Plasma Depth Analysis: A High-Performance Layer 1 Blockchain Architecture Designed for Stablecoins

1. Background and Overview

Image source: https://www.plasma.to/

Stablecoin Market and Demand: Stablecoins are one of the few areas in the blockchain space that have achieved product-market fit (PMF). They are widely used in scenarios such as daily payments and cross-border remittances around the world. However, general-purpose chains like Ethereum have high transaction fees and limited throughput, which does not fully match the specific application requirements.

Plasma Project Positioning: Plasma is a high-performance Layer 1 blockchain optimized for stablecoins, originating from Bitcoin sidechains and compatible with the Ethereum Virtual Machine (EVM). It aims to provide zero-fee USDT transfers and high throughput. Its core goal is to reduce the cost of stablecoin circulation on-chain, improve processing efficiency, and provide an underlying clearing network for daily use cases of stablecoins (such as on-chain trading, cross-border remittances, and merchant settlements).

Core Features: Plasma has a self-built network architecture that includes PlasmaBFT consensus, Reth-based execution environment, custom Gas model, zero-fee stablecoin channels, privacy transactions, and other features. In addition, the project has received support from well-known institutions such as Bitfinex, Founders Fund, and Framework Ventures, and has collaborated with stablecoin projects (such as Ethena, USDT0) and fintech companies (such as Yellow Card) to actively build a stablecoin ecosystem.

2. Technical Architecture

2.1 PlasmaBFT Consensus Mechanism

• Plasma adopts the self-developed PlasmaBFT consensus algorithm (an improved version based on Fast HotStuff), simplifying the consensus phase into two stages (preparation and pre-submission), and introducing pipelined parallel processing to achieve high concurrent consensus.
• PlasmaBFT achieves sub-second transaction finality and supports thousands of transactions per second under a single-chain architecture (team data shows it can exceed 2000 TPS). This BFT consensus provides the network with fast finality and high security, offering higher throughput compared to Ethereum's PoS validation mechanism.

2.2 EVM compatible execution environment

• The execution layer is based on the Reth Client developed by Paradigm (an Ethereum execution client implemented in Rust), featuring advantages such as modular architecture, memory safety, and high performance. The execution environment of Plasma is fully compatible with Ethereum (Solidity smart contracts can be deployed directly) and supports development toolchains such as MetaMask and Hardhat.
• Developers can reuse existing Ethereum ecosystem code and contracts to simplify migration work. Plasma balances Ethereum's account model with Bitcoin's UTXO model (supporting Bitcoin payments for Gas fees) to achieve a flexible payment settlement experience.

2.3 Native Bitcoin Bridge

• Plasma periodically submits the on-chain state root hash to the Bitcoin main chain to achieve secure anchoring. Plasma validators running Bitcoin nodes can verify Bitcoin blocks and transactions. When users send BTC to the bridge address, the validators detect this and issue an equivalent amount of wrapped BTC (wBTC) on the Plasma chain, which is released from the mainnet BTC using threshold Schnorr signatures during redemption.
• This design leverages the security and decentralization of Bitcoin to provide Plasma with a Bitcoin-like finality and auditability, all without altering the Bitcoin protocol. In the future, Plasma plans to integrate new technologies such as BitVM, OP_CAT, and ZKP to further enhance the security and decentralization of the bridge.

Customized Gas Model 2.4

• Plasma supports using multiple tokens to pay transaction fees: Users can pay Gas using the native token XPL or assets from the whitelist (such as USDT, BTC). If a non-native token is used for payment, the on-chain oracle will convert it to XPL at the market price to pay the fees.
• The system introduces a dual-channel trading mechanism: the network is divided into a "fee trading channel" and a "free trading channel", processing trades with different strategies in parallel. Stablecoin transfers can choose to enter the free channel (no fees required), while trades with high time sensitivity use the priority channel and pay XPL for acceleration. Through adaptive delay prioritization, users can choose between "slow zero fee" or "fast paid".

2.5 Privacy Payment Module

• Plasma research introduces privacy transactions (Shielded Transactions) on-chain, hiding information such as transaction history, recipients, senders, and amounts to protect user privacy.
• Considering the financial compliance requirements, the Plasma design may include selective information disclosure features: transaction details can be opened when meeting regulatory audits while defaulting to protecting user privacy. This privacy module is similar to the technologies of privacy coins like Zcash, but it needs to balance review and regulation.

2.6 Other Technical Features

• Highly Scalable Architecture Design: Through the modularity and phased synchronization of the Reth client, Plasma accelerates node synchronization and parallel processing to enhance performance.
• Tool Support: Subsequently launching infrastructure such as APIs and SDKs for stablecoins (the roadmap mentions the phased introduction of native tools), simplifying application development and integration.

Plasma Technology Architecture Diagram (Source: Gate Learn Creator Max)

3. Application Scenarios

Plasma Application Scenarios Table (Source: Gate Learn Creator Max)

Zero Fee Stablecoin Payments: Plasma is designed for everyday stablecoin payment scenarios, providing a seamless experience similar to peer-to-peer payments and merchant settlements. With the free USDT channel, users can achieve zero-fee USDT transfers on Plasma (referencing the large-scale USDT use case on Tron), reducing user costs and enhancing the experience.

Cross-Border Remittances and International Payments: In regions with unstable currencies (such as Africa and Latin America) and areas under economic sanctions, stablecoins have been widely used for value storage and remittances. Plasma can serve as a cross-border payment network, leveraging its high throughput and low-cost advantages to support global stablecoin transfers and address the bottlenecks of traditional remittance channels.

Compliant Digital Finance: Plasma is collaborating with projects such as Ethena (a decentralized US dollar stablecoin) to launch localized and compliant versions of stablecoins. Its infrastructure is suitable for financial institutions, enabling banks and payment companies to quickly integrate stablecoin payments and settlements through Plasma's settlement API, promoting the application of stablecoins in mainstream financial systems.

Merchant Settlement and Micropayments: Leveraging high throughput and low costs, Plasma can provide merchants with fast payment and settlement services. For example, Yellow Card, the largest stablecoin infrastructure provider in Africa, will use Plasma's free USDT transfers to help merchants handle peer-to-peer payments. In addition, smart contracts can support stablecoin-based installment payments, subscriptions, and other micropayment services.

Stablecoin DeFi and Ecosystem: A variety of stablecoins and DeFi protocols are planned to be deployed on Plasma. Communication has been established with several DeFi projects such as Curve, Maker, Aave, and Morpho for integration, providing users with services like stablecoin exchange, lending, and yield farming. With EVM compatibility, existing DeFi contracts can be quickly migrated, forming a rich stablecoin financial ecosystem.

4.XPL Economic Model

4.1 Issuance and Distribution

Image source: https://docs.plasma.to/docs/get-started/xpl/tokenomics

• The native token of Plasma XPL has a total supply of 10 billion tokens. In the mainnet public offering stage, 10% (1 billion tokens) was issued for investors to purchase, with a unit price set at 0.05 USD, corresponding to a financing target of 50 million USD.
• Token subscription is conducted by depositing stablecoins such as USDT/USDC/USDS into the Plasma Vault on the Ethereum chain for staking allocation. The final subscription amount reached 500 million USD, which is double the target (with deposits of approximately 500 million USD, including USDC ~345 million and USDT ~146 million), demonstrating the high recognition of the project's vision by investors.

4.2 Lock-up Mechanism

• To ensure fairness and stability, the deposit for the token sale will be locked from July 14th, and participants must lock their tokens for at least 40 days after the subscription ends. U.S. investors will have a longer lock-up period of 12 months to comply with local regulatory requirements. Users from the UK and certain restricted areas are excluded from participation.
• This lock-up mechanism restricts circulation in the short term, reduces speculative risks, and enhances early network stability.

4.3 Inflation and Distribution (Expected)

• Plasma has not yet publicly disclosed the complete inflation plan. However, one can refer to the models of other high-performance public chains (such as Avalanche, Cosmos), which typically set an annual inflation rate (to reward validators and support ecological development). Plasma can clarify the annual inflation rate and distribution mechanism of XPL in future releases.
• XPL holders may use it to pay transaction fees (Gas) and participate in network governance, which helps to form intrinsic value demand.

4.4 Staking and Governance

• Plasma adopts a Proof of Stake (PoS) model, where XPL can be used for staking by validating nodes to ensure network security. Stakers will receive transaction fees and block rewards as compensation, similar to the mechanisms of Ethereum or Avalanche.
• The XPL token is also expected to have governance features, allowing holders to participate in on-chain proposals and voting to decide on major matters such as protocol upgrades and fund usage (similar to the governance roles of tokens like ARB, OP, etc.). The specific governance mechanism and voting weight system are yet to be announced by the project team.

5. Industry Comparison

5.1 Other Layer 1 Blockchains

• Ethereum (Ethereum): The earliest large-scale smart contract platform, boasting the richest ecosystem and high security guarantees. However, its base network throughput is only about 15 TPS, and transaction fees during peak periods can reach tens of dollars, making it unsuitable for high-frequency, small-value payments. Although Ethereum's Layer 2 solutions can reduce costs, they still rely on the security and settlement speed of its main chain.
• Solana: Designed for extremely high performance, with a theoretical peak TPS of 65,000 and an average of 2,000 to 3,000 TPS on the mainnet; transaction fees are very low (approximately $0.00025). The drawbacks are issues with centralization and network stability (has experienced multiple outages). Solana is a non-EVM platform (uses Rust/Solana VM), and is not compatible with the Ethereum ecosystem.
• Avalanche: Adopts a multi-chain architecture (X-Chain, C-Chain, P-Chain) to achieve high performance, with C-Chain being EVM compatible. Typical TPS can reach thousands (around 4500 TPS), confirmation time is less than 1 second, and transaction fees are low (around 0.08 USD). Avalanche offers customizable subnets with high flexibility; however, the ecological scale and the number of validation nodes are relatively fewer compared to Ethereum.

Compared to these general public chains, Plasma focuses on stablecoin scenarios. It combines the security of Bitcoin and the programmability of Ethereum, optimizing the stablecoin transfer experience with zero fees and high throughput characteristics. In contrast, traditional public chains often struggle to meet both low fees and high concurrency at the same time. The dual-channel zero-fee structure and Bitcoin anchoring introduced by Plasma serve as its differentiated advantages.

5.2 Layer2 scaling solution

• Optimism and Arbitrum (Optimistic Rollups): Both are Layer 2 scaling solutions for Ethereum that significantly improve throughput and reduce fees by moving most transactions off-chain and periodically submitting data to the Ethereum mainnet. They are fully compatible with EVM, supporting the migration of Ethereum contracts to Layer 2. Security relies on Ethereum: transactions are initially assumed to be valid, and if there is a dispute, a "fraud proof" mechanism is enabled for correction. Currently, Arbitrum's total value locked and transaction volume are higher than Optimism (Arbitrum TVL is approximately $15.94 billion with a throughput of about 5.9 TPS; Optimism TVL is approximately $9.36 billion with a throughput of about 3.8 TPS). Both have issued governance tokens (ARB, OP) and do not provide a free transaction mechanism, still requiring Ethereum Gas.
• ZK Rollups: Including zkSync, StarkNet, etc., use zero-knowledge proof technology to batch transactions off-chain and submit validity proofs to Ethereum. The features include faster finality confirmation (no challenge period required) and stronger security, but the computational cost of generating proofs is relatively high. Currently, it mainly supports EVM-compatible versions. ZK Rollups can provide higher throughput and instant settlement in stablecoin scenarios, but ecosystem and developer support are still growing.

Plasma vs Layer2 Plasma, as an independent Layer 1 blockchain, has a security model and finality that are significantly different from Layer 2. Layer 2 relies on Ethereum as a safety net and requires waiting for a fraud proof period or proof generation; whereas Plasma adopts BFT consensus, allowing for real-time block confirmations; Plasma anchors its state to the Bitcoin network instead of Ethereum, which means Plasma is not affected by congestion on the Ethereum network. At the same time, Plasma provides zero-fee stablecoin channels, which is a feature that most Layer 2 solutions do not have.

5.3 Performance and Design Comparison Highlights

Throughput: Plasma can process thousands of transactions per second (targeting over 2000 TPS). In contrast, the Ethereum mainnet is about 15 TPS, Solana consistently around 2000–3000 TPS, Avalanche C-chain about 4500 TPS, while Optimism and Arbitrum are currently in the single-digit TPS range.

Cost Fees: Plasma charges no fees for stablecoin transfers; however, during peak times, Ethereum mainnet fees can exceed dozens of dollars, Solana transaction fees are negligible, and Avalanche is about $0.08. Layer 2 requires payment of Ethereum Gas, which is usually lower than the Ethereum mainnet, but cannot be completely free.

Ecological Compatibility: Plasma is compatible with Ethereum (Solidity contracts can be deployed directly), friendly to developers; Solana has an independent ecosystem; Avalanche supports multiple chains but requires using the C-chain; Layer 2 fully inherits the Ethereum ecosystem.

Security and Decentralization: Plasma leverages Bitcoin as a security foundation (sidechain anchoring), enjoying the security and decentralization advantages of Bitcoin; Ethereum uses PoS, providing high security; Solana has significant centralization controversies; Avalanche has a multi-chain architecture but a smaller node scale than Ethereum; Layer2 inherits Ethereum's security.

Application Positioning: Plasma clearly serves stablecoin payment scenarios and does not focus on complex features such as NFTs and games, thus its architecture is lightweight and efficient. In contrast, other chains have diverse functionalities but may deviate from the circulation needs of stablecoins.

6. Conclusion and Outlook

Positioning and Potential of Plasma: Plasma is dedicated to building a dedicated public chain for stablecoins, aiming to attract large-scale stablecoin applications with high performance and zero fees. This positioning currently has few precedents, akin to the metaphor of "Everything Bagel" in the movie "Everything Everywhere All at Once"—a comprehensive infrastructure for stablecoins. With its close relationships with Tether's parent company and founders, numerous ecosystem partners (such as Ethena, USDT0, Yellow Card, etc.), and leading technological architecture, Plasma is expected to become an important infrastructure in the stablecoin market.

Plasma is still in its early stages, and the mainnet has not yet officially launched. Its technical implementation and ecological appeal remain to be validated by the market. The key lies in whether it can quickly attract developers and users after the mainnet goes live, establishing the network effect of a stablecoin settlement network. Meanwhile, regulatory and security concerns must also be continuously addressed, especially the balance between privacy transactions and compliance.

Future Outlook: As the demand for stablecoins continues to grow, the necessity for dedicated chain infrastructure becomes increasingly prominent. Plasma's innovative ideas and strong lineup of supporters make it one of the projects worth watching. In the future, whether Plasma can fulfill its promise of zero fees and high performance, as well as how it will secure a place in a multi-chain coexistence landscape, will be key points of observation.