What is Thesis' Mezo? A Guide to the New Bitcoin Economic Layer

The building on Bitcoin movement is stronger than ever, as Layer 2 projects race to scale Bitcoin and boost its utility. The latest entrant to this race is Mezo, a new Bitcoin layer that is setting itself apart with a unique approach. 

This guide will dissect this protocol, helping you to understand what it is and how it works. 

What Is Mezo?

Mezo is an Ethereum Virtual Machine (EVM)-compatible network that provides fast and cheap transactions to help scale Bitcoin.. 

Unlike other Bitcoin layers, Mezo has marketed itself as an economic layer that prioritizes BTC users and long-term holders. This BTC-first Economic Layer allows users to earn BTC in return for securing the network, and according to Mezo, has a supply-reduction mechanism that helps secure the Bitcoin network along the way.

Mezo is currently under development but is accepting early BTC, tBTC, and wBTC (wrapped bitcoin) deposits, allowing people to position themselves to earn higher yields when the protocol launches. 

Who Is Building Mezo?

Thesis, a Bitcoin-first venture studio founded by the developer Matt Luongo, is building Mezo. It joins projects such as Fold, tBTC, and Keep Network in Thesis’ portfolio. 

Thesis announced Mezo in April 2024 and a $21 million fundraising round led by Pantera Capital. The funds will go toward Thesis’ vision of bringing 25% of the world economy on-chain. 

Besides Pantera Capital, the fundraising round included participation from Multicoin, Primitive Ventures, Hack VC, ParaFi Capital, Asymmetric Ventures, and other VC firms.  

Thesis plans to launch Mezo mainnet in the second half of 2024.

How Does Mezo’s Bitcoin Economic Layer Work?

Here’s a breakdown of the various components contributing to how Mezo works.

tBTC

Bitcoin will be bridged to Mezo using tBTC, a two-way bridge system that has been live on the Ethereum network since 2020. It is pegged to BTC at a ratio of 1:1 and is minted when you BTC is deposited into the bridge. tBTC enables users to use their BTC on Ethereum, Solana, Optimism, and other EVM networks to access DeFi products like lending, borrowing, stablecoins minting, and providing liquidity.

On Mezo, you can interact with the various decentralized applications (dApps) with BTC that is bridged via the tBTC bridge. All BTC on Mezo, whether used to run a validator, pay for gas, or be used in dApps, is enabled by tBTC bridging. When bridging back to Bitcoin, tBTC is burned, and BTC is unlocked.

Proof of HODL

Mezo leverages a Proof of HODL consensus mechanism where participants stake (lock up) BTC and MEZO tokens to secure the network and validate transactions through CometBFT consensus. 

CometBFT is software that serves blockchain applications similarly to a web server serving web applications. It uses the Byzantine Fault Tolerant (BFT) algorithm that can withstand up to one-third of its validator nodes being malicious without compromising the operations of a blockchain network. CometBFT validators are responsible for proposing blocks of transactions and voting for them.

Mezo’s Proof of HODL encourages people to hold BTC long-term, which, according to Mezo, helps increase the security of this network, power Bitcoin-native applications, and help earn yield. Mezo says it also reduces BTC’s circulating supply as gas fees are paid in BTC. 

Early Deposits

Mezo accepts early deposits, enabling people to accumulate a HODL score that will determine how much yield they earn once Mezo is live on the mainnet. The HODL score rises the longer a person locks up their BTC, tBTC, or wBTC. 

There are three lock-up periods: two, six, and nine months. Interested participants can use an invite code to lock BTC, tBTC, or wBTC to earn yields. Mezo is distributing invitation codes to the community, which can be accessed on the project’s Discord server. Once the lock period has elapsed, participants will have full access to their digital assets. 

The HODL score is based on points and a multiplier system. Every bitcoin (same as tBTC and wBTC) locked each day earns 1,000 points, while the multiplier system is determined by the lock-up period as follows: 

Suppose you have deposited 1 BTC and locked it up for six months. Mezo will calculate your HODL score as follows:

1 BTC * 1,000 base points per BTC per day * 10 (multiplier for 6 months) = 10,000

That means you will earn 10,000 points per day. Once Mezo launches on the mainnet, your points will start earning yields. 

If you wish to boost your HODL score, you can participate in the invite program, which permits you to invite others to join Mezo. This will earn you an invite bonus based on the HODL scores they accumulate.   

Mezo has created two special events, Halving and Doubling, to give the earliest depositors an advantage. The halving event will reduce the HODL score by half starting July 1, 2024. Conversely, the doubling event increased HODL scores two-fold during the Bitcoin halving weekend (April 20 and 21, 2024).  

Benefits & Drawbacks of Mezo

Now that you learned the basics about Mezo, let’s consider its benefits and drawbacks.

Pros

• Supports dApp development
• Aligns with Bitcoin’s security model
• Allows users to earn yields from holding BTC

Cons

• Mezo’s ability to deliver on its promise is yet to be tested
• In-depth details of how the network works aren’t yet available

What Does Mezo’s Bitcoin Economic Layer Bring to the Bitcoin Ecosystem?

Below are some of the most prominent use cases Mezo can bring to the Bitcoin ecosystem.

DeFi

Mezo is EVM-compatible, meaning it can support the complex smart contracts needed to power DeFi dApps. This will allow developers to create DeFi products like borrowing, lending, betting, trading, and liquidity provision. As a result, the Bitcoin ecosystem will enjoy added utility, attracting more users and boosting adoption.

Yield-Earning  

As an economic layer, Mezo allows its users to earn yields by holding BTC through the Proof of HODL consensus mechanism. This feature could bring more people to the Bitcoin ecosystem and expand the number of BTC holders. Proof of HODL would also affect Bitcoin’s circulating supply, which in turn could affect its price.

Stake Your BTC with Acre: Mezo’s Flagship DeFi Platform 

Staking is new way for bitcoin holders to earn yield and Acre helps with exactly that. 

Acre is a new liquidity layer for Mezo that enables users to earn staking rewards paid out in stBTC by depositing BTC. 

stBTC is a liquid-staked tokenized version of BTC that can be minted directly on Mezo. This token lets you participate in BitcoinFi (Bitcoin finance) applications and maximize your yield on bitcoin.

Acre is designed to find the best platforms for staking BTC and automatically distribute your deposited funds across various pools, such as Curve tBTC/stBTC, and protocols to earn you a yield.

Also, you can use your stBTC in some other DeFi applications to offer collateral in lending protocols, provide liquidity in decentralized exchanges, stake for additional rewards, and swap for more tBTC to stack more mats, or magic satoshis, which is a point system by Mezo. 

Xverse: Your Gateway to Web3 Built on Bitcoin

Xverse is a Bitcoin Web3 wallet compatible with Mezo that allows you to deposit BTC and earn bitcoin staking rewards on Acre. 

You can also earn yield using your Xverse wallet by stacking STX tokens on the Xverse pool. Alternatively, you can stack STX using Xverse and the liquid stacking protocol, StackingDAO.

In addition to BTC and STX, Xverse supports Bitcoin Ordinals, BRC-20 tokens, Runes, Rare Sats, and a range of digital assets on Stacks. 

Download Xverse today to store and manage these assets!