Mintlayer's blockchain structure and Proof of Stake (PoS)

Mintlayer adopts an innovative Proof of Stake (PoS) consensus protocol. Unlike Bitcoin's energy-intensive mining-based Proof of Work (PoW) system, the PoS model selects block producers based on the stake held by participants in the network. This fundamental difference not only ensures higher energy efficiency but also maintains network security. Block producers (referred to as staking pools) are selected to produce blocks through a probabilistic selection process, further enhancing the system's fairness and decentralization.

Mintlayer blockchain generates one block every 120 seconds, a carefully considered design choice. This frequency aims to create a predictable and stable block generation rate, ensuring that the network can scale efficiently while maintaining its security and decentralization features.

Verifiable Random Function (VRF) and Block Producer Selection

The selection of block producers is done through a verifiable random function (VRF), which is an encryption method that ensures the randomness and fairness of the selection process. Each pool generates a random number, and if this number is lower than a predetermined threshold, the pool is eligible to produce a block. This threshold is dynamic and based on network parameters and the pool's stake.

The VRF process aims to prevent manipulation and ensure that block producers cannot predict or control their likelihood of being selected. This randomness is crucial for maintaining the integrity and decentralization of the Mintlayer network, as it prevents a single entity from having disproportionate influence over the block production process.

Chain density method selects standardized chain

Mintlayer has introduced an innovative approach to selecting standard chains - the chain density method. Unlike traditional blockchains that typically choose the longest chain or the chain with the largest amount of work, Mintlayer focuses on the density of filled time slots within the chain.

In each time unit, the chain that produces the most blocks is considered the most reliable and becomes the canonical chain. This method is particularly effective in PoS systems as it not only encourages more efficient block production but also ensures network decentralization and resistance to manipulation.

Segregated Witness (SegWit) is used for signature management

Mintlayer uses a Segregated Witness (SegWit) system similar to Bitcoin to manage digital signatures in transactions. Segregated Witness is a method of separating transaction signatures from transaction data. In traditional systems, signatures are directly embedded in the transaction itself, but in the Mintlayer system, signatures are stored separately.

This isolation brings several advantages. First, it reduces the size of the transaction, thereby reducing costs and accelerating processing speed. Second, it enhances the flexibility of the system, making it possible to achieve more complex transaction structures without significantly increasing data loads. By adopting this approach, Mintlayer improves the scalability and efficiency of the network.

The encryption foundation of this system is built on the secp256k1 elliptic curve, which is the same encryption curve used by Bitcoin, ensuring compatibility and security. Mintlayer also integrates Schnorr signatures, which is a more efficient and privacy-preserving signature scheme with linear characteristics, making multi-signature transactions faster and more secure.

Staking pool and Nash equilibrium

The staking mechanism of Mintlayer is very important in its PoS consensus mechanism. Any user only needs to lock at least 40,000 ML tokens as collateral to create a staking pool. Once established, other users can delegate their tokens to the pool and receive rewards without running their own nodes.

The staking rewards are distributed according to a plan that decreases over time to incentivize early participation. For example, in the first year, each block generates 202 ML tokens, but this quantity gradually decreases over a period of 10 years.

To ensure network stability, Mintlayer applies the Nash equilibrium principle in its staking pool design. In essence, Nash equilibrium provides a theoretical framework under which, if other participants maintain their strategies, no participant can increase their rewards by changing their strategy. This is particularly important in PoS systems, as participants' stakes may fluctuate over time.

Mintlayer ensures that the total supply of ML tokens remains constant, allowing stakers to make decisions based on a fixed value without considering the changes in the total staked amount on the network. This provides greater predictability and stability, reducing the possibility of staking pool saturation or resource concentration in a few large pools.

The formula for calculating rewards ensures that a larger pool will not continue to accumulate rewards after reaching a certain size, known as saturation. Once a pool reaches saturation, additional delegations will no longer increase the pool's rewards, preventing centralization and encouraging staking power to be distributed among multiple pools.

Highlights

• Mintlayer uses a Proof of Stake (PoS) mechanism with a verifiable random function (VRF) to fairly select block producers.
• Block selection is based on chain density to ensure that the chain with the highest density is the main chain.
• Optimize transaction storage using Segregated Witness to separate signatures from data.
• The staking pool is at the core of the Mintlayer PoS system, rewarding based on the amount of staked ML tokens.
• Nash equilibrium is used to maintain balance and prevent centralization of the staking pool.