Manta Network, The Manta Ray Making Waves in the Layer 2 Space

Table of Contents

1. Fragmented Layer 2 Ecosystem: Manta Network's Strategic Approach

2. Manta Network's Technological Strategy: First ZK Modular Layer 2 to Adopt Celestia DA
2-1. First ZK Modular Layer 2 to Adopt Celestia DA
2-2. Multi-Prover, Manta Network's Integration of Polygon zkEVM and Universal Circuit

3. Leveraging CeDeFi and RWAs for Sustained Growth Beyond Short-Term Airdrop Marketing
3-1. Manta network's strong short-term performance following TGE
3-2. Manta network's mid- to long-term strategy for sustainability

4. Manta Network Aims for a Resurgence After Overcoming Past Challenges

 

 

1. Fragmented Layer 2 Ecosystem: Manta Network's Strategic Approach

In 2024, the Ethereum Layer 2 market is undergoing rapid transformation, characterized by the emergence of numerous diverse networks. As of July 10, L2BEAT reports 69 Layer 2 networks, while DefiLlama lists 31. The actual number is likely higher when considering emerging startup networks that have not yet been aggregated. This expansion has significantly altered the market's size and composition. In January 2023, according to DefiLlama, Arbitrum and Optimism dominated over 90% of the market with a combined TVL of approximately $2 billion. By July 10, 2024, their market share had fallen to less than 40%, even as the total TVL surged to $9 billion. The influx of numerous Layer 2 solutions has expanded the market but has also led to increased capital fragmentation due to varying network strategies.

To thrive in this competitive landscape, each Layer 2 project must craft a robust strategy that goes beyond technological innovation to encompass ecosystem revitalization. In this context, Manta Network stands out as a notable contender. Manta Network is vigorously promoting ZK-as-a-Service, positioning itself as a premier platform for zk applications that prioritize user privacy. Furthermore, Manta Network leverages Celestia as its data availability (DA) layer to minimize gas costs and enhance user experience.

This article delves into Manta Network's technological and market strategies to assess their potential competitiveness in the medium to long term. Developed by alumni from prestigious institutions such as Harvard, MIT, and Algorand, Manta Network quickly captured attention and secured approximately $60 million in funding from prominent investors including Binance Labs, Polychain Capital, and Spartan.

 

2. Manta Network's Technological Strategy: First ZK Modular Layer 2 to Adopt Celestia DA

Layer 2 solutions are designed to enhance the scalability of Layer 1 blockchains like Ethereum. Manta Network maintains security and decentralization by processing numerous transactions through its OP Stack-based “Universal Circuit” and then recording the summarized data on Layer 1. However, the cost of recording data impacts network efficiency and user experience. In particular, calldata, used to write Layer 2 data to Layer 1, is dependent on Ethereum's gas price, which fluctuates with network usage and can increase Layer 2 operating costs. In the future, Manta Network plans to transition fully to a zkEVM solution. (However, with the recent Ethereum Dencun upgrade, the associated costs have been significantly reduced, so it remains to be seen what the future impact will be).

2-1. First ZK Modular Layer 2 to Adopt Celestia DA

To tackle scalability and efficiency challenges, Manta Pacific has integrated Celestia's Data Availability (DA) solution, significantly enhancing its network performance. Celestia's DA technology is designed to maximize blockchain scalability, delivering low costs and rapid transaction speeds to users. 

Unlike Ethereum, where gas prices fluctuate with network usage, Celestia offers a more stable and lower-cost alternative. This is achieved through advanced data management techniques, including Data Availability Sampling (DAS) and Namespaced Merkle Trees (NMTs).

Data Availability Sampling (DAS) is a core component of Celestia's technology, optimizing data availability management on the blockchain. DAS allows lightweight nodes to randomly verify small portions of the entire block's data to ensure its existence. This method ensures high security and speed, utilizing significantly fewer resources compared to full nodes.

Namespaced Merkle Trees (NMTs) provide an innovative approach to blockchain ledger management. NMTs divide the ledger into separate sections tailored to different applications, enabling each application to download and process only the relevant data. This segmentation accelerates data processing and reduces unnecessary computational costs.

Celestia's efficient data management, enabled by DAS and NMTs, offers a faster and more cost-effective user experience compared to the Ethereum network. The modular design of Celestia's infrastructure allows Manta Pacific to scale the network flexibly as needed, while efficient data validation on lightweight nodes enhances overall security. These technical advantages position Manta Pacific as a scalable, ZK-specific modular chain, poised to deliver superior network experiences to its users.

2-2. Multi-Prover, Manta Network's Integration of Polygon zkEVM and Universal Circuit

Initially, the Manta Pacific network utilized Optimistic Rollup technology with Ethereum Data Availability (DA). However, in response to the increasing demand for user privacy and the broader adoption of blockchain technology, Manta Network has committed to advancing zero-knowledge (ZK) technology. A cornerstone of this initiative is the development of Universal Circuits, a ZK-as-a-Service solution designed to simplify the creation of ZK applications for developers unfamiliar with ZK intricacies. Unlike existing ZK rollup solutions that require specialized languages, Manta’s Universal Circuits are built on the OP Stack Bedrock codebase, ensuring seamless compatibility with Ethereum smart contracts.

To further enhance network performance and security, Manta Pacific plans to transition to the Zero-Knowledge Ethereum Virtual Machine (zkEVM) using the Polygon CDK. This strategic move aims to leverage zkEVM's capability to verify computations through zero-knowledge proofs while maintaining full compatibility with Ethereum, thereby significantly improving scalability. The adoption of zkEVM will not only bolster the network's performance and security but also enable support for a broader spectrum of ZK applications.

The Polygon CDK (Customizable Development Kit) supports a diverse array of configurations, including Rollup and Validium modes, providing unparalleled flexibility in scaling and customizing networks. Among these, Polygon zkEVM stands out by offering full compatibility with Ethereum, allowing existing Ethereum smart contracts to be utilized without modification. This compatibility significantly enhances user experience by reducing transaction costs by a factor of 10 to 100 and enabling near-instant transaction finality compared to Ethereum.

During the transition phase, Manta Pacific will adopt the Multi-Prover framework to securely transition to zkEVM. This integration will merge Polygon's ZK Prover with its existing OP Stack rollup, allowing Manta Pacific to leverage both Polygon's ZK Prover cluster and its existing Universal Circuit cluster. This architectural approach will bolster network robustness throughout the transition to zkEVM.

Given that the Polygon CDK also supports the integration of external Data Availability (DA) modules, Manta Pacific's Multi-Prover system, in conjunction with Celestia DA, will offer users a low-cost Layer 2 solution despite the varied designs. This strategic technological approach will enable Manta Pacific to deliver superior scalable ZK technology solutions, thereby distinguishing itself from other Layer 2 competitors.

 

3. Leveraging CeDeFi and RWAs for Sustained Growth Beyond Short-Term Airdrop Marketing

Airdrops have become a common marketing strategy for new projects prior to their mainnet launch. Users deposit assets into the nascent network and receive tokens proportional to their deposits over time. While this approach quickly attracts users and funds before the token generation event (TGE), it often leads to a significant exodus of funds and users post-TGE. To mitigate this, many networks are phasing in airdrops to reduce post-TGE churn. However, this remains a temporary solution, necessitating a strategy to sustain user and fund retention.

3-1. Manta network's strong short-term performance following TGE

To prevent a large-scale user and fund exodus post-TGE, Manta implemented staged airdrop programs such as "Into the Blue" and "New Paradigm." The initial airdrop program, New Paradigm, restricted fund withdrawals for 69 days, ensuring their use within Manta Pacific. Unlike BLAST and zkSYNC, which saw immediate TVL drops post-TGE, Manta experienced a short-term increase in TVL.

The New Paradigm airdrop program, launched on December 23rd, significantly boosted Manta Network's activity. It provided users with multiple earning opportunities. By depositing funds via Stakestone and Mountain Protocol, users received staking Elders and liquidity tokens usable on Manta Pacific. These tokens enabled users to engage with various DeFi protocols within the Manta Network ecosystem and earn $MANTA token rewards proportional to their activity. This program garnered attention due to its higher returns compared to traditional airdrops.

However, the sustainability of these strategies is limited. With a finite token supply allocated to airdrops, the impact diminishes with each loyalty program iteration. Additionally, funds can quickly drain out if competing networks offer similar or higher interest rates.

Subsequently, Manta launched the Renew Paradigm and Restaking Paradigm programs in March, distributing a total of 3M $MANTA to participants. These programs allowed participants to stake and re-stake assets to earn interest and $MANTA tokens. However, Renew Paradigm did not achieve the same success as New Paradigm, likely due to the finite token supply and the long lockup period (69 days) amid a general crypto market downturn. Consequently, Manta urgently needs to secure the network's sustainability, which it aims to achieve through CeDeFi and RWA.

Source: Manta Network

3-2. Manta network's mid- to long-term strategy for sustainability

Gain a competitive edge in the market with CeDeFi's stability and profitability

Traditional DeFi protocols have shown significant sustainability weaknesses, with vulnerability to hacking and fluctuating returns dependent on market conditions. During the crypto winter, most DeFi protocols saw sharp declines in TVL and token prices, and the interest income from DeFi investments has decreased. Therefore, the CeDeFi model, which combines the benefits of CeFi and DeFi, is gaining attention in the cryptocurrency market. CeDeFi allows for stable returns from CeFi while offering additional returns from DeFi.

Manta aims to gain a competitive edge with its CeDeFi protocol. Launched in May 2024, Manta CeDeFi's TVL surpassed $100M within a week and has maintained this level for over a month, likely due to a promotional event rewarding depositors with $MANTA points. The challenge will be to maintain this TVL after the event ends on July 27.

Manta's CeDeFi collaborates with Ceffu (formerly Binance Custody) to monetize user assets while ensuring their safety. Ceffu provides digital asset management and custody services for institutional investors. Its MirrorX feature minimizes counterparty risk by allowing users to access exchange liquidity without physically placing their assets on the exchange. When users deposit BTC on Ceffu, a Liquid Custody Token (LCT) called mBTC is issued and managed on the blockchain. MirrorX enables users to access Binance exchange liquidity via LCTs while keeping their deposited assets safe in cold storage. This allows Manta's CeDeFi to securely store assets while earning returns through the Delta-Neutral Funding Rate Arbitrage strategy, which eliminates asset price volatility risk through a "long spot + short futures" position and earns interest on funding fees via a short position.

Additionally, users who deposit assets into Manta CeDeFi receive mTokens, securitized tokens that generate additional revenue through various DeFi activities within the Manta ecosystem. They also earn MANTA points proportional to their funds and deposit duration, along with monthly $MANTA airdrops. Currently, depositing wUSDM yields a 5% CeFi APY, MANTA points (1% APY), and liquidity tokens.

Revenue models leveraging RWAs for long-term sustainability

Real World Assets (RWA) encompass traditional financial assets such as real estate, bonds, stocks, and gold. In the crypto market, RWAs refer to the digitization of these assets, making them tradable on the blockchain. By leveraging the transparency, security, and efficiency of blockchain technology, RWAs increase asset liquidity and offer new investment opportunities for investors.

Since 2022, the crypto market has endured a downturn known as "cryptowinter" due to unfavorable macroeconomic conditions, the collapse of FTX, and the Lunar crisis. During this period, most cryptocurrencies, including Bitcoin, saw significant price declines, and the total value locked (TVL) in most DeFi protocols plummeted. This market volatility has led investors to seek more stable investments, driving interest in RWAs backed by US Treasuries. These RWAs offer a steady stream of yields backed by high asset stability. In 2023, while the overall DeFi TVL increased by 42%, the TVL of RWAs tokenized with US Treasuries surged by 754%. Although RWA's market capitalization remains relatively small, this growth is noteworthy.

Source: Layer2 INSIDER

From this perspective, Manta Network's strategy of backing RWAs with Mountain Protocol's USDM is poised to be effective in medium- to long-term user acquisition. USDM is a stablecoin backed by U.S. Treasury T-Bills, and its stability was recently reinforced by BlackRock's BUIDL fund supporting wrapped USDM (wUSDM) for use on the Manta Network. The BUIDL Fund, tokenized through blockchain technology by BlackRock and the digital securities platform Securitize, invests in U.S. Treasuries and repurchase agreements. It combines BlackRock's custody security with the potential for higher yields than solely U.S. Treasury-backed assets.

With USDM, the Manta Network offers users an investment opportunity to secure stable returns. As of July 11, 2024, USDM has an annualized yield (APY) of 5%, and through the support of USDM on Manta CeDeFi and Renew Paradigm, USDM holders can earn additional returns. USDM is also supported by Shoebill Finance, Zerolend, Aperture Finance, and other DeFi protocols within the Manta ecosystem, providing holders with various investment strategy opportunities.

 

4. Manta Network Aims for a Resurgence After Overcoming Past Challenges

Manta Network has faced controversies in the past due to suspicions of token dumping and money laundering in the South Korean market. However, the organization has since released detailed transaction records, clarifying that all profits were allocated to the Manta Network Foundation Treasury Fund, aimed at supporting Korean developers and the community. Manta Network emphasizes community building through various grant programs and hackathons. Furthermore, it is expanding its ecosystem into fields such as memecoins, AI, RWAs, and CeDeFi, including a recent partnership with Bonk, a notable memecoin project in the Solana ecosystem, for a reward program. These initiatives are expected to expand the ecosystem and gradually restore community trust.

With its robust development strategy and strategic partnerships, Manta Network has the potential to establish a competitive position in the zero-knowledge (ZK) ecosystem. The transition to Polygon zkEVM and the introduction of the Multi-Prover framework will enhance Manta Network's technical foundation and support the onboarding of a wide range of ZK applications. This technical strategy is advantageous for developers and users needing ZK technology and is expected to lay the groundwork for further ecosystem expansion.

Manta Network's medium- to long-term revenue model through CeDeFi and RWA aims to ensure sustainable growth. CeDeFi combines the stable liquidity of CeFi with the benefits of DeFi, presenting an attractive model for investors. The RWA strategy will strengthen connections with traditional financial assets, introducing new investment opportunities to the DeFi ecosystem.

Manta Network is set to overcome past controversies and rise anew with its innovative strategies in ZK technology, CeDeFi, and RWAs. Observing whether Manta's ZK technology and market strategy can drive user adoption and sustain network growth will be intriguing.