exSat is an important component in the Bitcoin ecosystem, with institutions participating in early mining and staking to secure allocations.

exSat is an important component in the Bitcoin ecosystem, with institutions participating in early mining and staking to secure allocations.

As Trump wins the election, investors anticipate that a crypto-friendly government will introduce more policies favourable to the crypto industry. This caused Bitcoin to experience its largest monthly gain in history, approaching $100K. Bitcoin’s position in traditional finance is becoming increasingly significant, with continuous capital inflows into Bitcoin ETFs, pushing Bitcoin’s market capitalization to $2.6 trillion. As a result, it has become the world’s seventh-largest asset. If Trump follows through on his promise to make Bitcoin a national reserve asset, we could see countries competing to accumulate Bitcoin, potentially surpassing Apple’s market cap and challenging gold’s status as the global reserve.

On the other hand, Bitcoin has long been primarily a store of value due to its scalability issues. Unlike Ethereum, Bitcoin’s mainnet cannot generate yield in DeFi protocols. Currently, Bitcoin’s TVL is only 6.56% of Ethereum’s. If Bitcoin were to reach Ethereum’s TVL, it would have 15 times more potential, a $60+ billion market opportunity. With Bitcoin’s market cap 4.5 times larger than Ethereum’s, L2 solutions built around Bitcoin have seen explosive growth this year.

The Bitcoin ecosystem is undergoing a profound paradigm shift, showcasing multidimensional development trends. These include the expansion from a single-asset economy to a multi-asset one (via tokenization of diverse assets such as NFTs, stablecoins, and protocol tokens); the transformation from a store of value to a value creation engine (enabling Bitcoin to participate in DeFi and utilizing NFTs to drive the marketization of digital and physical assets); and the evolution from a payment intermediary to a decentralized value network (with Bitcoin’s on-chain data and its scaling technologies such as the Lightning Network and cross-chain protocols, positioning Bitcoin as the core infrastructure of the value internet, supporting more efficient and secure value exchange and transfer). This transformation redefines Bitcoin, not just as a store of value but as a cornerstone of innovation and economic growth, presenting unprecedented opportunities for the blockchain industry.

However, Bitcoin’s inherent limitations—such as the lack of smart contract functionality, trustless cross-chain capabilities, high transaction fees, network congestion, and confirmation delays—have long constrained the ecosystem’s development. The construction of many Bitcoin L2 solutions has further fragmented liquidity. Additionally, the security of new Bitcoin L2 solutions is still unproven in the market.

Against the backdrop of significant market demand and pressing pain points, exSat, supported by the EOS Network, was born to take an innovative path. exSat aims to break Bitcoin’s limitations, serving as an integration layer for Bitcoin scalability that connects closed blockchain islands and creates a more interconnected, efficient, and multifunctional blockchain ecosystem. By providing decentralized data indexing and trustless cross-chain functionality, standardizing the integration of most Bitcoin L2 solutions, and supporting technologies such as EVM, Antelope, and ZK, exSat seeks to maximize the potential, security, and stability of the Bitcoin ecosystem, unlocking Bitcoin’s full potential.

This article will explore exSat’s innovative features, architecture, participation model, and tokenomics, helping readers quickly understand this emerging solution for Bitcoin scalability.

1. Innovative Features

Let’s first explore the innovative changes that exSat brings to the Bitcoin ecosystem:

Improved Data Synchronization: exSat combines both Proof of Work (PoW) and Proof of Stake (PoS) mechanisms to securely import Bitcoin data through BTC staking.

Convenient Data Management: To ensure the smooth operation of smart contracts, exSat has developed a decentralized data indexing system. This system supports various assets, such as BTC, Ordinals, Runes, and more.

Secure Asset Management: exSat establishes a decentralized asset management system between BTC and itself, ensuring that asset transfers are both secure and convenient. This enables exSat to inherit Bitcoin’s trust foundation, offering more opportunities for developers to innovate.

Upgraded Smart Contract Functionality: Fully supporting Ethereum Virtual Machine (EVM) development, exSat allows developers to create richer decentralized applications (dApps) within the Bitcoin ecosystem.

Flexible Scalability Solutions: exSat provides developers with a secure and efficient tool to easily create Layer-2 solutions for Bitcoin, such as zero-knowledge proof rollups or sidechains using the latest Antelope protocol. This simplifies the development process.

exSat makes Bitcoin more scalable and adds smart contract functionality, transforming Bitcoin from a mere store of value into a more versatile tool. Compared to other similar projects, exSat places a strong emphasis on extending Bitcoin’s trust mechanism to a wider range of applications, thus allowing more decentralized applications and Layer-2 networks to share this trust foundation. With its modular design, exSat maintains security while offering scalability. It is foreseeable that exSat will help Bitcoin play a larger role in this technological revolution and support the flourishing of more diverse applications.

2. Protocol Architecture

How does exSat achieve the advantages mentioned above? Unlike typical Layer-2 solutions that focus on improving transaction speed or reducing costs, exSat innovatively introduces an integration layer to comprehensively expand the Bitcoin ecosystem. This section deeply analyzes the architecture of exSat.

Data Consensus Extension Protocol

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

By incorporating Bitcoin miners into the exSat ecosystem, the platform leverages Bitcoin’s mature PoW security framework to guarantee the integrity and reliability of block data synchronization across the network. In the exSat network, mining pools 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 synchronizers is rigorously verified through smart contracts, and only when the block’s hash matches the consensus of validators will the data be considered valid. The first synchronizer to upload correct block data will receive XSAT rewards.

The PoS verification mechanism introduces an additional validation layer. Validators participate in network governance and block validation by staking crypto assets. This enhances the network’s resilience while aligning their interests with those of other participants. The hybrid consensus mechanism ensures high security and decentralization for exSat, directly supports smart contracts, and completes transactions within one second. Validators provide trust and security by staking BTC and XSAT, and verify data submitted by synchronizers based on the PoS model.

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

Decentralized State Data Indexing

exSat offers decentralized state data indexing by synchronizing Bitcoin’s UTXO data through the following two steps:

1. Historical UTXO Data: For blocks before Bitcoin block height 840,000, exSat builds historical UTXO data through snapshots and uploads them in an open-source, verifiable manner.
2. Real-time UTXO Data: For blocks after height 840,000, exSat synchronizes, verifies, and parses data on-chain via synchronizers and validators, ultimately creating a real-time UTXO on-chain index.

These two processes establish a reliable UTXO data index, makes on-chain operations in smart contracts more efficient and trustworthy, and lays 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 a decentralized database (RAM). This ensures that the data is highly trustworthy within a consensus state. Asset data can only be accessed by DApps in a read-only mode, and only the block parsing contract can update the data. Through smart contracts or RPC interfaces, applications can call all data from off-chain services without the need for external oracles, thus achieving higher security and a smoother user experience. Combined with decentralized asset custody, this model creates new opportunities for decentralized applications based on Bitcoin, further driving the growth of the Bitcoin ecosystem.

Currently, other Layer-2 networks do not have their own indexed data, but exSat’s decentralized data indexing can provide data to these Layer-2 solutions, which positions exSat as a hub for Layer-2 networks. In terms of positioning, exSat is similar to Taobao, with other Layer-2 solutions acting as merchants that use the exSat (Taobao) platform (data) to offer services (sell products) to users.

Smart Contract Platform + EVM Compatibility

By being fully compatible with the Ethereum Virtual Machine (EVM), exSat facilitates the development of diverse smart contracts, thus expanding the practicality and functionality of the exSat platform.

With EVM compatibility and account abstraction, exSat allows flexible gas fee payments using multiple assets (such as BTC, Ordinals, and other Bitcoin ecosystem assets). The platform also supports paying gas fees on behalf of others. This simplifies operations for developers and users.

Validators manage a multi-signature custody account and use a threshold signature scheme to handle deposit and withdrawal operations on the Bitcoin network. Deposits are completed by transferring funds into the custody account. When exSat imports raw Bitcoin blocks into the system, it can detect and process deposit transactions. Withdrawal requests are sent to exSat smart contracts, which will verify the request and generate a Bitcoin transaction. Validators responsible for operating the multi-signature custody account will sign and forward the transaction to the Bitcoin network.

Rollup Extension Possibilities

exSat provides Bitcoin’s data availability and settlement layer and supports all Rollup solutions, including Optimism (OP) and zero-knowledge proof Rollups. Since both data availability and settlement are handled on exSat, there is no need to use data availability sampling for data publishing. Zero-knowledge proof validation from Bitcoin L2 Rollups will be performed on exSat.

This modular approach allows developers to customize Bitcoin L2 solutions based on different needs and is expected to drive the flourishing of the Bitcoin DApp ecosystem.

3. How to Participate

exSat has secured over $20 million in funding from the EOS Foundation as startup capital. The founder of exSat, Yves La Rose, is also the founder and CEO of the EOS Foundation.

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

Additionally, exSat’s key industry partners include Matrixport, Spiderpool, Antpool, viaBTC, Everstake, HashKey Cloud, OKX, BitTrade, Bitget, and others.

The exSat Network has attracted over $690 million (7318 BTC) in Total Value Locked (TVL). Individual users can now stake Bitcoin on the exSat network to earn XSAT token rewards.

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

exSat is currently running the Pioneer 2.0 campaign. Users who complete staking tasks (minimum stake of 0.005 BTC) and accumulate 100 points can participate in the prize pool. In addition to XSAT token rewards, exSat will distribute community incentives equivalent to $100,000 in this event.

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

According to official information, staking BTC can yield approximately three times the amount of XSAT token rewards. For a minimum stake of 0.005 BTC, users can mine 0.015 XSAT per day. Currently, the off-chain price of XSAT is around $110, so the daily return for a basic staking account would be about $1.65. With Bitcoin priced at $90,000, the expected annualized return is approximately 133%.

Given the substantial potential returns, 41 institutions have already participated in early mining, while retail participation remains relatively low. By staking Bitcoin on the exSat network, individual users can earn XSAT alongside institutional participants, without the need to accumulate points or wait for future airdrops. Retail investors may find more opportunities by participating in emerging projects like exSat, alongside popular Bitcoin projects.

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

4. Token Economics

The total supply of the XSAT token is 21 million, following a halving mechanism similar to Bitcoin. Each halving cycle consists of 210,000 blocks, with the calculation starting after synchronizing the first 840,000 Bitcoin blocks (N > 840,000).

Initial Supply and Halving Mechanism

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

Phased Network Launch Plan

Initialization Phase

1. The exSat Foundation is responsible for synchronizing the historical data of the first 840,000 Bitcoin blocks as a snapshot. No rewards are distributed during this phase, as its purpose is to lay the foundation for network operations.

Network Launch Phase

1. Once the historical data synchronization is complete, the exSat network officially launches and begins to synchronize raw data from the Bitcoin blockchain in real-time. This process allows the network to continuously receive and process the latest block data, and discover and verify UTXO and other types of crypto assets. Meanwhile, the exSat mining reward mechanism will also come into effect. Prior to the XSAT staking phase, validators only need to meet the minimum staking threshold of 100 BTC, without the need to stake XSAT. This phase is expected to last for approximately six months, with validator rewards proportional to the amount of BTC staked.

XSAT Staking Phase

1. The XSAT staking phase will be initiated approximately 3-4 months after the first halving event. Only users who meet the minimum staking requirement of 100 BTC and rank high in XSAT staking (at least 21,000 XSAT) will become official validators and can participate in signature processes and earn rewards.

exSat allows users to earn token incentives through both PoW and PoS mechanisms.

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

Validators, on the other hand, qualify by staking at least 100 BTC. The first validator to complete the verification of Bitcoin block data will receive data verification rewards (10%). In addition, validators will also earn staking rewards (40%), which can be increased up to 80% when no miners are producing blocks.

This design improves the efficiency and security of block data processing while providing users with high-return opportunities when participating in building the Bitcoin ecosystem.

5. Conclusion

exSat, supported by the EOS Foundation, was launched through a fair launch mechanism in collaboration with leading custodians and mining pools. As a bridging layer dedicated to expanding the Bitcoin ecosystem, exSat strengthens Bitcoin’s data consensus while enhancing interoperability, scalability, and security within the ecosystem. By enabling direct queries of Bitcoin and ecosystem token balances, exSat facilitates seamless asset and information flow between networks and Bitcoin L2s, and will establish itself as a pivotal component in the Bitcoin ecosystem’s landscape.

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