Mode Network My Investment Thesis.

INVESTMENT THESIS.

1.  Mode Network is a pioneer for DeFAI and will be a highly valuable contributor for DeFi.

2.  Mode has a developer centric ecosystem, reaching $500M in TVL and 376K users.

3.  Mode has the ability to scale and aim for widespread adoption, using the OP superchain.

4.  Attractive risk/reward investment offering a 85x upside, with Bloomberg projecting the AI market to be valued at $1.3 trillion by 2032.

KEY RISKS.

1.  Intense Competition: Mode will have to compete with established protocols such as, Optimism, Base and Solana.

2.  Regulatory Barriers – the intersection of AI and DeFi will face increased scrutiny from regulators.

3. Adoption Barriers: User migration and adoption speed may be influenced by existing habits and platform dependencies.

4.  Execution Risk. Mode will need a successful delivery of promised features, such as AI-powered interfaces and the Synth Subnet as well as being a constant innovator to maintain their competitiveness.

Protocol Overview.

The Mode Network has a modularisation model and a developer focus, it is designed to foster the growth and adoption of blockchain applications. Mode operates as an infrastructure project within the DeFAI landscape, utilizing Ethereum’s proof of stake mechanism which enables Mode to focus on their innovative revenue-sharing model rewarding users and developers through revenue allocation and a referral scheme to enhance decentralisation.

Target Market

Mode’s integration with Optimism’s Superchain is key as Mode benefits from shared security, scalability and interoperability helping to creating a strong competitive moat. This is by combining their synthetic data, AI enhanced security and decentralised agent architecture. 

TAM: The total addressable human market (TAHM) is just the beginning, but the real opportunity lies in the total addressable agent market (TAAM) the thousands of autonomous agents that will increasingly drive AI-to-AI transactions on chain through swaps, lending, borrowing, managing liquidity pools and even traditional applications. The true long-term TAM will be defined by AI-driven economies at scale. Here we see Mode positioning itself as the infrastructure layer, enabling seamless agent-to-agent transactions on-chain.

Use-cases

Defi: Mode’s DeFi Agents automate complex tasks within DeFi. This can help to on board both retail and institutional players looking to optimise DeFi strategies from, monitoring positions across protocols to maximising yield farming thereby reducing manual intervention.

On-Chain Agent infrastructure enables users to deploy AI agents where there are 7,349 live agents in their ecosystem with $332.4K AUM by agents. The Mode terminal, which interacts with DeFi protocols, enables simplified strategies and automated execution.

 Developers: Mode provides a fee sharing model, funding program, a software development toolkit (SDK) and a dashboard to build AI-driven applications to organically growing their ecosystem.

Frontends: Mode simplifies user interactions with AI-powered automation enabling low fees and a seamless onboarding process through their terminal. Its infrastructure enables efficient and user-friendly interfaces that drive greater adoption for DeFi and seamless transaction swaps via natural language.

INVESTMENT THESIS

1. DeFAI leadership: Mode is combining both DeFi and AI to enabling complex operations which will be abstracted behind user friendly interfaces while the AI agents interact directly with smart contracts for the user.

2. Developer Centric Ecosystem: This developer-first approach ensures long-term scalability and network adoption, through grants, public funding and shared revenue.

3. Scalability for institutional adoption: Leveraging the Optimism Superchain, Mode offers ultra-low fees and high throughput. As user adoption grows Mode is best positioned to capture significant market share over the long term.

4. Long-term potential and investment upside: The DeFAI market can reach $39 billion by 2032, with the future being an on-chain agent-to-agent economy, Mode offers a lucrative 85x upside given their unique ecosystem.

TECHNICAL OVERIVEW

Mode network is designed to leverage scalability and security while integrating AI tools to simplify access to DeFi.

Revenue Share Model: Mode has introduced a unique approach to transaction fees by distributing them across four key categories: the sequencer, developer, the chain and users.

Sequencer Contributions: The sequencer funds the Layer 1 security and instead of retaining the fees Mode redistributes a portion to incentivise developers to build on the platform. This is done through, tracking the contracts and know how profitable they are, once all the transactions have been sequenced the funds are then returned to developers. 

Dynamic Gas Model: This system prevents extreme gas spikes, significantly reducing costs compared to Ethereum and making Mode an attractive option for users and developers.

The OP Stack and the Superchain:

Mode leverages the OP Stack and the Superchain to build a scalable and efficient network. The OP Stack addresses Ethereum’s scaling challenges where these Layer 2 solutions are interconnected through collaboration and modularisation mechanisms to, enable seamless interoperability between blockchains. Through this Mode can effortlessly bridge assets, leverage and deploy strategies across multiple chains all whilst enduring the benefits of the Superchain. The modular model consists of five core layers the data layer, sequencer, execution, roll up layer, proof and fault layer in order to provide a robust foundation for scalability, security and innovation.

The Synth Subnet

Mode’s data layer is built around the vision for a Synth Subnet which leverages Bittensor’s technology to create a powerful Synthetic forecasting data for AI Agents and LLMs. Having recently launched, the Synth Subnet revolutionises DeFAI by providing the most accurate synthetic price data.

How it works: The Synth Subnet is achieved through a decentralised network of miners generating hypothetical trajectories of asset prices that reflect real-world dynamics, this then enables the AI Models to train on a vast array of potential market scenarios.

For example, Tesla trains its autopilot AI with real-world driving data but relies heavily on synthetic data to simulate rare or dangerous scenarios that may not frequently occur. Similarly, in financial markets, where past performance doesn’t predict future behaviour. Mode Network generates synthetic price paths, allowing its AI models to train on diverse market conditions such as extreme volatility and flash crashes to ensure adaptability and better preparedness.  

 Their price predictions are then rigorously scored using a Continuous Ranked Probability Score (CRPS) which is evaluated by validators, fostering a competitive environment where accuracy is consistently rewarded through emissions.

 Security: Mode’s infrastructure is set to lead DeFi adoption with its AI-secured sequencer and FortaNetwork firewall, ensuring a secure and low-cost chain that blocks high risk transactions before execution, creating a safe environment for institutional users.

The Synth Subnet is indispensable for AI agents to outperform competitors by optimising liquidity pool positions, managing collateral to prevent liquidations and trading options efficiently. However, the subnet lacks a trusted execution environment (TEE) and ZK processing which could enhance the security and scalability of the subnet, but this would require evaluation of the trade-offs between added security and performance.

BUSINESS MODEL & TOKENOMICS

Business Model

Consumers: Mode uses the sequencer fee sharing mechanism for developers and users. Users can get actively involved both on chain and off-chain through airdrops, software development toolkit and staking. In addition, users benefit from AI-powered interfaces that simplify operations whilst enduring low fees.

Native Token ($MODE): Used for governance, staking and facilitating transactions within the ecosystem, enabling the voting on key network upgrades and proposals as well as offering rewards in OP tokens and AI agent airdrops for staking Mode. In turn this can increase the tokens value as the network grows.

DeFi Incentives: The Mode token supports DeFi activities as every agent that launches, staked mode holders will receive a portion of the agents token, this creates a cyclical demand for $MODE as users stake tokens to access rewards and participate in the ecosystem.

 Token Supply: MODE has a total supply of 10 billion tokens and an initial circulating total supply of 1.3 billion. As of January 2025, approximately 2.5 billion tokens are in circulation. The Tokenomics are designed to decentralise Mode and incentivise active participation from users and developers in the ecosystem. Furthermore, there is a gradual release of tokens which helps to control inflation and maintain security.

The distribution is as follows:

1. User and Developer Airdrops: 35%

2.  Investors: 19%, have a 12-month cliff from TGE followed by a 24-month linear vest.

3.  Core Contributors: 19%, have a 12-month cliff from TGE followed by a 24-month linear vest, helping to prevent sudden sell-offs and promotes long term commitment.

4. Foundation and Onchain Treasury: 27%, helping to increase the networks value over time.

COMPETITIVE LANDSCAPE

Base is a competitor to Mode in their sector. Base has been designed using the OP stack technology and integrates APIs for price forecasting data into agents, same as the Mode Network. However, Mode leverages AI agents to optimise tasks in DeFI whereas, base has a much broader focused ecosystem.

Mode prioritises quality, impactful projects and developers versus bringing over the best projects to their ecosystem, presenting Mode as an ambitious challenger to established layer 2s like Base. Mode offers more automation and incentives than base further giving Mode a competitive ed

 VALUATION ANALYSIS

Long-Term Upside:

The Mode token trades at $0.02 with a market cap of $70 million and a current FDV of $283 million. Time and innovation will be important for Mode but, with the US governments $500B investment into AI this should be the catalyst the sector needs as we will start to see market attention value AI and Cryptocurrency.

 Longer term with the AI industry projected to be $1.3 trillion by 2032, we have typically seen new narratives capture 10% of the market, as seen with DeFi, and if this happens the Crypto x AI market would be worth $130B, coupled with a speculative premium (3x in early-stage markets) could push Crypto x AI to $390 billion by 2032. If the DeFAI market captures 10% this would represent $39 billion a 24x from current levels. With Mode pioneering DeFAI Mode can capture 15% of the DeFAI market from being a key infrastructure player. As a result, this gives Mode Network an 85x upside at a price of $1.70 and a market cap of $6b.

Note: Mode’s most recent private funding round was 6^th May 2024 and launched at$ 0.05 cents with an FDV of $372 million, presenting a potential long-term upside as it’s at $0.02.

STATE OF THE PROTOCOL

Team: James Ross founder of Mode.

 An angel Investor in Eigenlayer and Ethena, founder of agency0x which was acquired by Hype. Partners as well as, an advisor for Hashflow.

Mode’s Partnerships:

Mode’s skills and reach are further enhanced by its innovative alliances and partnerships with top blockchain and AP initiatives like Giza, Olas and RPS AI. As well as with lending protocols Ionic, Renzo and Layerbank.

ROADMAP

- Q1 2025, AiFi Vault Layer, reflecting Mode’s intention for an AI-powered treasury.

- Mode AI Terminal Launch: Uses the Synth Subnet enables the ability to answer probabilistic questions on market data.

- Partnerships with Chirperai for a launchpad for domain-specific Stage 3 agents.

- Q2 iOS and Android Wallet Apps

- Q3 2025 AiFi Fundraising Platform: a hub for crypto ai projects to find investors

- Q4 2025 AI2AI Financial Services: AI agents can be fully autonomous on-chain.