Investing in Mintlayer

Sky Ventures
5 min readApr 2, 2021

The latest addition to Sky Ventures Portfolio is Mintlayer. We want to discuss the reasons for our investment in Mintlayer.

Mintlayer is a long-term, secure solution for scaling and accelerating the future of decentralized finance.

Decentralized Finance:

Decentralized finance is a form of finance that does not depend on central financial systems and methods such as brokerages, exchanges, or banks to offer Lending, Insurance, LP’s and utilizes smart contracts on blockchains, the most common being Ethereum.

DEFI has shown tremendous growth over the last 12 months and the total volume locked in DEFI reached 37.46 billion dollars in volume.

Source: Defi Pulse

Network Congestion and lack of Long Term Sustainability:

Over 90 percent of Defi applications were built on Ethereum Network. Due to the rise of Defi over the past 12 months, more users interact with the protocol built on the network, and it caused severe network congestion issues. As the network is congested, transaction speed decreases and transaction fees are spiked to enormous levels.

Ethereum Average Transaction Fee

Transaction Fees spiked a lot in recent times on the ethereum network. A lot of retail investors are facing severe issues while interacting with protocols built on the Ethereum network. The lack of future-proof sustainability and long-term plans for scalability, combined with a complex technical architecture, make Ethereum an unsuitable long-term solution for truly decentralized finance.

Why Mintlayer?

Mintlayer’s protocol eliminates Ethereum’s flaws and enhances its features on the Bitcoin infrastructure.

Mintlayer’s vision is to create a long-term sustainable network for decentralized finance leveraging a Bitcoin security model.

Mintlayer block is a reference to bitcoin block. Every mintlayer round comprises 1008 bitcoin blocks where a Participant can create chain blocks.

To be a Participant, a user needs to run a node and stake enough MLT tokens(40000) to pass a minimum threshold level. An algorithm automatically enforces an election for a user to become a participant: the higher your stake, the more your chances. The selection mechanism uses hashes of the Bitcoin blocks as a randomization source to ensure an unbiased selection of the participants and randomly establish the order they will follow to create and validate blocks, thus fulfilling the concept of Decentralization.

Mintlayer Architecture

Mintlayer Wallet:

Mintlayer wallet enables users to interact with Defi protocols, store assets, etc. There are two versions released for desktop and mobile users in Full node and Light node.

The light node version comprises storing and transferring assets on MLT Blockchain, peer to peer exchange of MLT Blockchain assets using atomic swap dex.

The full node comprises staking MILT tokens to be a participant of the Network, create customized smart contracts, connect to multiple oracles for data query to facilitate dex transactions.

Decentralized Exchanges on Mintlayer:

A Dex comprises two components, a messaging system and a trading engine. A messaging system on the Ethereum network is mostly Ox protocol and is prone to vector attacks, and a trading engine is a smart contract.

Mintlayer users and developers can choose between various types of dex transactions based on their need for decentralization, security, and censorship.

1)Atomic Swap Dex:

Atomic swap plays the role of smart contract ad does not rely on any messaging system. Users can exchange any order intentions through any mode of communication. Atomic swap dex is the best choice for OTC Deals as both parties to already be in contact and agree on the pair exchange details.

2)DHT Multi Parity Swaps:

Atomic Swap still plays the role of a trading engine, and it enables a peer-to-peer communication system that allows swaps between two unknown entities with no prior contact. The orders broadcasted from the peers are stored by the nodes in a decentralized manner using a distributed hash table (DHT). Every full node can activate the DHT-DEX functionality: nodes are free to sync the full DHT, prune it, start partial sync only when they are online (starting from the most recent orders), or not sync at all. Once activated, the node starts syncing the Distributed Hash Table of orders from the peers.

3)Observer of multiparty swaps:

There are few drawbacks to the DHT Messaging system, like the slowness of transactions, heavy resource-draining for mobile app users, spam attacks in fake orders, etc. Observers overcame the drawbacks of the DHT messaging system in Observer of Multi Parity Swaps. Specialized nodes can intermediate the messaging system. Nodes can subscribe to the “observer” services, which act as the quality guarantee to its subscribers.

4)Book aggregators for multiparty swaps:

Another solution to avoid the drawbacks of a DHT constructed in a peer-to-peer way is to trust special node relayers that act as book aggregators and store the DHT on behalf of the users. It helps light node users as they cannot have time and resources to sync many megabytes of orders or sort and filter them.

5)Programmable Pool DEX

The programmable pool dex offers less privacy but more efficient than atomic swaps. Participants in the pool will provide the address of their assets when submitting an order and use the order pool parameter in the order package.

6) Lightning Network DEX

Order packages are integrated into Mint Layer wallet to trigger Lightning Network transactions. When a user wants to execute the trade, the wallet recognizes the Lightning Network swap’s specific request by the parameter lightningSwap. It also automatically produces the payment invoices and HTLC transactions according to that order request.

MLT Token:

MLT serves as a utility purpose in the ecosystem. MLT tokens are staked to be a participant. MLT token allows its holders to express their opinion regarding the network’s development to encourage community-driven protocol. Users can help to prioritize roadmap events, suggest features, and more. MLT tokens can be used to pay network fees and issuance fees when creating tokens on Mintlayer.

MLT Farming:

  • In the first ten years since the main net launch, each Mintlayer the block will generate a reward for the block creators until the total supply reaches the 600,000,000 MLT hard cap.
  • Newly generated tokens are collected by network participants staking a minimum of 40,000 MLT tokens, following the Mintlayer consensus rules.
  • Long-term believers will benefit from the project’s commitment because the longer they participate in staking, the more MLT tokens they receive.

The initial unlocked token supply is 34,450,000 MLT at the Token Generation Event.

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