ExSat: Annualized return of 133% Breaking through the boundary of Bitcoin

Written by: Jesse, core contributor of Biteye

With Trump's victory in the election, investors expect the new pro-cryptocurrency government to issue more policies that are conducive to the development of the cryptocurrency industry, and Bitcoin has also set a record for the largest monthly increase in history, approaching $100,000. Bitcoin's position in the traditional financial market is becoming more and more important, and funds are continuously flowing into Bitcoin ETFs, making Bitcoin the seventh largest asset in the world with a total market value of $2.6 trillion. If Trump fulfills his promise to use Bitcoin as a national reserve after taking office, we will see countries scrambling to buy Bitcoin. By then, the total market value of Bitcoin is expected to exceed that of Apple, the world's largest company by market value, and challenge the reserve status of gold.

On the other hand, due to the limitation of scalability, Bitcoin has only been used as a value store for a long time, and the mainnet Bitcoin cannot generate interest in the DeFi protocol like Ethereum. At present, Bitcoin's TVL is only 6.56% of ETH. If it reaches the same TVL as Ethereum, Bitcoin's TVL still has 15 times the space, an incremental market of more than $60 billion. Not to mention that Bitcoin's total market value is 4.5 times that of Ethereum. Therefore, L2 built around Bitcoin has achieved explosive growth this year.

The Bitcoin ecosystem is undergoing a profound paradigm shift, showing a multi-dimensional development trend. Expanding from a single-asset economy to a multi-asset economy (introducing diversified assets through tokenization, such as NFTs, stablecoins, and protocol tokens); transforming from a value storage role to a value creation engine (realizing the application of Bitcoin in DeFi, using NFTs to promote the marketization of digital and physical assets); upgrading from a payment intermediary to a decentralized value network (through Bitcoin's on-chain data and its extension technologies, such as the Lightning Network and cross-chain protocols, Bitcoin is becoming the core infrastructure of the value Internet, supporting more efficient and secure value exchange and transmission). This transformation has made Bitcoin no longer just defined as a carrier of value, but also an important cornerstone of innovation and economic growth, bringing unprecedented opportunities to the blockchain industry.

However, Bitcoin's inherent limitations, such as no smart contract function, trustless cross-chain, high transaction fees, network congestion, and confirmation delays, have always restricted the development of the Bitcoin ecosystem. The construction of numerous Bitcoin L2s has further fragmented liquidity. In addition, the security of the new Bitcoin L2 also needs to be tested by the market.

Against the backdrop of huge market demand and painful pain points, exSat, supported by EOS Network, came into being and embarked on an innovative development path. exSat aims to break through the limitations of Bitcoin, become the docking layer for Bitcoin scalability, connect closed blockchain islands, and create a more interconnected, efficient, and versatile blockchain ecosystem. By providing decentralized data indexing and Bitcoin trustless cross-chain, standardizing the integration of most Bitcoin L2s, and supporting technologies such as EVM, Antelope, and ZK, exSat aims to maximize the possibilities, security, and stability of the BTC ecosystem and fully unleash the potential of Bitcoin.

This article will introduce the innovative features, architecture, participation methods, and token models of exSat to help readers quickly understand this emerging Bitcoin expansion solution.

1. Innovative features

First, let's take a look at the innovative changes that exSat brings to the Bitcoin ecosystem:

• Better data synchronization method: Combining the two mechanisms of "proof of work" and "proof of stake", the secure import of Bitcoin data is achieved through BTC staking.

• Convenient data management: In order to enable the smooth operation of smart contracts, a decentralized data indexing system has been developed. This system can support a variety of assets, such as BTC, Ordinals, Runes, etc.

• Safe asset management: A decentralized asset management system has been established between BTC and exSat to ensure that asset transfers are both safe and convenient, enabling exSat to inherit Bitcoin's trust foundation and provide developers with more opportunities for innovation.

• Smart contract function upgrade: Fully supports Ethereum virtual machine application development, developers can develop richer decentralized applications in the Bitcoin ecosystem.

• Flexible expansion plan: exSat provides developers with a secure and efficient tool to easily create Bitcoin's second-layer network solutions, such as zero-knowledge proof rollups or side chains using the latest Antelope protocol, simplifying the development process.

The emergence of exSat not only makes Bitcoin easier to expand, but also adds smart contract functions, making Bitcoin no longer just a storage tool. Compared with other similar projects, exSat attaches importance to how to extend Bitcoin's trust mechanism to a wider range of application scenarios, so that more decentralized applications and second-layer networks can share this trust foundation. exSat adopts a modular design concept, which is scalable while maintaining security. It can be foreseen that exSat will help Bitcoin play a greater role in this technological revolution and support the flourishing of more diverse applications.

2. Protocol Architecture

How does exSat achieve the above advantages? Unlike typical L2 solutions that aim to increase transaction speed or reduce costs, exSat innovatively introduces a docking layer to comprehensively expand the Bitcoin ecosystem. This section deeply analyzes the architecture of exSat.

Data Consensus Extension Protocol

exSat uses a decentralized hybrid consensus mechanism that combines Proof of Work (PoW) and Proof of Stake (PoS) to ensure the accurate synchronization of Bitcoin blocks in exSat.

By incorporating Bitcoin miners into the exSat ecosystem, the platform leverages Bitcoin's mature PoW security architecture to ensure the integrity and reliability of synchronized block data across the network. In the exSat network, mining pools can act as synchronizer nodes, responsible for synchronizing raw block data from the Bitcoin blockchain and submitting it to the exSat network. The block data submitted by the synchronizer will be strictly verified by smart contracts, and the data will only be considered valid when the hash value of the block is consistent with the validator consensus. The first synchronizer to upload the correct block data will receive XSAT rewards.

The PoS verification mechanism introduces an additional layer of verification, where validators participate in network governance and block verification by staking crypto assets, enhancing the network's risk resistance while ensuring consistency with the interests of participants. The hybrid consensus mechanism ensures the high security and decentralization of exSat, directly supports smart contracts and completes transactions within 1 second. Validators provide trust and security by staking BTC and XSAT, and verify the data submitted by synchronizers based on the PoS model.

Through the collaboration between synchronizers and validators, the exSat network realizes the upload and verification of Bitcoin block data. This mechanism ensures that the exSat network has a reliable data foundation and provides trust and security for all subsequent operations.

Decentralized State Data Indexing

exSat provides a decentralized state data indexing function, which synchronizes Bitcoin's UTXO data in the following two steps:

• Historical UTXO data: For blocks before Bitcoin block height 840,000, exSat constructs historical UTXO data through snapshots and uploads them in an open source and verifiable manner.

• Real-time UTXO data: For blocks after height 840,000, exSat synchronizes, verifies, and parses on-chain through synchronizers and validators, and finally creates a real-time UTXO on-chain index.

This two-step process establishes a reliable UTXO data index, making smart contract operations on-chain more efficient and reliable, laying the foundation for the application and expansion of the exSat network.

In the exSat system, Bitcoin block data is parsed by smart contracts and stored in the decentralized database RAM, ensuring that the data is highly reliable under consensus. Asset data is only accessible to DApps in read-only mode, and only block parsing contracts can update data. Through smart contracts or RPC interfaces, applications can call all data from off-chain services without external oracles, thereby achieving higher security and a smoother user experience. Combined with decentralized asset custody, this model creates new opportunities for decentralized applications based on Bitcoin and further promotes the prosperity of the Bitcoin ecosystem.

Currently, other second-layer networks do not have their own index data. The decentralized data index of the exSat network can provide data to these second-layers and become the hub of the second-layer. In terms of positioning, exSat is similar to Taobao. Other second-layers are merchants who use the platform (data) of exsat (Taobao) to provide services (sell things) to other users.

Smart Contract Platform + EVM Compatibility

Through full compatibility with the Ethereum Virtual Machine (EVM), it is conducive to the development of diversified smart contracts and expands the practicality and functionality of the exSat platform.

With EVM compatibility and account abstraction, exSat can use a variety of assets (such as BTC, Ordinals and other Bitcoin ecosystem assets) to flexibly pay for Gas fees. At the same time, the platform also supports paying gas fees for others, simplifying operations for developers and users.

The validator manages a multi-signature escrow account and uses a threshold signature scheme to handle deposit and withdrawal operations on the Bitcoin network. Deposits are completed by transferring funds into the escrow account. When exSat imports the original Bitcoin block into the system, it can detect and process deposit transactions accordingly. Withdrawal requests need to be sent to the exSat smart contract. The smart contract will verify the request and generate a Bitcoin transaction based on the request. The validator responsible for operating the multi-signature escrow account will sign and forward the transaction to the Bitcoin network.

Expanding possibilities through Rollup

exSat provides a data availability and settlement layer for Bitcoin, supporting all Rollup solutions, including Optimism (OP) and zero-knowledge proof Rollups. Since data availability and settlement are performed on exSat, there is no need to use data availability samples for data release. Zero-knowledge proof verification from Bitcoin L2 Rollups will be performed on exSat.

This modular approach enables developers to customize Bitcoin L2 solutions according to different needs, which is expected to promote the prosperity of the Bitcoin DApps ecosystem.

III. Participation

exSat received a grant of over $20 million from the EOS Foundation as start-up capital. Yves La Rose, the founder of exSat, is the founder and CEO of the EOS Foundation.

exSat launched its mainnet on October 23 and its cross-chain bridge on November 5. The exSat cross-chain bridge was developed in collaboration with Ceffu, ChainUp, Cobo and Cactus, and has been audited by Blocksec.

In addition, exSat's major industry partners include Matrixport, Spiderpool, Antpool, viaBTC, Everstake, HashKey Cloud, OKX, BitTrade, Bitget, etc.

exSat Network has attracted more than $690 million (7,318 BTC) of TVL, and individual users can already stake Bitcoin on the exSat network to get XSAT token rewards.

TVL query link: https://defillama.com/protocol/exsat-credit-staking

exSat is currently launching the Pioneer2.0 event. Complete the staking task (minimum staking 0.005BTC) and accumulate 100 points to participate in the prize pool. In addition to XSAT token rewards, exSat will also distribute community incentives worth 100,000 U to users in this event.

Event link: https://x.com/exSatNetwork/status/1854217085569937590

According to official news, staking BTC can get about 3 times the amount of XSAT tokens in return. According to the minimum pledge of 0.005BTC, 0.015 XSAT can be mined every day. The current XSAT over-the-counter price is about 110U, and the daily return for the minimum security number is 1.65U. Based on the current Bitcoin price of US$90,000, the expected annualized rate is about 133%.

Given the considerable potential returns, 41 institutions have participated in the first mine, and there are not many retail investors participating. Staking Bitcoin on the exSat network allows you to earn XSAT immediately with institutions, rather than accumulating points or waiting for future airdrops. While retail investors are rolling in hot Bitcoin projects, participating in emerging projects such as exSat may have more to gain.

Staking Guide: https://medium.com/exsat-network/exsat-bitcoin-staking-guide-4bca438eea5e

Fourth, Token Economics

The total supply of XSAT tokens is 21 million, using a halving mechanism similar to Bitcoin. Each halving cycle consists of 210,000 blocks, starting from the synchronization of the first 840,000 Bitcoin blocks (N>840,000).

Initial Supply and Halving Mechanism

At the launch of the network, the initial reward for each block is 50 XSAT. The reward will be halved at the end of each halving cycle to control inflation and maintain the economic viability of mining incentives.

Phase-based Planning for Network Launch

1. Initialization Phase

The exSat Foundation is responsible for synchronizing the historical data of the first 840,000 Bitcoin blocks as a snapshot. No rewards are issued at this stage, and the purpose is to lay the foundation for network operations.

2. Network Launch Phase

After completing the historical data synchronization, the exSat network is officially launched, synchronizing the original data of the Bitcoin blockchain in real time. This process allows the network to continuously receive and process the latest block data, discover and verify UTXO and other types of crypto assets. At the same time, exSat's mining reward mechanism will also be officially effective. Before the launch of the XSAT staking phase, validators only need to meet the minimum staking threshold of 100 BTC, and no additional XSAT is required. This phase is expected to last about six months, and the validator's reward will be proportional to the amount of BTC staked.

3.XSAT Staking Phase

About 3-4 months after the first halving event, the XSAT staking phase will be launched. Only users who meet the minimum 100 BTC staking requirement and rank high in XSAT staking (at least 21,000 XSAT) can become official validators, participate in signing and receive rewards.

exSat allows token incentives through both PoW and PoS.

Mining pools need to participate in Bitcoin block production within 72 hours. Mining pools that successfully submit Bitcoin block data can obtain data submission rewards (accounting for 10%) and block production rewards (accounting for 40%).

Validators obtain participation qualifications by staking at least 100 BTC, and when verifying Bitcoin block data, the first validator to complete the verification can obtain data verification rewards (accounting for 10%). In addition, validators can also obtain staking rewards (accounting for 40%) through staking. When no miners generate blocks, this reward ratio can be increased to up to 80%.

Through this design, exSat not only improves the efficiency and security of block data processing, but also provides users with high-yield opportunities to participate in the construction of the Bitcoin ecosystem.

V. Summary

exSat is a project supported by the EOS Foundation. It was launched in a fair launch manner and has in-depth cooperation with leading custodians and mining pools. exSat is dedicated to expanding the docking layer of the Bitcoin ecosystem. By expanding Bitcoin's data consensus, it enhances the interoperability, scalability and security within the Bitcoin ecosystem. By facilitating direct queries on Bitcoin and ecosystem token balances, exSat can achieve seamless flow of assets and information between different networks and Bitcoin L2, and will be an important part of the Bitcoin ecosystem.