🚀This Is What You Should Know About MINA

A deep dive into MINA Protocol: From zk-Tech to Fundamental Metrics

Author

Laura & Sooraj
November 04, 2023

Greetings, Metrics Explorers!

Laura and Sooraj here, ready for another expedition into the crypto wilderness!

A massive shoutout for sending your inquiries and votes to us!

Today, we don our explorer caps to dive into the Mina Protocol (MINA).

Continue to send your brilliant questions; they could guide our upcoming adventures!

Onward we go!

What you’ll learn today

Insight 1:

What is a "succinct" blockchain, and how does MINA differ from traditional blockchains like Bitcoin and Ethereum?

Insight 2: 

Does Mina's Ouroboros Samasika merely replicate Cardano's Ouroboros Praos, or does it present foundational distinctions?

Insight 3: 

What level of daily selling pressure will result from the impending unlocks on the MINA token?

1. Primer on Mina Protocol

What is Mina Protocol?

Mina Protocol is a Layer 1 blockchain that uses zero-knowledge proofs (ZKP) to create a succinct blockchain, which is a blockchain that remains a constant size regardless of the number of transactions it processes.

This makes it the world's lightest blockchain, with a size of about 22KB, equivalent to a few tweets.

The native cryptocurrency of the Mina Protocol is the MINA token, which is used to execute network transactions.

The Origins of Mina Protocol

Mina Protocol was developed by O(1) Labs with the aim of making cryptocurrencies more user-friendly and accessible to all.

It was rebranded from the Coda Protocol in September 2020

What is a “succinct” blockchain?

A succinct blockchain is one whose verification complexity is largely independent of chain length, meaning that instead of retaining the entire chain, one merely holds onto the current state along with a proof that there exists a blockchain explaining the current state.

This approach significantly reduces the computational and storage requirements, making the blockchain more scalable and accessible.

The full node size of Ethereum is roughly 1310 GB for a GETH full sync using default settings. The Bitcoin full node size stands at about 522 GB, and it too is steadily growing as new transactions are recorded.

How does that work?

The Mina protocol utilizes zkSNARKs for state summaries within its fixed-size snapshots. The protocol separates block production from computing SNARK proofs, maintaining transaction speed through parallel scan state, which allows for network scalability.

Mina's ecosystem includes a marketplace called SNARKetplace, where block producers buy state transition proofs from SNARK workers, rewarding them with transaction fees.

The network comprises validator nodes, which validate transactions and create blocks, rewarded by stake weight and transaction fees; SNARK workers, who generate zk-SNARKs and compete for rewards in the SNARKetplace; and archive nodes, which maintain an accessible history of the blockchain.

In Mina, every participant effectively operates a full node, with the ability to independently verify transactions and the network state, thanks to the lightweight nature of recursive zk-SNARKs that ensure full-node security with minimal data and verification time.

Ledger Model and Consensus

The protocol uses an account-based model similar to Ethereum, and the specific PoS based consensus protocol used by Mina is called Ouroboros Samasika, which is based on Cardano's PoS Ouroboros.

What are the key differences between the consensus mechanism of Mina and Cardano?

The key differences lie in the way in which Mina's Ouroboros Samasika consensus mechanism resolves forks, in contrast to Cardano's Ouroboros Praos.

Cardano's mechanism relies on the history of the chain all the way back to the genesis block to resolve forks. This requires nodes to store and verify the entire transaction history, which can be resource-intensive and limit decentralization.

Mina's Ouroboros Samasika uses decentralized checkpointing to decide whether a fork is short-range or long-range when choosing between candidate chains.

A fork is short-range if it occurred within a recent number of blocks. Since Mina is a succinct blockchain, it relies on the history of the last few hundred blocks to resolve forks, with this information contained within the top block’s consensus data.

For long-range forks, Mina uses the critical window density value to allow the network to resolve the fork, selecting the chain with the higher minimum density.

The main innovation of Mina’s Ouroboros Samisika involves replacing long-range chain checking with a minimum-density function, or a single number that stands in for checking all the blocks on a chain. The minimum chain density of a valid chain will always be higher, leading any node to naturally follow the chain with the highest density, even if it isn’t the longest.

zkApps! What’s that?

Mina's smart contracts, referred to as zkApps, provide powerful and unique characteristics such as unlimited off-chain execution, privacy for private data inputs that are never seen by the blockchain, and the ability to write smart contracts in TypeScript.

These zkApps can privately interact with any website and access verified real-world data for use on-chain, without ever compromising the privacy of users.

Future of Mina

Mina Protocol's roadmap is divided into five tracks: Trust Minimization, ZK-Programmability, Settlement Layer Performance, Recursive Rollups (MinaVerse), and Road to DAOification.

Each track aims to enhance Mina's capabilities and make it the ultimate layer 1 blockchain. The roadmap is designed to be a starting point, with the intention to iterate on it with the Mina ecosystem in the coming months and years.

  • Trust Minimization: This track focuses on ensuring the Mina blockchain is sustainably and scalably decentralized.

  • ZK-Programmability: This track aims to build the best possible ZK-programmability layer on Mina with scalable verification and zero-knowledge privacy

  • Settlement Layer Performance: This track optimizes the performance of Mina’s latency, finality, and throughput.

  • Recursive Rollups (MinaVerse): This track pushes the boundaries of composability between platforms and enables applications and platforms to connect and build off each other on Mina

  • Road to DAOification: This track sets up a system of decision-making for Mina to function effectively and have a positive impact on the world

The roadmap provides a vision for the evolution of Mina Protocol over a multi-year period. It includes high-level tracks and detailed components for each track, aiming to make Mina more powerful for developers, both inside the current scope of Web3 and extending beyond to a world where cryptocurrency is part of the stack for every develop.

We've discussed the concepts extensively; now it's time to scrutinize the metrics.👇

1. Market Overview

Circulating Market Cap

This metric serves as an indicator for evaluating the asset's relative size in the broader cryptocurrency market.

Current value in USD: $585.7 million

90-Day Trend: +43%

Current value in BTC: 23,865 BTC

90-Day Trend: +22%

Daily Volume

The daily trading volume of a crypto asset indicates both market interest and market liquidity. Higher volume corresponds to lower volatility, and vice versa.

Current value: $28 million

What does this daily volume and size of the market cap mean?

With a market cap of $597 million, Mina is positioned as the 73rd largest cryptocurrency.

For context, Ethereum (ETH) has a market cap of $221 billion and a trading volume of $12 billion. Solana (SOL) has a market cap of $17.6 billion with a trading volume of $1.75 billion, while Cardano (ADA) has a market cap of $11.3 billion with a trading volume of $271 million.

Compared to these larger ecosystems, Mina's market presence is modest.

2. Supply and Demand

Token Inflation Rate

Inflation Rate's Significance

A high rate could dilute the token's worth, turning it into something less exciting. A low rate, however, could drive up both demand and price.

Current value: 11% Token Supply Growth

To provide context, the Mina token’s inflation rate is higher than Ethereum's (ETH) 0.37%, Solana's (SOL) 7.4%, and Cardano's (ADA) 2.9%. This points towards a rapid increase in Mina's token supply compared to the more conservative inflation policies of the other blockchains currently.

Here's a sneak peek into Mina's inflation targets👇

Annualized Fee Revenue

Annualized Fee Revenue serves as a gauge of the financial health of a protocol. Elevated revenue figures point to vibrant transactional activity within the network, whereas diminished numbers could hint at waning user engagement

Current value: $27,250

Supply/Demand (S/D) Ratio

The S/D ratio measures the network's financial balance. A ratio close to 1 indicates fee revenue and reward payouts are nearly equal.

A ratio below 1 suggests that more rewards are being paid out than fees are being earned.

Current value:

▪️ Annual Fee Revenue: $27,250

▪️ Rewards Per Year: $68.66 million

▪️ Ratio: 0.00040

Meaning, Inflation is outpacing Annual Fee Revenue demand by a factor of 2,495.

Valuation to Demand (V/D) Ratio

Here we are looking at the valuation-to-demand ratio. So what does it mean?

L1 token valuations hinge on anticipated network adoption levels. Market capitalization reflects the speculative premium for potential future use, while the past year's transaction fees denote current network demand.

Let's examine the ratio of current valuations to the last year's transaction fees to gauge market expectations.

Annualized Fee Revenue: $27,250

Current Market Cap: $585.7 million

That means, the market capitalization currently exceeds last year's total transaction fees by a factor of 22,018.

3. Security & Participation: Key Staking Metrics

Staking Ratio

Staking ratio can provide insights into the level of network participation among token holders, as well as the overall health and security of the network.

Current value: 99.12%

90-Day Trend: +1.2%

Mina has one of the highest Staking ratios in the whole blockchain Industry.

Mina also offers a "supercharged" rewards program for accounts that qualify, both for block producers and delegators. This program doubles the rewards for accounts that have non-time locked tokens. If an account stakes unlocked MINA tokens, it will receive doubled coinbase rewards.

Staking Market Cap

The staking market cap reflects the total value of staked tokens and indicates network security and participant commitment. A high staking market cap suggests a more secure and stable network.

Current value: $654.12 million

Note: Staking market cap surpasses circulating market cap as unlocked tokens are actively staked.

90 Day Trend:  +44%

Staking Wallets

The number of Staking Wallets indicates network participation and decentralization. A higher number suggests an active, engaged community, while a lower number might indicate centralized control or lesser community involvement.

Current value: 66,640

90-Day Trend: +4.62%

4. Reward Metrics

Reward Rate

It is the current annualized average reward rate across the network. This is the rate at which stakers can earn rewards for participating in network consensus and/or governance.

Current value: 10.5%

Reward Stability

This is computed by comparing the realized reward rate over the last 365 days to the expected reward rate 365 days ago.

Current value: 100%

Remember: this metric may not be that accurate as it is currently in beta by stakingrewards.com, and continuously being worked and improved upon to better the scoring framework.

5. Risk

Decentralization

A. Governance

Mina does have decentralized governance and on-chain voting. The Mina Improvement Proposal (MIP) process is the primary mechanism for proposing changes to the Mina Protocol.

Once a MIP has been finalized, it is put forward for a community vote.

Any Mina account can vote in two ways: using its tokens or delegating its tokens to another account that can vote on its behalf. An account that is not delegating can vote with their token balance, while an account that is delegating can choose to allow their delegatee to vote on their behalf.

B. Initial Token Distribution

While Cardano and Tezos earmarked 80% of tokens for public sale, Mina reserved a smaller share for public allocation, yet it remains more substantial than the allotments of protocols like Solana or Avalanche.

C. Network

At present, Mina has 402 active validators.

Fully Diluted Market Cap

The Fully Diluted Market Cap (FDV) indicates potential value dilution. If any tokens are set to enter circulation, this could exert downward pressure on the asset's price.

Current value: $646 million

The difference between the fully diluted and circulating market cap is approximately 7% of the circulating market cap.

Slashing

Mina has no slashing.

Upcoming Unlocks

Upcoming unlocks can influence the token’s price as large amounts of tokens might enter the market.

Here’s a concise overview of the ongoing and upcoming unlocks for Mina tokens👇

Based on the available information, there is theoretically a selling pressure of $170,000 for Mina tokens due to the ongoing unlocks.

6. Conclusion: Narrative vs. Metrics

Current Market Sentiment

In the cryptocurrency landscape, narratives often ignite interest, but the metrics illuminate the underlying truths and potential trajectories.

Limitations of Mina

Despite Mina Protocol's sleek blockchain approach, it shares similar throughput limitations with Bitcoin, managing only 22 transactions per second and requiring 15 confirmations for finality.

This places Mina's speed on par with Bitcoin, rather than ahead. However, advancements in zero-knowledge proofs could enhance Mina's efficiency. Ethereum's scalability plans also depend on such technological improvements, making Mina's bet on zk-technology a reasoned gamble.

Yet, this positions blockchains like Solana, which boast speed and cost-efficiency, to potentially overshadow Mina in market appeal while it works on scaling solutions.

Insight equates to strength, especially in the constantly shifting landscape of cryptocurrencies, where keeping abreast of developments is key.

We have curated a suite of vital tools to assist you in maneuvering the dense maze of blockchain statistics and insights.

🧰 Your Toolbox - to boost your token metrics research

  • minascan.io: Primary block explorer for Mina, essential for transaction and block activity insights.

  • Token Unlocks: This is a token analytics dashboard that provides comprehensive tokenomics data and monitors vested tokens.

  • Stakingrewards.com - Continues to be a valuable resource for staking metrics, including staking ratio and reward rates.

  • Tokenmetrics.com - One of the best sources of reliable on-chain metrics.

  • Remember: Cross-verify information, understand each metric, and stay updated with reliable sources. Especially researching outside the network’s databases to verify the numbers.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.

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