total of $10.9 million in a founding round co-led by Bixing Ventures and Three Arrows Capital. Previously, O(1) Labs raised $3.5 million in a seed round in May 2018 which was followed by raising $15 million during Series A.
The failure of legacy blockchains like Bitcoin and Ethereum
Legacy blockchains such as Bitcoin and Ethereum have played an important role in establishing distributed ledger technologies. However, the exceptional success of these DLTs (distributed ledger technologies) at providing a decentralized system for verifying payments and launching ICOs comes with a high cost: the lack of scalability and an enormous chain size.
Traditional cryptocurrencies require nodes to process the entire history of transactions, which allows them to provide a secure and decentralized network at the great cost of scalability. The general issue of scalability signifies a massive barrier to any meaningful adoption of DLT technologies. Ethereum, for instance, is struggling with poor throughput with a maximum of 13 transactions per second in comparison to the 150 million transactions centralized payment providers such as Visa are able to process.
At the moment, Ethereum can handle about 13 transactions per second, which cuts in half to about 7 transactions per second for tokens.
Because of a lack of scalability, verifying legacy blockchains takes time and computational resources. With a consumer computer, downloading and verifying Bitcoin’s blockchain (300 GB) and its more than 500 M transactions takes days which poses an enormous entry barrier. The considerable resource requirements of legacy blockchains prevent regular users from running a full node on the network that stores and verifies the blockchain. For this reason, the number of nodes operating networks such as Bitcoin and Ethereum has decreased despite growing adoption. In the case of Bitcoin, the total node count has even fallen to a 3 year low as can be seen in the image below.
The discussed entry various of running a full node undermine the decentralization of legacy blockchains and reduce their performance.
By introducing a lightweight cryptocurrency, Mina Protocol seeks to solve the issues that are inherent with legacy blockchains.
Mina Protocol is designing a so called “succinct blockchain” that allows the efficient verification of the transaction history without relying on any external advice. This goal is accomplished by including proof for the validity of the network in each block. By employing incrementally computable SNARKs, Mina insures that the cost of computing remains proportional to the number of transactions.
In the Mina Protocol, a full node does not have to store the entire blockchain. Instead, it can verify transactions by refining the state of commitment in the latest block header. Doing so allows the network to only require so called “provers” (that are comparable to Bitcoin miners) to store the full blockchain. As a result of this, the entry area for running a full note is dramatically reduced, which increases decentralization exponentially.
The consensus protocol of Mina is called Ouroboros Samasika — a provably-secure proof-of-stake (PoS) consensus protocol for succinct blockchains. By relying on the latest block header for verifying transactions, a state proof size within the Mina Protocol is 864 bytes large and takes around 200ms to verify. This means that Mina is considerably faster than legacy blockchains and can be verified with devices such as a smartphone.
Parallel scan state
Mina employs a parallel scan state, which increases transaction throughput in comparison to sequentially computed proofs. To accomplish this, blocks that still need to be proved are distributed across parallel provers.
Legacy blockchains are confronted with one central challenge: their inability to provide rapid evidence of correctness. The more popular they become, the more inaccessible they become to their users because of a growing transaction history that needs to be verified by new participants joining the network.
Mina Protocol utilizes recursive zk-SNARKs to replace the need for verifying historical transactions with an easily verifiable proof.
Network Roles and Incentives
Mina seeks to enable users to fully verify the current state of the network with a zk-SNARK. To accomplish this aim, the following rules are incentivized to participate in the network.
Thanks to it’s low entry barrier, the majority of network participants will be able to verify transactions in Mina. All it takes is to download a zk-SNARK, which is a few hundred bytes in size and takes a few milliseconds to verify.
- Block producers
Comparable to miners, the block producers of Mina are incentivized by protocol distributions (block rewards and network fees paid by users). It is important to note that block producers do not face the threat of slashing. Block producers are incentivized to include the highest fee transactions but they will have to SNARK an equivalent number of previously added transactions for each transaction they add to a block.
So-called Snarkers are participants who produce zk-SNARKs that verify transactions. These Snarkers are incentivized by block producers who pay them from the total transaction fees. This creates a dynamic in which blood producers seek to minimize the fees they pay out to Snarkers, which incentivizes participants to produce the most cost-efficient zk-SNARK proofs.
In Mina, rewards and fees are distributed pro-rata to current holdings. Under the assumption of a high staking participation, there is no inflation in the protocol, which ensures that the holdings of participants remain constant. However, participants who decide against staking or delegating will be confronted with a dilution of their holdings.
The initial inflation is set at 12% to motivate participants of the network to start staking. Within the following five years, this rate will decrease to 7% at which point it will remain constant.
Block reward multiplier
The rewards for verifying transactions (block rewards) change dynamically in accordance with the inflation rate. But also the participation in the network has an influence on block rewards. For example, if only 50% of the entire network chooses to stake their Mina tokens, block rewards will double. The number of blocks produced is expected to be proportional to the staking ratio, which is designed to encourage more participants to stake at low participation levels.
As you can see in the graphic below, the more participants are staking their tokens, the lower the block reward multiplier.
Mina will empower Snapps that are set to revolutionize Web3.0.
Snapps = Dapps + Privacy + Off-Chain Data + Scalability
So called Snapps (Snarkified Applications) are comparable to Dapps on Ethereum but provide significant scalability benefits. This is because Snapps are being executed once by their developers, after that all other nodes can verify the SNARK proof associated with the Snapp. In comparison to Ethereum’s Dapps for which every node and miner has to run the same computation, Snapps are largely more efficient.
But what are the use cases for such Snapps?
Proof of Credit Score
Snapps will allow borrowers to prove their credit score without having to disclose their credit score to lenders. Conversely, lenders will be able to reliably verify credit scores without having to perform the (potentially costly) credit check themselves.
Proof of Identity
In order to verify the validity of an identity document, Snapps could be used. The benefit for users will be that they can stay in control of their data by not having to disclose the identity document itself.
Proof of Crypto Holdings (for example on Coinbase)
Should it be required to prove that an applicant for a service needs to meet a certain balance on a crypto exchange, Snapps can be utilized to verify the threshold without disclosing the actual amount.
Last but not least, eligible voters will be empowered to vote privately with Snapps without having to disclose what they voted for or they are.
We hope you enjoyed this introduction to Mina Protocol. Stay tuned for more.