Interview with Mode Network: The Most Powerful DeFi L2 is Here, How to Play After Receiving the MODE Airdrop

Mode Network is a Layer2 network focused on the DeFi sector, aiming to collaborate with Optimism to create a superchain. Mode Network launched its mainnet on January 31, 2024, and started its points airdrop in February. Currently, Mode has initiated the second season of the airdrop points campaign. The total supply of MODE tokens is 1 billion, with an initial issuance of 1.3 billion tokens. Of these, 35% are allocated for airdrops, 19% for key contributors, 19% for investors, and 27% for the foundation. For project updates, please follow the official Twitter.

On May 16, BlockBeats had a conversation with James Ross, the founder of Mode Network, and Kai, the head of the Mode Network ecosystem, discussing what users can do after receiving the MODE airdrop and the development overview of the Mode ecosystem. Below is the transcript of this X Space session:

BlockBeats: Welcome everyone to today's Space. First, could the guests briefly introduce themselves?

James Ross: Hello everyone, I am the founder of Mode Network. I have been in this industry for about seven years, previously focusing on early projects in the Ethereum ecosystem. I have also been involved in blockchain investment for five years.

Kai: Hello everyone, I am Kai, the head of the Mode Network ecosystem. I started my DeFi entrepreneurship in 2016 and have since participated in many projects in the DeFi sector, such as derivatives trading and DEX. Later, I joined Binance as the head of DeFi for the BSC chain. After that, I joined the Mode team.

BlockBeats: Could you both briefly explain what Mode Network is and why you chose to work on this project?

James Ross: Mode is an L2 focused on the DeFi sector, using OP Stack technology and joining the OP ecosystem. Our vision is to create the strongest DeFi hub for the Ethereum ecosystem and the OP superchain ecosystem. The OP superchain is a large family, including many chains like the OP mainnet Base. Mode Network aims to build an ecosystem based on OP Stack, either L2 or L3, focusing on the DeFi sector. We will try to create more DeFi application scenarios, including new DeFi assets, bringing more revenue opportunities to the entire industry.

Kai: OP is now increasingly focused on launching more L2s. Mode Network takes on the role of the DeFi hub (infrastructure support) in the OP mainnet. For example, Velodrome started deploying on Mode a few days ago, and other OP mainnet ecosystem projects will gradually deploy on Mode. We are also closely connected with Base ecosystem projects, often communicating together. Some teams can choose to deploy on Mode first, and after we help incubate the project, they can then deploy on the Base chain. We are committed to collaborating with Base and OP to promote the development of the OP superchain.

BlockBeats: Mode Network has just completed an airdrop. Could you share Mode's upcoming incentive plans? What can users who received the airdrop do now?

James Ross: Yes, Mode has just completed the first quarter airdrop and has now started the second season airdrop. Through these two seasons of airdrops, Mode's user base has grown significantly, on-chain transaction volume has increased, and TVL (Total Value Locked) is higher. By participating in the Mode ecosystem now, users can see more assets available for lending, trading, etc. There may be more new complex applications joining the ecosystem, allowing players to try various DeFi strategies, bringing more revenue opportunities to users. Importantly, Mode will integrate more blue-chip DeFi projects, such as Velodrome, Uniswap V3/V4, and more blue-chip lending protocols that will soon be launched.

Kai: Yes, one common approach is for users to stake their airdropped tokens. Another approach is to place MODE tokens on DEX, lending protocols, or mining protocols. Some games use MODE as the base currency, such as using MODE to purchase in-game items. More applications will be launched in the next week or two, with MODE as a special token among them. So, there are three main directions: staking, earning tokens within existing ecosystem projects, and developing new ecosystem projects to create application scenarios for MODE tokens.

BlockBeats: The current crypto market already has public chains focused on DeFi, such as Canto, Osmos, and dYdX. Why does Mode still choose to focus on the DeFi sector?

James Ross: Looking at successful projects in the crypto industry, the most successful ones are often DeFi projects, which is undeniable. From Compound to Aave and Uniswap, after several cycles, the projects that have survived are DeFi projects. DeFi is one of the few areas in the crypto industry that has found product-market fit (PMF).

DeFi is a market entry field that has seen a lot of innovation recently, including innovations in asset forms, such as LSD and LRT projects, and the emergence of RWA tracks derived from stablecoins. Based on these new assets, new DeFi strategies have been created. However, there is a significant gap in the OP superchain ecosystem, lacking innovation in assets and yield strategies, with not many developers building new gameplay on these new assets.

The concept of a superchain is that various chains based on OP Stack are interconnected, and assets on these chains will flow to the places with the highest yields. Similarly, assets will flow to Mode. Mode will become a DeFi hub or yield center in the OP superchain, where users can engage in various lending and trading activities. We are actively promoting the development of the Mode ecosystem and have achieved significant results in many areas.

Kai: Mode's core competitiveness is that we are ecosystem infrastructure enthusiasts. Many L2 projects are slow in ecosystem development, taking 1, 2, or 3 years to build their ecosystem. Many ecosystems start with high expectations but have very low overall efficiency. For builders and founders, time cost is crucial, so we build ecosystems and launch assets quickly. Once an asset is determined, it will be integrated and applied throughout the ecosystem within a week or two. We know which scenarios each asset is suitable for and how a new application on Mode can collaborate with other projects in the ecosystem, potentially creating new gameplay or product forms.

The second point is that Mode Network is based on the OP ecosystem. Besides Base, we have received a lot of funding support from OP. But we are not limited to this; we also collaborate with the BTC ecosystem and stablecoin projects. We can see more new tracks, new hotspots, and new opportunities and take action quickly. Whether it's LRT, the BTC ecosystem, or stablecoins, we have caught up with the trends of the past three to four months and will quickly grasp new development directions in the coming months.

BlockBeats: Mode has close ties with ecosystem projects. Will you participate in specific project communications?

Kai: We indeed have deep relationships with many projects. Many people think that BD's job is to bring projects into the Mode ecosystem, and that's it. But the real work begins after the project is deployed. We help them with marketing and growth within the ecosystem. We maintain close communication with most project teams, so when new directions or opportunities arise, we can quickly pass them on to the projects. This is why we can often capture this information. It's not just us supporting the projects; the projects also provide us with important market feedback.

BlockBeats: The Mode ecosystem has seen a lot of development recently. Could you share some noteworthy DeFi projects in the Mode ecosystem, besides the LRT protocol?

James Ross: I think a key point for us is to closely collaborate with major projects and our native projects on Mode. For example, Atlendis is a pretty good project, and it is...

Privacy credit solutions. In addition to RWA projects that can be developed based on this, we also have a stablecoin project backed by national debt that is about to be launched. Furthermore, we are closely collaborating with many developers to develop new lending protocols and will soon cooperate with Ethena to introduce the Ethena Protocol's stablecoin USDE more quickly. We will also have many collaborations with other projects, and some new forms of lending protocols are under development.

I believe Velodrome is also worth paying attention to and will soon be launched in the Mode ecosystem. Velodrome's economic model has proven to be very successful on OP. Aerodrome on the Base chain also has the capability to compete with Uniswap, so we are very excited to work with such a team. We have also launched an accelerator, and the team is actively developing native projects.

Kai: In any track, there are many subfields, such as lending. Besides the basic Compound V2, there are various lending products. When it comes to lending, the first reaction might be building blocks, but you still need to know which blocks can be stacked. When the blocks are stacked, something new might emerge, so it's not just about stacking blocks. Two blocks together form a completely different shape, so we are also making many attempts in this area.

Our accelerator also has dozens of projects. In the next one or two months, there should be ten to twenty projects going online, each with at least one innovation point. So we are also very focused on creating some innovative and interesting products. Of course, because they are relatively new products, they need to be polished or go through several rounds of testing. But I think it's worth it. If everyone only does things that have been validated, there will be no innovation.

BlockBeats: Mode has its native DEX and lending protocol. How do these native protocols compete with established DeFi projects?

James Ross: There are mainly two ways for the growth of the DeFi ecosystem. One is to increase security measures to make the protocol safer, which may come at the cost of more redundant governance or more centralization. We see many large blue-chip projects with particularly high security and high decentralization, but their yields are not particularly high. For example, Aave or Uniswap often have very high TVL and a lot of funds in the pool, but the yield may only be 3%. This is a common phenomenon. Large projects must first ensure safety, and large fund users also feel that they need more safety and can give up some yield.

For some native new protocols, their development is not very mature and not so decentralized, but their yields are much higher because they need to attract users from large projects, so their yields must be higher. So I think we will continue to see competition between these two different types of protocols, just like we see competition between large companies and startups. These new protocols need to come up with various strategies to make their yields higher, otherwise, it will be difficult for them to sustain. The DeFi ecosystem needs such experimental projects to constantly come up with new ways to play.

From the perspective of startups and large companies, new DeFi protocols innovate faster, and the entire team can easily make quick adjustments based on new market demands. So a very obvious shortcoming of large projects in terms of development is that they are not so fast, which provides many opportunities for these startups. For the native Dex and lending projects in the Mode ecosystem, we are very confident that innovation is the main driving force for project development.

Kai: As a chain, Mode mainly needs to provide the soil, whether for large or small projects. The key is to make participants feel that this is an ideal place that can promote their growth, a place suitable for the development of their projects. Ultimately, the result of the competition will depend on everyone's strength. In addition, we need to attract various users who may have different capital scales and risk preferences. In fact, although various projects compete in some aspects, they target different vertical markets in other aspects. Everyone needs to find their own positioning and target customer group. From a broader perspective, whether it is the Mode ecosystem, the OP ecosystem, the entire Layer 2, or Layer 1, I think the market space is much larger than the current size of Mode. So I think competition is not something we need to focus on excessively at the moment. We should concentrate on maximizing everyone's potential and increasing the market share.

BlockBeats: Recently, Mode's TVL has grown rapidly, mainly driven by the demand for LRT yields. After the EIGEN token airdrop ends, how does MODE plan to bring yields to these LRTs in the future?

James Ross: Even after the EIGEN token airdrop ends, the popularity of LRT will continue for a while, and there will still be a lot of discussion around Eigenlayer points. In addition to the second season of EIGEN points, there is also the upcoming AVS. The market's expectations for AVS are not high, possibly because people do not understand AVS well or are not particularly optimistic about its prospects. However, various AVS chains issued based on Eigenlayer should provide more incentives for LRT users. Therefore, this is the main factor for the growth of Eigenlayer's income, encouraging everyone to continue holding LRT. The Mode team is also actively introducing more assets to provide new opportunities for LRT or other assets, including new interest-bearing stablecoins and synthetic stablecoins mainly based on physical assets, primarily in the form of RWA. Based on these new assets, more new applications will be introduced to increase existing income.

Kai: LRT itself comes with a certain yield, but we are also considering how to give this type of asset more yield or improve capital efficiency. I want to make LRT an acceptable asset similar to the Curve pool. Many pools only accept USDT, USDC, but if they can also accept LRT, then these LRTs can earn LP yields in addition to their own yields. We are also in talks with some games to see if they can integrate LRT to make the entire game's economic model more sustainable. These LRT users can earn some in-game rewards.

BlockBeats: Mode Flare is undoubtedly a highlight of Mode. Can you briefly introduce Mode Flare? Why do we need more DeFi L3 application chains on top of MODE as a DeFi L2?

James Ross: Besides allowing teams to achieve higher TPS and faster settlement speeds, a very key point of Layer 3 is customization needs. Many teams may not be satisfied with DeFi-focused L2; they may need more customized features, such as using custom tokens as Gas fees, choosing different chains, you can choose Celestia or EigenDA, which will benefit teams that need high throughput and low Gas.

Although the scalability of L2 is already quite good, L3 will have a lot of space in the direction of customization. Of course, all final transactions will be settled back on Mode. There are already five L3s in the testnet stage, and more L3s will come out later. The Mode team is very efficient. I think more projects will first choose to deploy and issue on Mode L2 in the future.

BlockBeats: Thank you very much for today's sharing. We have a more comprehensive understanding of Mode Network. Do you have anything else you want to convey to the Chinese community or want to add?

Kai: I think the main problem in the crypto market now is still returning to the construction of the ecosystem, especially in terms of infrastructure. At the technical level, there has been quite serious homogenization. It feels like many strategies, whether it is the points system or other aspects, are actually very similar. But I am thinking, three months later, six months later, or even a year later, there may be 10, 20, 30, or even more L2s rapidly emerging. What will be left after that? I hope we can still be continuously building real things at that time. We really need to build a very complete and prosperous ecosystem. We will involve the projects and products on OP, and then further innovate on this basis.

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