What’s Mitosis Ecosystem?

9may...WMMw

7 May 2024

The modular era has dramatically simplified the process for developers to construct their own specialized networks. Although this transition has sparked DeFi innovations, efficient capital allocation has become more complex than ever due to the surge of networks and protocols.
Individuals in the DeFi landscape face an overload of choices and a scarcity of clear information. It is infeasible for each participant to keep up with rapidly emerging networks, and moving assets across different networks is costly and cumbersome. Additionally, unclear reward schemes lead to inaccurate decisions, with discrepancies between speculation and actual outcomes resulting in substantial opportunity costs.
Mitosis consists of the Mitosis L1 Ecosystem and Mitosis Vaults on multiple networks. The Mitosis Ecosystem manages the liquidity that flows from different networks through the Mitosis Vaults. Mitosis defines this liquidity as Ecosystem-Owned-Liquidity(EOL), and all participants within the ecosystem can opt to partake in the decision-making process of liquidity allocation. The EOL across multiple networks redefines the DeFi LP experience. Here are a few scenarios to illustrate what Mitosis can do:

A lending protocol offers favorable terms to the Mitosis Ecosystem in hopes of receiving a portion of the EOL for its lending pool. With control over the sum of all LPs’ liquidity, the ecosystem gains a greater bargaining power, forcing the lending protocol to propose a more competitive reward scheme.
A new DEX protocol wants to utilize Mitosis’ EOL to bootstrap liquidity. The DEX must present a clear and compelling reward scheme to attract the ecosystem. This allows the ecosystem to make an informed decision while DEX benefits by minimizing its dependence on private market makers.
An active DeFi participant on Ethereum is aware of the rapid innovations across multiple networks but struggles to keep track of all of them. To stay current and avoid falling behind, the LP decides to deposit into the Mitosis Vault. The LP can tap into benefits from all networks supported by Mitosis simply by depositing to Mitosis on Ethereum.

Modular Era

What we envision

The modular era is an upcoming future where user actions span multiple rollups and chains.
Imagine users freely navigating through numerous Web3 applications, seamlessly interacting with different rollups and chains without even realizing it.
Behind the scenes, user assets will be constantly transferred across a giant mesh of blockchains to facilitate user actions.

This future is not that far away

The imminent arrival of such a future is evidenced by several noticeable trends. Foremost among them is the remarkable advancement of modular blockchain architecture, and another important one is the rapid surge of assets on Ethereum Layer 2 (L2) networks.

Modular blockchain architecture has revolutionized the process of building a new chain, making it akin to assembling Lego blocks - selectively integrating pre-made layers of blockchain. Products that provide these layers are attracting significant attention. As of February 2024, Celestia’s market cap boasts $2.8Bn, having surged eight-fold in the last four months. Eigenlayer has $2.5Bn worth of assets locked in its protocol. These developments have made the creation of new rollups and chains effortless and streamlined, catalyzing a proliferation of innovative new networks
L2 networks are attracting a substantial volume of assets. For example, Arbitrum alone has witnessed an inflow of $7.8Bn in $ETH, solely accounting for the transactions via its canonical bridge. Use cases for various assets are escalating across different networks. Millions of transactions are executed daily on Arbitrum, Optimism, and zkSync rollups. This indicates a growing trend where users are more engaged with specialized applications spread over various rollups and chains. As user activity expands beyond a single chain, there is a corresponding rise in the frequency of asset transfers between these networks

Cross-chain DeFi infrastructure is critical

Cross-chain DeFi as an infrastructure is a key component of the modular era. This infrastructure is crucial for seamless transfers and conversions of assets for users to enjoy the full potential of Web3 applications across multiple networks. As the modular era matures, the cross-chain DeFi market will grow exponentially.

Liquidity networks are the backbone of cross-chain DeFi

Liquidity networks* handle the transfer of assets between chains. A scalable liquidity network is essential to accommodate the burgeoning demands of cross-chain DeFi. However, existing liquidity networks are not scalable enough to meet the upcoming demands of the modular era.

Scalability Problem

Scalability of Liquidity Network

The scalability required of a liquidity network encompasses several aspects. This includes scalability as the volume of operable liquidity, scalability in the range of networks supported by the protocol, and scalability in ensuring the secure growth of the protocol.
All aspects of scalability are crucial for liquidity networks. Depending on scalability, a liquidity network can either act as a catalyst for the broader adoption of the modular era or become a constraining bottleneck that hinders its progress.
However, current liquidity networks are not sufficiently scalable to cope with the growth of the cross-chain DeFi market in the modular era.

Scalability Problems

Capital Efficiency: Cross-chain liquidity is only being used for cross-chain transfer
The volume of operable liquidity is directly tied to usability, deciding factors such as the extent of slippage and the speed of transaction settlements. However, current liquidity networks are unsuitable for operating large volumes of liquidity because they miss out on usage opportunities other than cross-chain transfer demands.
Interoperability: The network coverage of current liquidity networks is subordinate to their underlying arbitrary message bridge (AMB) protocol
The scalability of supported networks is important for both users and application builders, as users need to move their assets freely without concerns about whether the base liquidity network supports a particular network. However, current liquidity networks cannot scale beyond the permissioned interoperability of the underlying AMB layer.
Security: The security measures of current liquidity networks are often not measurable and limit their growth potential
Security is a critical backbone of a protocol's scalability because as the protocol grows, it becomes a larger target for exploits. This means that all users must bear the increased risk as the protocol grows if security is not robust enough. However, security for current liquidity networks is often hard to measure and not objectively proven, limiting the protocol’s capacity to grow.

Mitosis Liquidity Protocol

The Mitosis Liquidity Protocol is meticulously designed to tackle the three aforementioned challenges. Let's delve into how Mitosis achieves scalability in these thee aspects.

Capital Efficiency

Current liquidity networks are not fully prepared to address the growth potential of the upcoming cross-chain DeFi because they can only operate cross-chain transfers regardless of the size of their liquidity. Cross-chain transfer is just a fraction of the cross-chain DeFi market.
Therefore, the usage of collected capital in liquidity networks is limited to a fraction of its full potential. The limited usage directly impacts the volume of liquidity as it renders the protocol a less attractive platform to provide liquidity.
In other words, liquidity providers (LPs) for liquidity networks would be reluctant to forego yield sources other than cross-chain transfer.
This results in a limited volume of liquidity, which poses a significant problem because the volume of liquidity is directly linked to cross-chain user experience, affecting the speed of settlement and the extent of slippage.

Mitosis unlocks the potential of cross-chain liquidity

Mitosis Liquidity Protocol ensures scalability in capital efficiency because it is capable of operating an increasingly wider range of cross-chain DeFi demands as liquidity increases. This is facilitated by Mitosis’ unique architecture. The two key components involved are miAssets and the Mitosis Ecosystem.
When users deposit their assets into the Mitosis Liquidity Protocol, they are issued corresponding miAssets at a 1:1 ratio (e.g. deposit eETH, receive meETH). These miAssets can then be utilized in a variety of DeFi activities. One of the options is depositing miAssets into DeFi protocols within the Mitosis Ecosystem. Once a DeFi protocol within Mitosis accumulates sufficient miAssets, it facilitates the corresponding cross-chain action. Let’s delve deeper into the flywheel of this mechanism.

Increased liquidity supplied to the Mitosis Liquidity Protocol results in more miAssets on Mitosis Ecosystem
As more miAssets are onboard on Mitosis, more liquidity is provided to DeFi’s within Mitosis Ecosystem
When a certain DeFi accumulates sufficient liquidity, it unlocks the corresponding cross-chain action
- Example 1: A DEX within the Mitosis Ecosystem with sufficient liquidity enables Mitosis Liquidity Protocol to facilitate cross-chain exchanges
- Example 2: A lending-borrowing protocol within the Mitosis Ecosystem with sufficient liquidity enables the Mitosis Liquidity Protocol to facilitate cross-chain lending-borrowing
As a result, the Mitosis Liquidity Protocol captures a larger segment of the cross-chain DeFi market, thereby making Mitosis a more attractive protocol to provide liquidity
In turn, more liquidity providers decide to deposit to the Mitosis Liquidity Protocol, which loops back to the first point, creating a flywheel

Scalability Problem

Current liquidity networks face painstaking challenges in network scaling due to their reliance on AMB(arbitrary message bridging) protocols. For instance, the Squid Router cannot connect with rollups and chains unless Axelar decides to support them. Similarly, Stargate depends on LayerZero for network coverage. In the modular era, decentralized applications, rollups, and chains must interact with other networks in order to attract a diverse user base and utilize infrastructures across different networks.
In fact, the ability to effectively leverage various networks will become a key competitive advantage. In this context, liquidity networks, the connectors among networks, should possess the flexibility to integrate new rollups and chains that demonstrate high potential.
However, current liquidity networks lack autonomy in terms of network connectivity. They must first convince the AMB protocol to support a particular network and either wait or incur additional costs until the network support aligns with the interests of the AMB protocol. This process becomes strikingly inefficient when new chains and rollups emerge rapidly and in great numbers.

Mitosis Liquidity Protocol

The Mitosis Liquidity Protocol achieves flexible network scalability via a partnership with Hyperlane, an AMB protocol that ensures permissionless interoperability.
Chains and rollups wishing to connect with Hyperlane AMB only need to deploy a few smart contracts. They can achieve interoperability with all networks that incorporate Hyperlane without any governance permission and additional costs. Teams that resonate with the goal of permissionless interoperability are actively contributing to integrating Hyperlane into their preferred execution environments.
Mitosis team, with particularly interest in Cosmos Ecosystem, has taken the initiative to develop Hyperlane for cosmwasm. Cosmwasm Hyperlane joined a growing list of EVM Hyperlane, Move VM Hyperlane, Solana VM Hyperlane, and more on the horizon.
Through Hyperlane, the Mitosis Liquidity Protocol can scale to any network, basing these decisions solely on the rationale specific to the liquidity protocol.

About Mitosis Expedition

Introduction

Liquid restaking tokens (LRT) have the potential to become the next-generation DeFi primitive. In the near future, LRTs must exist in hundreds, if not thousands, of modular rollups. Mitosis is the partner in LRT's inevitable multi-chain transition.
The Mitosis Expedition campaign is where LRT's cross-chain expansion begins.

Program Details

Expedition Mainnet will run on the Ethereum Mainnet and L2 networks (Arbitrum One, Optimism, Manta, and Mode).
Campaign Duration: 15:00 UTC on April 25th ~ TBD
During this program, participants can experience Mitosis's fundamental features: Deposit and Redeem. Deposit LRTs, receive miLRTs, and hold miLRTs to earn MITO Points. You can also redeem miLRTs, retrieve LRTs, and deposit LRT on other supported networks.
The program has four stages called Epochs. Each Epoch (except for Epoch 4) has an LRT deposit limit.

Epochs 1, 2, and 3 have LRT deposit thresholds:

Epoch 1: 1,000 eETH
Epoch 2: 2,800 eETH
Epoch 3: 8,000 eETH
Epoch 4: No cap

Network breakdown and respective MITO Point Boosts are as follows:
Network deposit thresholds are applied to each LRT that Mitosis supports. In other words, if Mitosis supports a new LRT, that LRT will have a different deposit threshold that is unaffected by the weETH's deposit threshold.
Holding 0.001 or more miLRTs during an Epoch makes you eligible for that Epoch's Epoch's Boost until the end of the Expedition campaign. Only one Epoch Boost (with the highest multiple) gets applied to a participant's address.

Participation Benefits

Expedition Mainnet offers LPs multiple yield sources and future benefits. LRT providers retain their EigenLayer and LRT underwriter points reward while earning MITO Points for future $MITO airdrops. Also, just by holding miAssets, LPs will earn points from other DeFi applications which will be integrated to Mitosis in the near future. Let’s dive deeper into each of the benefits:

1. MITO Points

Expedition participants earn MITO Points by depositing LRTs and holding miLRTs. Accumulating MITO Points grants eligibility for Mitosis governance token ($MITO) airdrops. Expedite MITO Point earnings via multiple methods, including increasing the holding duration of miLRTs, completing Missions, and collecting Badges. Check here for more details on MITO Points.

2. EigenLayer Points

miLRT holders keep earning EigenLayer Points. In other words, LRT holders continue stacking up their EigenLayer points even after providing LRT to Mitosis.

3. EtherFi Loyalty Points (2x)

Similar to EigenLayer Point retention, Mitosis eETH providers (or miweETH holders) keep earning their EtherFi Loyalty Points. Additionally, EtherFi offers a 2X boost on their point earnings for all miweETH holders participating in Expedition Mainnet.

4. Mitosis Vault

Mitosis optimizes its LP yield by allocating locked assets in various yield sources across multiple networks. Mitosis aggregates its multi-chain, multi-app token/point earnings into miAssets. In other words, users gain multi-chain DeFi exposure just by holding miAssets.
Mitosis Vault will operate full on-chain governance, with miAsset holders participating in deciding the Vault’s strategies. The Mitosis community will soon unveil more details.

What is miLRT?

miLRT is a derivative token representing the LRT asset locked in Mitosis. Mitosis LPs deposit their LRTs into Mitosis and receive miLRT on a 1:1 basis. miLRT holders can always burn miLRT to retrieve the underlying LRT.
miLRT is a core Mitosis feature that enables the concept of Ecosystem-Owned-Liquidity (EOL). LPs earn the yields embedded in the underlying LRT just by holding miLRT. Mitosis Vault strategies manage the LP assets by allocating them to various yield sources across multi-chain DeFi. Instead of manually deploying capital and causing inevitable liquidity fragmentation, LPs can conveniently gain multi-chain DeFi exposure by holding miLRT.