Leading mining companies are stepping in, detailing Marathon's incubated Bitcoin L2 Anduro

Written by: Karen, Foresight News

Marathon Digital, one of the largest mining companies in North America, is showcasing its foresight and innovation in Bitcoin technology and network development by incubating the Bitcoin Layer 2 project "Anduro," accelerating the development and adoption of Bitcoin.

According to the financial report released by Marathon Digital today, the company's hash rate increased by 253% to 24.7 EH/s in 2023, producing 12,852 Bitcoins, setting a company record, and driving a 230% revenue growth in fiscal year 2023, reaching $387.5 million. By the end of 2023, Marathon Digital's balance sheet held $357.3 million in cash and cash equivalents, as well as 15,126 Bitcoins, with profits significantly benefiting from the adoption of the new fair value accounting rules published by the U.S. Financial Accounting Standards Board (FASB).

The successful implementation of the newly incubated Anduro could provide new momentum for the development and application of the Bitcoin network, potentially attracting more innovators and users to the Bitcoin ecosystem. Not to mention, a thriving on-chain Bitcoin ecosystem could directly benefit miners like Marathon Digital.

Anduro aims not only to address the miner incentive issues arising from the reduction of Bitcoin mining rewards but also to enhance the functionality and appeal of the Bitcoin network by providing a suitable application layer. So, what exactly is Anduro? How does it operate? And how will it drive the development of the Bitcoin network and ecosystem?

What is Anduro?

Bitcoin mining rewards are halved every four years. Currently, there are about 52 days remaining until the next Bitcoin halving, expected on April 21, 2024, when the block reward will decrease from 6.25 BTC to 3.125 BTC.

The reduction in mining income may impact miners' motivation, while mining is crucial for the security and operation of the Bitcoin network. In this context, Marathon Digital believes it is essential to maintain long-term incentives for miners, attract innovators, and increase transaction volume through a Bitcoin application layer. Moreover, current Bitcoin Layer 2 and sidechains are rarely compatible with Bitcoin. What Anduro aims to do is create a suitable Bitcoin application layer.

Anduro is incubated by Marathon Digital. According to the Anduro Litepaper, its Chief Technology Officer, Engineering Director, and Product Head are held by corresponding personnel from Marathon Digital: Ashu Swami, Michael Casey, and Jullian Duran, indicating Marathon Digital's intention to promote the development of the Anduro platform by integrating its internal resources, highlighting the importance Marathon Digital places on Anduro. Although Marathon helps incubate Anduro, the network is intended to be community-led and community-driven.

According to Marathon Digital, Anduro is a multi-chain Layer 2 network for Bitcoin, aimed at serving as an application layer while strengthening the potential incentives behind Bitcoin's proof of work (PoW). Anduro also allows for the creation of multiple sidechains.

How does Anduro operate and drive Bitcoin adoption?

Anduro consists of three key components: Collective, sidechains, and sidechain native assets. The Collective manages the anchoring of the main chain, thereby pegging the value of Anduro BTC to BTC at a 1:1 ratio. In other words, BTC must be locked on the main chain to mint Anduro BTC, and to unlock main chain BTC, Anduro BTC must be burned on the sidechain.

Additionally, Bitcoin miners generate blocks for both Anduro and Bitcoin simultaneously, earning Bitcoin-denominated rewards from both networks. The Collective also participates in Anduro sidechain consensus by signing periodic blocks to facilitate MEV (Miner Extractable Value) resistance and rapid finality.

Anduro can consist of multiple sidechains, all of which are open source. Marathon has already developed two sidechains on Anduro: Cooperative and Alys, which can be further developed by open-source contributors.

Among them, Coordinate is a Bitcoin-compatible sidechain for creating, trading, and transacting assets, specifically tailored for existing retail DeFi on Bitcoin. One example listed in the Anduro Litepaper is that inscribed assets have a significant user experience gap, while Coordinate's native asset issuance capability, low latency, and low fees make it a better choice for inscribed DeFi. Additionally, issues such as trading slippage, royalty evasion, and inscribed data pruning can also be addressed at the protocol level.

Alys is an Ethereum-compatible chain with smart contract programmability, designed for institutions to issue and trade tokenized real-world assets.

In summary, Anduro, as a Bitcoin Layer 2 network, ensures close integration and compatibility with the Bitcoin main chain through its unique mechanism design. Furthermore, through the locking and minting mechanism, Anduro ensures a 1:1 peg of its BTC assets to main chain BTC, providing secure and efficient liquidity for Bitcoin assets on the sidechain. The sidechain design of Anduro allows developers to create customized blockchain solutions based on specific needs and application scenarios, whether for Bitcoin-compatible retail DeFi applications or Ethereum-compatible institutional asset trading.

At the same time, Anduro introduces the Collective mechanism, enabling Bitcoin miners to participate in block mining for both Anduro and Bitcoin networks, earning rewards from both networks, which not only increases miners' sources of income but also enhances the security and stability of the Anduro network.

As Fred Thiel, Chairman and CEO of Marathon, stated, "Anduro could introduce new fee revenue streams, thereby increasing Marathon's growing technology stack. Moreover, by expanding Bitcoin's functionality, Anduro may enhance Bitcoin's adoption rate, thereby driving the development of the entire Bitcoin ecosystem."