The Defiant

Over the last year liquid staking protocols have developed into a significant role in modern DeFi. Lido Protocol alone has seen its TVL rise from 6b USD in January of 2023, to 20b USD today.

Mantle has just launched its native Liquid Staking Protocol (LSP) on Ethereum L1, set to be governed by Mantle DAO, which has access to one of the largest on-chain treasuries in DeFi today.

What is Mantle?

Following a successful mainnet alpha launch on July 17th, 2023 the network's TVL currently sits at $245M.

Everything within Mantle is powered by its native gas token $MNT. $MNT token holders make up the Mantle Governance DAO, which is responsible for all decision making pertaining to future product developments, and controlling one of the largest treasuries on-chain.

At the core of the ecosystem is Mantle Network, a rollup based L2 solution for Ethereum that aims to be fully compatible with the Ethereum Virtual Machine. The network is designed with a modular architecture which separates transaction execution, data availability, and transaction finality into separate modules. This allows for individual modules to be upgraded in order to adapt to advancements pertaining to each technology stack.

What is Mantle’s Liquid Staking Protocol?

Mantle’s LSP is a permissionless, non-custodial ETH liquid staking protocol deployed on Ethereum mainnet, but governed by Mantle. Like everything launched from Mantle Governance, the LSP adheres to the governance process, but also has access to treasury resources, and can interact with other products and applications in Mantle Ecosystem.

In addition to maintaining and furthering the chain, one of the core focuses of Mantle is the development of its Liquid Staking Protocol (Mantle LSP). Mantle Staked Ether (mETH) functions as the receipt token, with the goal of becoming one of the most efficient ETH staking tokens in DeFi.

Built with previous liquid staking explorations in mind, Mantle LSP is designed with four particular focuses. A highly rewarding $mETH experience, a simple and modern architecture, robust risk management, and its utilization as a core Mantle product.

When using the LSP, users will receive mETH as their value-accumulating receipt token. Mantle’s goal with mETH is to help develop it into one of the most efficient staking tokens in DeFi by maintaining the highest sustainable core yield through MEV tactics and Treasury yield sharing. Through partnering with Ondo Finance, Mantle LSP looks to offer best in class yield, with $USDY/$mUSD currently yielding an estimated 5.1% APY.

Using a modern post-Shanghai Upgrade architecture and robust risk management the LSP on Mantle is designed for efficiency and scalability. On the backend, the core smart contracts and off-chain services are entirely non-custodial, to ensure staked ETH remains in protocol-defined smart contract addresses. Permissions and roles amongst oracles, operators, guardians, and the Mantle Security Council are segregated to mitigate risk, and the validation services are performed on the Tier 1 node operators.

As a Mantle Core Product, Mantle LSP leverages Mantle Core Contributor Engineering and growth capabilities, while allowing for future synergies across the ecosystem. mETH already has a few existing integrations for stakers to use. It can be used within certain LSDfi dApps across Ethereum, major DeFi primitives that exist on Mantle, and on Bybit. As the chain develops further, Mantle Governance views mETH as a staple within its native DeFi ecosystem, and an extra layer of security added to Ethereum that adheres to Mantle Governance.

The Mantle Ecosystem At a Glance

Mantle Governance

As the first DAO-Spawned Layer 2, Mantle Governance is responsible for macro strategies, and delegation within the DAO to allow for attention to detail and effective management.

As a result the governance DAO voted on the MIP-25, which approved the formation of a sub-establishment within the DAO referred to as the Mantle Economics Committee. The Economics Committee is responsible for evaluating and making decisions in regards to treasury assets in a conservative manner. Within this proposal, the treasury management pertains specifically to LSD and ETH staking. As a result the committee authorizes Mantle LSD and Lido ETH staking strategies with a combined allowance of up to 200k ETH. When evaluating decisions the committee may also engage in commercial negotiations, assess staking strategies of other ETH LSD projects, and decide on entry and exit strategies.

More recently the DAO passed MIP-28, which launches liquidity support for applications, seed liquidity for RWA-Yield-Stablecoins and other treasury maintenance such as asset rebalancing. Through MIP-28, there’s new allocation from the treasury of up to 250m USDx towards stablecoin development, as well as a combined allowance of 300m USDx, 250k ETH, 2,000 BTC, and 400m MNT in liquidity support for applications and third party bridges.

Summary

While still in its early days, the mainnet launch of Mantle has been exciting for many in the DeFi space due to its fast growth and the respectable work of the erstwhile BitDAO, which has since merged into Mantle. Mantle’s vision for an expansive Layer 2 vision is grand, and the Layer 2 market is quite saturated, but the DAO also has access to one of the largest on-chain treasuries in DeFi. To stand out from the rest of the market, Mantle looks to establish itself as one of the top destinations within all of DeFi for yield.

Decentralization is at the forefront of the chain’s development, and following MIP-28 there is a large amount of liquidity being used to bootstrap a variety of applications being built out on Mantle. In addition to the DAO based funding, new protocols will benefit by integrating mETH as capital efficiency is maximized by the Mantle LSP.

The DAO-led Mantle ecosystem has seen a spike in total TVL since the start of Q4, which may indicate interest from more DeFi users or developers’ desire to begin building more products on the chain. Mantle Governance’s goal to support the next-generation of innovators, builders and developers has been displayed with recent governance votes, as they continue to push for further adoption of decentralized and token-governed technologies.