Mineral & $MNER White Paper
Asset Overview
What it Mineral
Mineral is a project utilizing BTC Layer 1 for issuing inscription assets and BTC Layer 2 for DeFi applications. Mineral itself is a Layer 1 inscription, while $MNER is a Layer 2 treasury token. It's the first project of its kind that is supported by BTC hash power using BRC420/BRC20 RWA inscriptions. The project aims to continuously distribute earnings to users by increasing the treasury's RWA holdings. With a focus on a virtuous flywheel in the DeFi space with sustainable yield incentives, it introduces a new paradigm for Decentralized Finance with an emphasis on composability and injecting foundational yield-generating assets into the DeFi sector.
Mineral & $MNER
Mineral: The first batch of Blue Mineral which is a BRC-420 inscription was fairly launched on December 31, 2023, with a total of 40,000 pieces and a royalty price of 0.0012345 BTC.Moreover,Blue Mineral will never issue additional tokens.
$MNER: $MNER is a treasury token which is a BRC-20 inscription, with a total minting volume of 21 billion pieces. $MNER is issued and released based on the minting volume of Blue Mineral at a fixed ratio of 1:100 (Blue Mineral: $MNER). The minting ratio of $MNER for subsequent batches of Mineral will be adjusted based on the royalty price of Blue Mineral.
Mineral of subsequent tranches
The treasury mechanism on Layer 2 facilitates the sale of $MNER tokens, enabling the acquisition of additional Real World Assets (RWAs). This foundation of increasingRWAs allows for the introduction of more Mineral batches with unique colors, specifications, and combinations. The pricing of these subsequent Minerals will be determined by the treasury's requirements for new RWAs, ensuring each batch has a distinct icon and name to prevent duplication. This pricing strategy aims to optimize the acquisition of RWAs without market manipulation, adjusting the release ratio of $MNER based on the royalty price of new Minerals compared to the original Blue Mineral. The purpose of this pricing strategy is to minimize the wear on royalty UTXOs while maximizing the acquisition of Real World Assets (RWAs). For instance, if the next batch of X Mineral is priced at 10 times the royalty of Blue Mineral, the release ratio for $MNER would be adjusted to 1:1000. This approach ensures a sustainable expansion of the project's asset base without the need to manipulate the market.
The Highlights
Since its inception, Bitcoin has led the cryptocurrency market cap, solidifying its position further with the approval of Bitcoin ETFs, thus becoming a liquidity gateway for traditional finance into Web3. Before the emergence of Ordinals and Bitcoin Layer 2 protocols, Bitcoin primarily served as digital gold and a store of value. The introduction of inscriptions as an asset issuance instrument on Bitcoin's Layer 2 has expanded its ecosystem, making it a central narrative in the upcoming bull market. This development underscores the principle where there is money; people, liquidity, and applications will follow.
Mineral is the first project to issue Real World Asset (RWA) inscriptions on BRC420 and the first Bitcoin native DeFI project incorporating mining RWA to be deployed on the Merlin Chain (BTC Layer 2). Mineral distinguishes itself from many DeFi 1.0 projects that rely on liquidity locking practices and unsustainable subsidization akin to Ponzi schemes. We diverge from unsustainable DEFI 1.0 practices by integrating intrinsic value from mining and combining mechanisms from Blast and OHM to create a sustainable yield-generating DEFI model. The team envisions Bitcoin Layer 2 as the foundation for a DEFI renaissance, boasting strong composability and ZKEVM compatibility on Merlin Chain and enhancing Bitcoin's liquidity and fostering a tight-knit community between ecosystems. This approach potentially allows for greater spill-over into other Layer 2s or back to Layer 1, expanding the impact and reach of the DEFI applications built on Bitcoin's Layer 2.
Mineral DEFI ecosystem employs a unique treasury design using the $MNER token to shore up its holdings of Real-World Assets (RWAs). This design not only enhances $MNER's yield-generating potential but also offers vast possibilities for cross-project collaboration due to its composability. The DEFI flywheel design of Mineral and $MNER breaks down into several components, aiming to create a robust and sustainable model for growth and interaction within the ecosystem.
- Strong correlation between the price of Bitcoin mining server and BTC: Due to the high correlation between the prices of mining servers and Bitcoin's price, integrating the external yield from mining into the economy for timely distribution enhances the investment value and directly benefits stakers. This approach allows stakers to potentially double their exposure to Bitcoin gains on a single unit of investment. Bitcoin serves as the market's benchmark in the cryptocurrency industry, making this strategy particularly effective for investors seeking direct benefits from Bitcoin's potential appreciation. Compared to cloud mining, mining company stocks, or direct mining server purchases: Mineral offers greater transparency (through observer links which are uncommon), more immediate profit distribution (distributed yields can be claimed at anytime), a variety of DeFi interaction options (multiple mining strategies), and superior liquidity in secondary trading; potentially exceeding the market pricing of traditional mining product.
- Sustainable Growth through the Treasury’s Flywheel: The project facilitates sustainable growth of the treasury's Total Value Locked (TVL) by distributing BTC profits and $MNER token incentives to $MNER stakers, along with offering high APY and low initial circulation to kickstart the first round of $MNER activation. The high demand for APY encourages the facilitationof $MNER spot sales and futures; funding the acquisition of a new batch of mining servers (RWAs). This approach creates support for high APY over a long period of time. This cycle creates a flywheel effect: the majority of profits from new mining machines are allocated to $MNER stakers. This strategy significantly boosts the underlying value of $MNER's. The treasury employs dynamic strategies for the sale of $MNER, adjusting the volume sold based on market supply and demand to optimize its economic impact.
- Cross-project collaboration commitment: Mineral facilitates intermittent collaborations within the Merlin Chain ecosystem and with other Layer 2, EVM-compatible, and Layer 1 projects. This opens a channel for investors to gain additional returns beyond mining: offering broader access to the crypto economy and enabling multi-faceted mining opportunities. Announced collaborations include Merlin Chain's Restaking, Merlin Swap's transaction rebates and trade mining. More partnerships are expected in the future; enhancing the project's scope and benefits for participants.
- Strong DEFI interoperability: Mineral and $MNER's yield-generating features are highly valued in the DEFI sector, partly due to the scarcity of such assets. Industry giants such as Maker Dao holds $1.2 billion in U.S. Treasuries and BlackRock has invested in four top North American Bitcoin mining companies. As the U.S. enters a period of lower interest rates; leading to reduced Treasury yields, the demand for alternative yield-generating assets is expected to rise significantly. This demand, coupled with ETF approvals, suggests a strong market appetite for Bitcoin-based yield assets, surpassing even that for Ethereum's staking derivatives, LSD. It is believed that the demand for Bitcoin's native yield-generating assets will be substantial, whether from the DeFi sector or newly entered traditional financial institutions (TradFi). Mineral's design supports restaking mechanisms, potentially fulfilling this substantial market need. Partnerships are already underway in this direction.
Lock, Stake, and Restake
stMineral
stMineral: Lock and stake your Mineral to receive stMineral. Staking periods vary (30, 180, 360 days), with different boosts depending on the duration.
stMNER
stMNER: Lock and stake your $MNER to receive stMNER. Staking periods vary (30, 180, 360 days), with different boosts depending on the duration.
Both stMineral and stMNER stakers have the opportunity to re-stake in other DeFi reward pools. Merlin's Mtoken can also be restaked in the Mineral L2 protocol. For details on cross-project collaboration and re-staking methods, please refer to the official announcements. For example, staking Blue Mineral in Merlin's Seal earns M-Mineral, which can then be restaked to receive the same BTC and $MNER rewards as ST-Mineral. M-Mineral holders can choose from three lock-up periods, each offering a different amount of stM-Mineral, just as Mineral staker. However, it's important to wait for stMineral to unlock before reclaiming M-Mineral.
Model and Flywheel
- Sell the first batch of BRC420 Mineral inscriptions to collect royalties and deploy BTC mining servers.
- Initiate staking for Mineral
- Conduct the first treasury spot sale of $MNER, approximately 5% of the total released $MNER in the first batch.
- Initiate staking for $MNER. Both staked Mineral and staked $MNER could earn respective staking rewards.
- Intermittently sell $MNER futures (released over 2 weeks) to fund further mining servers purchases, minting the next batch of Mineral held by the treasury.
- Release $MNER in proportion with the new batch of Minerals, deploying new mining servers to inject mining rewards into the pool.
- Repeat the above cycle.
- Engage in cross-project restaking and other collaborations.
- After the Treasury's RWA and yield reach a certain volume, we will consider adding more functionalities, including but not limited to DEX, vault, lending, and over-collateralized stablecoins, among others.
* Mner Club Foundation will intermittently buy back Blue Mineral.
- Notes：
- Initially minted $MNER will be locked, released in proportions after each batch of Mineral is minted, with no other unlocking mechanisms.
- Of the $MNERs released per batch, 10% are allocated to the team (with a 6-month lock-up period), and 20% go to the Mner Club Foundation; supporting cross-project collaboration, incentives, buybacks, listing, market making, and financing to strengthen the ecosystem.
- $MNER holders mayhave voting rights. The Mner Club Foundation will periodically propose distributions for mining and project earnings and adjusting allocations based on community feedback. Details are yet to be finalized, but the aim is to better balance the interests of all parties involved. However, it is confirmed that adjustments will only be made for future batches, and the distribution ratios for batches sold in the past will remain unchanged.
- As different batches of RWA are acquired, Minerals and $MNERs released with each RWA batch are not bound to individual mining servers. Distribution is based on the percentage of total hash power.
- Subsequent batches of Minerals are mainly vouchers for treasury to purchase new RWA, held 100% by the treasury, not sold publicly, not involved in staking, with profits distributed to Blue Mineral and $MNER stakers in specific manners.
Reward & Distribution
stMineral reward overview
stMineral staker will receive
- BTC mining net yield. (Refer to the economic model diagram for a quantitative example).
- 1 % released $MNER .(Conditions for distribution may vary according to each batch of announcement.)
- Cross-project collaboration benefits.
- Cross-ecosystem exclusive benefits.
- 100% Merlin Grants benefits.
- Investment boost for the first batch of $MNER spot sales.
stMineral reward distribution mechanism
1. 40% BTC mining net yield based on first batch total hashrate：
- Earnings are derived from the first batch's hash power, based on the hash power of the first batch compared to the total of different batches. Then we allocate 40% of it to the stMineral staking pool.
- The net yield will be further distributed to stakers in proportion to their share in the staking pool.
- Distribution occurs on a T+1 daily basis. Once eligible, you can claim your rewards. Unclaimed net yield will be held in reserve.
2. 1 % released $MNER allocation
- The stMineral staking pool is eligible for a total of 40k $MNER rewards from the first batch.
- The $MNER will be further distributed to stakers in proportion to their share in the staking pool.
- Rewards are injected into the reward pool daily during your lock-up and holding period. Once eligible, you can claim your rewards. Unclaimed $MNER will be held in reserve.
- The allocation ratio for subsequently released $MNER will be dynamically adjusted based on market conditions, and announcements will be made in advance.
*Based on the aforementioned situation D, the allocation of subsequently released $MNER:
- The $MNER will be further distributed to stakers in proportion to their share in the staking pool.
- Rewards are injected into the reward pool daily during your lock-up and holding period. Once eligible, you can claim your rewards. Unclaimed $MNER will be held in reserve.
- The quantity of newly released $MNER is determined by comparing the royalties of the new batch of Mineral versus the royalty of Blue Mineral.
3. Cross-project collaboration benefits may vary with each activity's mechanism. For detailed information, please refer to the specifics of each event.
Given the characteristics of Mineral as a first-layer inscription asset, it will secure benefits from first-layer collaboration projects in the future. These specifics will vary based on the unique aspects of different collaborative projects and the requirements of both first and second-layer users. Airdrops already issued include $voya, $merl, and Rune Stone.
- We will first determine whether the cross-project benefits are fungible or non-fungible tokens. If they are fungible, then most of those earnings will be injected into the Mineral reward pool.
- The benefits will be further distributed to stakers in proportion to their share in the staking pool.
- The distribution period and whether unclaimed earnings are held in reserve will be determined based on individual circumstances.
- The distribution of non-fungible tokens (NFTs) and other types of collaborative efforts will be announced based on specific circumstances.
4. In the future, Mineral plans to deploy on multiple chains. With each new chain deployment, we will offer exclusive incentives and airdrops to Blue Mineral stakers to varying degrees.
5. Mineral achieved second place in the competition of staking ranking at Merlin Seal. In future collaborations with Merlin, the Merlin Grants obtained will be given entirely to Mineral stakers. Please wait for the official announcement from Merlin for the specific Merlin Grants rules. (The future TVL and number of users of Mineral and MNER will be important criteria for the Grants evaluation.)
stMNER
stMNER staker will receive
- BTC ming net yield. (Refer to the economic model diagram for a quantitative example).
- 20 % released $MNER.
- Cross-project collaboration benefits.
stMNER reward distribution mechanism
Since $MNER is fungible across different batches, the rewards for the first and subsequent batches are as follows:
- 60% BTC mining net yield based on first batch total hashrate
- Earnings are derived from the first batch's hash power, based on the hash power of the first batch compared to the total of different batches. Then we will allocate 60% of it to the stMNER staking pool.
- The net yield will be further distributed to stakers in proportion to their share in the staking pool.
- Distribution occurs on a T+1 daily basis. Once eligible, you can claim your rewards. Unclaimed net yield will be held in reserve.
- 100% of the BTC mining net yield from the acquired hashrate of subsequent batches.
- The net yield will be further distributed to stakers in proportion to their share in the staking pool.
- Distribution occurs on a T+1 daily basis. Once eligible, you can claim your rewards. Unclaimed net yield will be reserved.
- 20 % released $MNER
- The stMNER staking pool is eligible for a total of 800k $MNER rewards from the first batch.
- The $MNER will be further distributed to stakers in proportion to their share in the staking pool.
- Rewards are injected into the reward pool daily during your lock-up and holding period. Once eligible, you can claim your rewards. Unclaimed $MNER will be held in reserve.
- Cross-project collaboration benefits may vary with each activity's mechanism. For detailed information, please refer to the specifics of each event.
- We will first determine whether the cross-project benefits are fungible or non-fungible tokens. If they are fungible, those earnings will be injected into the $MNER reward pool.
- The benefits will be further distributed to stakers in proportion to their share in the staking pool.
- The distribution period and whether unclaimed earnings are held in reserve will be determined based on individual circumstances.
- The distribution of non-fungible tokens (NFTs) and other types of collaborative efforts will be announced based on specific circumstances.
- In the future, $MNER will gain profits from second-layer collaborators. These specifics will vary based on the unique aspects of different collaborative projects and the requirements of both first and second-layer users.
Lock, Stake , and Booster
Between the final states of Mineral & $MNER and stMineral & stMNER, there are two processes that can yield rewards for holders: locking and staking. We will elaborate on these processes using Mineral and $MNER and the various types of rewards involved.
Lock
Locking Mineral/$MNER, up to the amount held. The lock-up period affects the amount of stMineral / stMNER one can receive: the longer the lock-up period, the more stMineral / stMNER is obtained. We elaborate the rules as chart below:
| Mineral Locking Duration | 30Days | 180 Days | 360 Days |
|---|---|---|---|
| stMineral Amount | 1 | 6 | 1 2 |
| $MNER Locking Duration | 30Days | 180 Days | 360 Days |
| stMNER Amount | 1 | 6 | 1 2 |
When the lock-up period ends, the protocol does not automatically redeem your assets. You will need to manually make the redemption in order to reclaim the original amount of Mineral or $MNER the corresponding st tokens will be burnt. Upon unlocking the $MNER and Mineral, staking automatically ends.
When the unlock date arrives but you have not manually redeemed yet, your held stMineral/stMNER remains in a locked state. However, the protocol will no longer distribute rewards to these stMineral/stMNERs.
Stake
To obtain specific rewards, you need to stake stMineral or stMNER. Generally, each stMineral or stMNER represents one unit of stake. Rewards are distributed based on the proportion of one's stake in a specific staking pool compared to the total stakes of that pool. Each type of reward is based on different categories of staking pools, whether for stMineral or stMNER.
For example, Amy, Bob, and Cathy each lock a Mineral for 30, 180, and 360 days, receiving 1, 6, and 12 stMinerals respectively. If they stake all their stMinerals, the total staking power in the pool is 19 (12+6+1). Amy's staking power percentage is 1/19, Bob's is 6/19, and Cathy's is 12/19. These percentages are used for reward distribution and are calculated at 24:00 (UTC+8) the day before the rewards are distributed. In another example, if we plan to distribute rewards on March 2nd, we will capture the percentage of stakes at 24:00 (UTC+8) on March 1st.
APY Abstract
The yield allocation is calculated every day at 24:00 (UTC+8), the day before the rewards is distributed. The reward will be claimable on a daily basis (T+1). The unclaimed rewards will be reserved and could be claimed anytime in the future.
APY is calculated as the formula below on a daily basis.
Mineral
a: BTC mining net yield.
b’: $MNER market price.
c: The amount of $MNER allocated to stMineral
d: Price of Mineral on L2
e: The amount of staked M-Mineral under different locking periods.
g: Cross-project token allocation
f: Allocation percentage to different locking periods.
n: The duration in days employed for yield computation.
The unit of APY is in %.
$MNER
a: BTC mining net yield.
b: Average sale price of Treasury $MNER.
b’: $MNER market price.
c: The amount of $MNER allocated to stMNER
e: The amount of staked $MNER under different locking periods.
g: Cross-project token allocation
f: Allocation percentage to different locking periods.
n: The duration in days employed for yield computation.
The unit of APY is in %
RWA — Value Net yield
BTC mining yield comes from two sources: block rewards and transaction fees, collectively known as gross yield. Mining costs include electricity and maintenance expenses. Stakers will receive net yield after deducting such costs. Currently, in North America, the cost of electricity plus maintenance is over 7.5 cents, while the first batch of Mineral's servers operates at around 6 cents.Operational cost is not the only consideration in the BTC mining landscape; it's influenced by a complex mix of factors including political climate, wars, business environment, and operational support. This means future operations may be set up in regions with relatively higher electricity and maintenance costs.
Net yield = gross yield – electricity costs – facility management fees and operational/issuance costs.
Mining servers are production tools and as such, have value not only in the BTC that they mine but are assets in their own right with their price highly correlated to BTC's price, sometimes even exceeding BTC's capital appreciation during bull markets. You can observe this phenomenon through the BTC hashrate index charts(from Hashrate Index), which illustrate the relationship between mining server values and BTC prices.
The mining server that Mineral first adopted is Antminer s19XP which is competitive in the industry. Of course, we will not be constraintedto such series and will dynamically determine the most appropriate modelin the subsequent RWA purchases.
Collaboration benefits
Cross-project benefits include, but are not limited to: token swaps, restaking, and airdrops. The initial collaboration with Merlin's M token will take the form of restaking, and Merlin Swap will offer transaction rebates and transaction mining. Efforts will be made to promote cross-project collaborations between Mineral and high-quality projects, aiming to capture more value for the ecosystem.
How to acquire $MNER
1. By locking and staking Mineral, you will receive $MNER from the rewarding pool, which is linearly released and accounts for 1% of the released $MNER in the first batch.
2.Treasury spot $MNER sale
For details on the sales mechanism, please refer to the launchpad page on the Mineral official website.
3.Treasury $MNER futures contract sale
The treasury will intermittently sell $MNER futures contracts to meet market demand for $MNER and replenish the treasury, using the proceeds to purchase new batches of RWA assets. $MNER futures contracts are named because they cannot be settled and distributed to buyers immediately after purchase. In fact, the future contract requires a 14-day waiting period before distributing $MNER to the buyers' wallets, making them eligible for staking. Therefore, futures contract will have a 2% discount on the selling price compared to spot prices. For the basis of the spot price, we will adopt the average spot transaction price three days before the futures start selling.
To incentivize M-Mineral stakers, any address holding stMineral that participates in the $MNER futures contract sale will enjoy an additional 2% discount on the selling price. Details are as follows in the table below:
| Spot Price | Futures Contract Discount | stMineral Exclusive Discount | Final Price of $MNER Futures Contract | |
|---|---|---|---|---|
| Non stMineral Holder | average spot transaction price three days before the futures start selling (a) | 2% off | NA | a* 0.98 |
| stMineral Holder | average spot transaction price three days before the futures start selling (a) | 2% off | 2% off | a *0.98 * 0.98 |