Case Studies

Cheaper and Faster Settlements

Problem:

  • Exchanges usually require 2/3 confirmations for BTC deposits - a 20/30 minute time window which could be crucial in rapid price movements.

During the March 12 “Black Swan” price drop, exchanges like Bitfinex saw an inflow of ~18,000 BTC, while Binance’s hotwallet increased by ~36,600 BTC. During that period, BTC price experienced a few major drops, some of which occurred in the 30 minute window, such as a sharp drop of 12.14% between 10:30 and 11:00, and a 12.07% decline between 23:00 and 23:30 UTC.

Furthermore:

  • Users experience friction when storing tokens from different blockchains (such as having to access BTC blockchain wallet to transfer Bitcoin, later accessing ETH to transfer Ethereum and ERC20 tokens, afterwards accessing LTC blockchain to transfer Litecoin, etc.).
  • When transacting each cryptocurrency, they must pay fees for every blockchain they transact on (paying three different fees for BTC, ETH and LTC blockchain as per example above).
  • Dealing with certain cryptocurrencies might increase exposure to tracking and identification (such as when dealing with ETH blockchain, where anyone can track the balance of the wallet easily).

Solution:

Mintlayer offers the possibility to wrap different cryptocurrencies and tokens on its blockchain, so that users and exchanges can rely on a single wallet to perform all the transfers instead of using multiple coins and software. To make this happen, a “Peg-in/Peg-out” model is used. A single entity or a federation of entities lock-in the tokens in its native blockchain (smart contract or a simple multisignature account), then issues wrapped tokens on Mintlayer network, while having them backed & locked on the native network. For instance, anyone can store “m-BTC” in a Mintlayer wallet, while being confident that the funds can be redeemed on the native network at any moment.

Thanks to the high frequency of block issuance and the security model envisioned with the new Mintlayer’s Proof-of-Stake, it is estimated that Mintlayer transactions sent to the exchanges will be accepted in a few minutes. It allows for cheaper fees and faster settlements, enhancing user experience and creating the possibility to make arbitrage for traders.

Moreover, handling multiple tokens was never so comfortable before. With transaction batching and coinjoin functionality which already exists on Bitcoin, exchanges and users can transfer several different cryptocurrencies (even those that natively belong to different blockchains), in a single transaction. This greatly reduces the friction - time and money saved compared to sending each payment individually. Having a monetary incentive to batch transactions means users are inclined to do it, which greatly helps the sustainability of the blockchain in the long run, considering the amount of space saved.” Mintlayer is built while keeping Bitcoin’s technical strengths in mind. One of which is the unspent transaction output (UTXO) structure. Compared to Ethereum’s account/balance model, UTXOs offer greater privacy benefits if users use new addresses for each transaction.

Finally, Mintlayer also supports Lightning Network and can bring the pegged tokens on an even faster and cheaper second layer.

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