Why we invested in Mina Protocol

The Mina Ecosystem recently raised $92m through strategic and private sales of MINA and we have since doubled down in this round which was led by FTX Ventures and Three Arrows Capital. The funds will be deployed to accelerate Mina’s adoption as the leading zero-knowledge platform within Web3 by attracting world-class developers. Our first investment in Mina was made in 2020 and since then we strongly believe and support their vision to bring zero knowledge technology to Web 3.0.

Read on to find out more about on why we invested in Mina

Inherent issues in legacy blockchains

We have noted that one of the biggest limitations that most layer 1 blockchains face is that it is expensive and cumbersome for users to fully access them directly without intermediaries due to their data-heavy nature. Additionally, the resource-intensive requirements prevent most users from full decentralized participation especially as throughputs increase. Nodes are currently required to download the entire chain in order to participate in consensus. Without expensive hardware, this is not feasible at all for most average users. Finally, because all transactions and data are on-chain and public, it is hard to enforce privacy and verifiability at the same time.

For instance, Bitcoin’s blockchain is currently over 380 GB and a new member of the network must verify over 700,000,000 transactions in order to have full-node security. This problem is also exacerbated in other cryptocurrencies, which claim to have 10x-100,000x the transaction throughput of Bitcoin, and therefore generate gigabytes or terabytes of data every week under peak loads. Data evidence reveals that the growth of full nodes for cryptocurrencies like Bitcoin and Ethereum has slowed significantly despite its increasing popularity over time.

Privacy is also a separate issue that most web users face currently. The centralized nature of Web 2.0 resulted in the concentration of data in the hands of globalized entities such as Facebook and Google. Think about it — whenever you sign up for a new email, you have to hand over personal data such as your name, age, contact details. When you browse around on Facebook, often enough results in personalized ads related to your browsing history. How many times have you handed over credit card details in order to either pay for something or prove that you can pay for it? This could be problematic when these global entities do not know how to effectively use our data or even worse — lose our data when a hack or leakage occurs.

Mina seeks to resolve the above issues by utilizing zero knowledge technology and empowering users with control over their own data privacy. Unlike most blockchains, Mina’s capacity remains a constant size of 22 kilobytes regardless of the number of transactions made on it, allowing anyone with a smart phone to run a full node on it. This world-first privacy-preserving innovation would enable true scalability and decentralization as anyone can operate a node to help secure its network without needing complex computer hardware.

Introducing Mina’s technology

Mina’s technology can be explained with Zero-Knowledge Succinct Non-Interactive Argument of Knowledge (zk-SNARK), a lightweight digital snapshot of the entire blockchain that can verify validity without disclosing the information. This technology is exciting because from a theoretical standpoint, we are able to solve the blockchain scalability trilemma — a belief that decentralized networks can only provide two of three benefits at any given time with regards to decentralization, security, and scalability.

It is important to first understand the concept of Zero-Knowledge Proof — a method in which individuals can prove to another person that they know a specific value without divulging any other information in the process.

How is this possible? We can illustrate zero knowledge proofs with an example with “Where’s Waldo” game. Each page is a large complicated illustration, and somewhere in it there is a small picture of Waldo, in his sweater and hat, and the reader is invited to find him. Imagine that you want to be able to prove that Waldo is in the image, without showing where. Take a large sheet of cardboard, cut a Waldo-sized hole, and overlap it on the “Where’s Waldo” image, so that Waldo shows through the hole. Now we are able to prove that we know exactly where Waldo is, but there is no context to show where.

Going back to zk-SNARK, Succinct means that the size of the proof is small at a few kilobytes and is easy to verify whole. Non-Interactive means there is no need for a back-and-forth communication between the evidence provider and verifier. In summary, when a new block in Mina is created, it takes a snapshot of itself — with the snapshot of the prior state of the blockchain as the background. That new snapshot will in turn be used as the backdrop for the next block, and the cycle continues.

The Mina Protocol uses a proof-of-stake consensus mechanism named Ouroboros Samasika. The network is made up of the following two key actors which takes place on a platform called Snarketplace. The mutually beneficial relationship between the two actors can explain the economics of the protocol and how it is self-sustainable.

Block producers: They are responsible for validating transactions and including them in blocks. There is no limit to the number of producers with the chance of producing a block proportional to the funds staked. Additionally, the funds are not locked and are not subjected to slashing. When the producers are including a new block, they must also include a zk-SNARK. For instance, if a block producer wants to create five blocks, they must find SNARKs for those five transactions.

Snarkers: They are responsible for producing zk-SNARK to verify transactions. The snarkers aim to sell their zk-SNARK to block producers with competitive bids. The block producer will pay the snarkers out of the coinbase reward and transaction fees that they earned.

Mina’s zk-SNARK-powered smart contracts are called zkApps (“zero knowledge apps”) which uses an off-chain execution and mostly off-chain state model. Notably, zkApps only incurs a flat fee to send zero-knowledge proof to the chains unlike most blockchains which uses a gas-fee based model.

Some use cases

Secure login: Imagine being able to access any internet website or service privately without creating an account, handing over personal data at the risk of leakage or compromise. Developers across chains can integrate this private, secure option into their services and users can create zkApps-based accounts on Mina using their email. In turn, the zkApp is able to verify with any websites/services that the user owns the underlying email without revealing the actual address.

Defi: Teller Finance — a credit risk platform, has built a zkSapp on Mina which can privately prove that a user has a credit score of more than 700. Users generate a zero-knowledge proof that proves their credit score which is sent to Teller Finance via an encrypted transaction. Users do not need to reveal their underlying credit score or social security number thanks to zk-SNARKs. This is an unprecedented breakthrough that allows more data privacy and opens up more possibilities for unsecured lending in the Defi space.

Strong growing community

Mina has built a strong community of people with a passion for decentralized blockchain. Their growing 300,000+ follower base across Twitter, Discord, Telegram, Reddit etc. not only has regular engagements but also multiple volunteer open-source collaborations such as MinaResearch. Mina also has an impressive lineup of founding Genesis Block Producers including Bison Trails and Figment Networks. Their workshops and bootcamps for participants to learn about building zkApps have consistently attracted overwhelming interest. Additionally, top participants have been rewarded with The zkApps Builder Program which give them resources to launch their own zkApps application. The community will continue to grow in the near future as a $1.2 million grant had been awarded to =nil; Foundation to implement a bridge between Mina with Ethereum. The possibility of Ethereum-based applications accessing the Mina protocol in the future will bring more widespread attention to the benefit of zk-SNARK.

Stellar team and investors network

Mina Protocol was created by O(1) Labs, founded by Evan Shapiro and Izaak Meckler in 2017 after recognizing the holes in the design of legacy blockchains like Bitcoin and Ethereum. Both founders have backgrounds in computer science and cryptography research. Mina Protocol is supported by a public benefit corporation, Mina Foundation — through issuing grants to significant third-party contributors. Prominent board members include Former Executive Director at ZCash Foundation Josh Cincinnati, Principal of Slow Ventures Jill Carlson. Besides Bixin Ventures, other leading investors include Three Arrows Capital, Coinbase Ventures, General Catalyst and more.

Disclaimer: The information and publication are not intended to be and do not constitute financial advice, investment advice. Bixin Ventures has been an active investor in Mina Protocol since 2020.

Written By Mustafa Yilham & Jermaine Wong