Matcha Q4 2023 Brief
Key Insights Volume on Matcha increased by 58% QoQ, crossing over $1 billion as it recovered from the decline in Q3. Total unique traders on Matcha increased by 16% YoY, though declining by 16% QoQ. Ethereum regained the lead in share of trades on Matcha, accounting for 26% of Matcha trades, while the next highest activity chains were Optimism (20%) and Arbitrum (19%). Matcha saw a 36% YoY decline in the daily average rate of failed trades (revert rate), from 9.5% to 6.1% using the Standard trading mode. In Q4, Matcha added support for cross-chain trading and made a series of updates to its limit order product. Primer Matcha is a decentralized exchange (DEX) aggregator that was launched in June 2020 by 0x. As a DEX aggregator, Matcha aims to deliver users the best prices on DeFi trades. Using the 0x Swap API, Matcha finds the best-executed price from over 100 onchain (i.e., AMMs) and offchain (i.e., 0x proprietary RFQ) liquidity sources. This approach enhances price efficiency and optimizes gas costs for users, rendering it a more economical choice than direct trading on platforms like Uniswap or SushiSwap. Matcha also offers a range of core features that enhance the trading experience. It supports the trading of over 5 million tokens on nine blockchains, including Ethereum, BNB Smart Chain (BSC), Polygon, Avalanche, Optimism, Fantom, Celo, Arbitrum, and Base. Gas fees are conveniently embedded into trades to cover re-submission costs, alleviating concerns over failed transactions and eliminating the need for users to hold native gas tokens. Matcha also provides MEV (Maximal Extractable Value) protection, powered by 0x Swap APIs, to prevent slippage and MEV attacks. Ethereum and Polygon users that utilize Matcha Auto or route trades through RFQ also avoid MEV attacks. Additionally, Matcha supports cross-chain trading across seven different networks (Ethereum, Polygon, Arbitrum, Optimism, Base, BNB Smart Chain, and Avalanche). Website / X (Twitter) / Discord Key Metrics Performance Analysis Volume and Trades Matcha’s trade volume recovered in Q4. It increased by 58% QoQ despite seeing no change in the total number of trades. This dynamic implies that the average trade size also grew by 58%, reflecting the bullish sentiment that categorized Q4. The increase in average trade size may also be attributed to users placing more trust in Matcha due to features like RFQ routing and Matcha Auto, which protect against MEV attacks. In Q4, the average daily percentage of MEV-protected trades increased from 16% to 23%. As DEX traders make higher volume trades, they will increasingly value tools that protect against harmful MEV to ensure the integrity of their trades. Ethereum stood out in Q4 as it regained the lead in share of trades on Matcha, accounting for 26% of Matcha trades. Meanwhile, Optimism lost 10% of its trade share from Q3, falling to 20% of the Matcha trade share in Q4. Arbitrum remained roughly the same, accounting for 19% of the Matcha trade share. In raw values, every chain except for Fantom saw trade volume increase. However, Ethereum’s outpaced most other chains, increasing its share of Matcha volume to 87%. The volume share of ETH (including ETH derivatives) and USD-pegged stablecoins grew 11% QoQ as the most popular trading pairs on Matcha. This growth may have been a result of ETH ETF speculation, given the positive sentiment around the upcoming (during Q4) Bitcoin ETF approval. Other pairs excluding the top five trading pairs accounted for over 15% of the Q4 share, the highest percentage in the past year. This increase in trading of ad-hoc pairs may have been influenced by Matcha increasing its number of indexed tokens to over 5 million tokens in Q4. In the same period, stablecoin-to-stablecoin trading (Stable/Stable) and ETH derivatives (ETH/ETH) trading fell by 5% and 10%, respectively. Unique Traders In Q4, Matcha added support for cross-chain trading and implemented a series of updates to its limit order product. While this effort, combined with the updates from Q3, appeared to retain returning unique traders (+16% QoQ), the overall number of unique traders fell by 16% QoQ, following a record Q3 for new unique traders. Regardless, total unique traders have increased 16% YoY, with new traders rising by 7% YoY and returning traders rising by 24% YoY. Revert Rate Matcha uses the 0x Swap API and 0x Protocol for its backend processes. The 0x Swap API aggregates liquidity across all supply sources (onchain and offchain), helping traders by filling orders with the best prices. This process requires orders to be stored offchain while trade settlement occurs onchain. The 0x Protocol ensures all parts of the trade are satisfied before executing the swap; if not, the trade is reverted. The revert rate is useful for determining the reliability of the protocol. In Q4, Matcha maintained low volatility for revert rates. It ended the quarter with an average of only 6% of trades reverted, compared to the market average of 9%. Matcha greatly improved over the past year, with 36% fewer trades being reverted YoY (from 9.5% to 6.1%). This improvement can largely be credited to the various updates made throughout the year by the 0x team, which is responsible for Matcha’s backend infrastructure. Qualitative Analysis Matcha Upgrades Matcha implemented a series of upgrades in Q4, adding new features and improving functionality. Added support for Phantom Wallet. Added new liquidity support to enable Matcha to access liquidity from Camelot DEX (one of Arbitrum’s largest liquidity sources) and PancakeSwap V3 (BNB Smart Chain’s highest-volume DEX). This feature was accomplished by using 0x’s Swap API to power its DEX liquidity aggregation. Added a trade history feature that enables users to view their completed swaps and manage limit orders placed on Matcha. Increased token coverage to over 5 million tokens, up from 4 million in Q3’23. Launched cross-chain swaps available on seven chains. Implemented limit order updates that enhance usability. Cross-Chain Swaps Since cross-chain swaps launched in early December, users have been able to trade assets on Matcha across seven different chains. Key aspects of this product are listed below. Users maintain custody while using this product. Support across seven chains: Ethereum, Polygon, Arbitrum, Optimism, Base, BNB Smart Chain, and Avalanche. Only five steps, all on the same interface. Matcha has not announced any fees for the service. Powered by Socket, an interoperability protocol that facilitates data and asset transfers across chains. (Socket is not a bridge or cross-chain user application, it is developer tooling.) Limit Orders Updates Limit orders are a trading tool that enables traders to buy or sell assets at a specified price, ensuring the trader does not pay more or sell for less than this predetermined price. 0x’s limit order product can be used on three chains: Ethereum, Polygon, and BNB Smart Chain. Matcha’s limit order upgrades were released at the start of October in Q4. Below is a recap of these upgrades made available to users going into Q4. Shortcuts: enables fixed percentage adjustments to orders, simplifying and speeding up the limit order process. Rate Control: lets users set exact order amounts of tokens they want to trade. Duplicate Orders: lets users duplicate previous orders — saves time instead of creating repeat orders. Order Batch Cancellation: gives users the power to cancel all unfilled orders in one transaction. (This operation costs gas.) Closing Summary Matcha continued to ship products and features throughout Q4: it added high-quality liquidity sources, increased support to over 5 million assets, added cross-chain trading, implemented limit order updates, and launched a trade history feature. Some of these additions invariably contributed to the improvement and maintenance of important metrics. Matcha saw trade volume jump by 58%, added 16% more returning unique traders, and maintained low revert rates on trades. Throughout Q4, Matcha continued to ship valuable products and features, positioning itself well to capitalize on the next stage of the market cycle. ——
Source: Micah Casella — Published: 2024-01-24T13:15:00ZState of BNB Smart Chain Q4 2023
Key Insights BNB Smart Chain (BSC) processed a record 32 million transactions in a single day and 4.6 million average daily transactions in Q4’23, up 30% QoQ and up 35% YoY. BSC grew its revenue by 27% QoQ and saw its market capitalization increase by 48% QoQ. The number of active validators on BSC grew from 32 to 40, up 25% QoQ and up 54% YoY. This growth was spurred by the implementation of BEP-131 and BEP-159. Venus Protocol overtook PancakeSwap in DeFi TVL share on BSC, accounting for 39% of the total share; PancakeSwap accounted for 37%. BNB Chain launched the mainnet of BNB Greenfield, marking the start of a BNB Chain-native storage network that synergizes decentralized cloud storage with the smart contract functionality of (BSC), thus creating a powerful infrastructure stack for Web3-native and AI-focused projects. Primer BNB Chain (BNB) is an ecosystem of blockchains where each chain serves a particular function. The three core components of BNB Chain are as follows: BNB Smart Chain: smart contract layer (will add staking and governance functionality) BNB Beacon Chain: current staking and governance layer (will migrate functionality to BSC and be discontinued) BNB Greenfield: storage network opBNB: optimistic rollup (with plans to upgrade to a zero-knowledge rollup) The metrics in this report will focus on BNB Smart Chain (BSC). BSC is an EVM-compatible, layer-1 blockchain secured by a form of Proof-of-Staked-Authority (PoSA) that combines aspects of Proof-of-Authority (PoA) and Delegated Proof-of-Stake (DPoS). In PoSA on BSC, the validator set is of fixed size and is elected by stake weight (staked plus bonded). In addition, validators must continue staking assets to secure the network, and validators chosen to produce blocks are rotated (not based on stake weight). For a full primer on the BNB Chain ecosystem, refer to our Ecosystem report. Website / X (Twitter) / Telegram Key Metrics Performance Analysis Financial Overview As the third-largest Layer-1 protocol by market capitalization, BSC had a productive quarter, experiencing a positive change in all of its financial metrics. It saw QoQ growth in market capitalization(+48%), revenue measured in USD (+27%), and gas fees burned in BNB (+21%). As such, the protocol ended the year with a 4% annual deflation in Q4. Many of BNB Chain’s initiatives appeared to impact the progress of the protocol throughout the year. BNB Smart Chain (BSC) generated over $39 million in revenue in Q4, an increase of 27%. Revenue denominated in BNB, which measures all fees collected by the protocol, grew by 23%, indicating an increase in activity. Though already trending upward, the spikes in revenue from December may be attributed to inscriptions-related activity, which led BSC to experience a record 32 million transactions on December 7, 2023. Additionally, speculation on BSC’s native asset, BNB, led the market capitalization to increase by 48% QoQ, recovering from two consecutive quarters of decline. The renewed interest in BNB may be a result of the activity facilitated by the blockchain. Network Overview A few of BSC’s most impressive improvements throughout the year include a 35% YoY increase in daily transactions, a 45% YoY reduction in the USD cost of an average transaction fee, and a 54% increase in the number of active validators. The year’s technical developments showed that BSC can experience heightened activity while still lowering costs for users and improving the decentralization of the protocol. Active addresses are those that were active on BSC as a sender or receiver. Daily average active addresses fell 7% QoQ, and daily average new unique addresses fell 43% QoQ. The decline in new unique addresses may be a result of new users trying opBNB, which launched the previous quarter, rather than BSC. In Q4, opBNB added nearly $25 million in bridged assets, indicating movement to the new chain. Additionally, users of XCAD Network and Galxe, two of BSC’s most used SocialFi applications, saw declines in unique active wallets of roughly 36% QoQ and 64% QoQ, respectively. Regardless, these falls in active addresses have not significantly impacted BSC’s onchain activity. BSC had a record quarter, averaging roughly 4.6 million daily transactions, an increase of 30% QoQ and 35% YoY. It experienced multiple spikes in transactions in December largely due to inscriptions-based activity. The use of inscriptions originated on Bitcoin as a workaround to create NFTs and tokens, given that Bitcoin lacks native support for smart contracts. On smart contract platforms like BSC and other EVM-compatible blockchains, inscriptions are an alternative to traditional token creation methods. On Bitcoin, data is inscribed directly onto satoshis (Bitcoin’s smallest unit of measurement) in transactions. EVM-based inscriptions are similar; however, EVM chains use "calldata," which is optional data sent in a transaction and is read-only and cost-effective. Creating BEP-20 tokens requires smart contract development and can be costly, but inscribing data within a transaction is simpler and cheaper. Of all EVM-based blockchains, BSC has the largest number of addresses that have minted inscriptions. On December 7, 2023, BSC processed a record 32 million transactions, of which, many were inscription-related. And the average transaction fee cost for that day was only $0.27 USD, which was 74% less than the average transaction fee cost during all of Q4. This event showed BSC’s ability to scale activity while providing steady fees for the user. The size of BSC’s validators followed an upward trend throughout the year, adding eight validators in Q4, a 25% QoQ increase, and a 54% YoY increase. The implementations of BEP-131 and BEP-159 in Q3 were instrumental in increasing the size of BSC’s validator set over the past two quarters. BEP-131 introduced candidate validators onto BSC, which essentially created the role of backup validators should there be any issues with active validators. Also, BEP-159 introduced a permissionless validator election mechanism. While the amount of BNB staked decreased by 2% QoQ, the value of BNB staked increased 44% to $7 billion, further increasing the security of the system. Having a higher dollar value of staked assets in PoS protocols increases the difficulty for newer malicious actors to attack the system due to the higher entry point for staking. To further increase BSC’s security, BEP-322 was proposed to introduce a standardized mechanism for Proposer-Builder Separation (PBS). Potentially beginning in Q1’24, this proposal would improve transparency, encourage competition through multiple MEV (maximal extractable value) solution integrations, and stabilize MEV-focused products. Ecosystem Overview Ecosystem Growth Strategy The drivers of BNB Chain’s network activity and fundamental value accrual include its growth strategy to attract developers and grow its ecosystem. BNB Chain has established several growth initiatives that were run throughout Q4 2023, including: Most Valuable Builder (MVB) Accelerator Program — Applications for the seventh season of this program, in collaboration with Binance Labs, opened in December 2023. Teaming up with CMC Labs, this program aims to incubate 100 new projects and will take place between February and March 2024. It features a 10-week accelerator, builder grants, and operational resources for applicable teams. Gas Grants Program — The Gas Grants program, which ran in October and November, incentivized projects that contributed to the BNB Chain ecosystem by providing them with gas fee grants proportional to their monthly gas fee volume. The total pool for these gas grants was fixed at $200,000 in BNB tokens each month, with individual projects receiving up to $15,000 monthly. In October, 21 projects received grants, and 22 projects received grants in November. DAU Incentive Program — BNB Chain transitioned its Gas Grants program to the DAU Incentive Program in December. It awards up to $200,000 monthly, and individual projects can earn up to $90,000 from the prize pool. The total prize pool varies, equaling the sum of gas fees of eligible projects up to $200,000. Eligible projects are ranked based on their average DAU during the month they participate in the program. DeFi Throughout Q4, BSC’s DeFi TVL grew from $3.2 billion to $4.3 billion, a QoQ increase of 33%. To avoid double-counting, liquid staking TVL was excluded from the figure. However, Wrapped Beacon ETH’s TVL measured in USD rose from $1.3 billion to $1.8 billion, up 40% QoQ. Despite an exploit in early December, Venus Protocol recovered and overtook PancakeSwap in TVL share, accounting for 39% of the total share; PancakeSwap took 37%. While the top five protocols collectively accounted for 85% of BSC’s DeFi TVL, hundreds of other protocols accounted for over 15%, worth $656 million. Despite the concentration of TVL among top protocols, the dollar value of TVL of BSC protocols outside the top five indicates the financial strength among even smaller protocols. BNB Chain actively promotes newer protocols with multiple initiatives, cohosting meta-governance grants with PancakeSwap. In Q4, they selected four early-stage projects to receive the meta-governance grants: Cakepie, StakeDAO, Breakfast Finance, and Redacted Cartel. Stablecoins BSC hosts a diverse ecosystem of stablecoins that has become dominated by USDT over the past year. This change can be largely attributed to the other large stablecoins seeing higher percentage outflows than USDT, which increased TVL by 6% YoY. Most notably, the largest outflows came from BUSD (-88% YoY), which held the largest share of BSC’s stablecoin TVL in Q4’22 and Q1’23. BUSD lost much of its value throughout the year due to admissions of a gap in collateral, the NYDFS ordering Paxos (the BUSD issuer) to cease issuance, and Coinbase suspending BUSD trading. Regardless, BSC still fostered a diverse stablecoin environment worth $4.6 billion in Q4, with $113 million held in 26 other stablecoins outside of the top five in the ecosystem from the past year (USDT, BUSD, USDC, DAI, and TUSD). Other After a record Q3 for NFT secondary sales transactions, participation of unique buyers and sellers, and secondary sales volume measured in BNB (though not USD), BSC saw NFT-related metrics fall in all areas. NFT marketplace transactions fell by 86% QoQ, leading secondary sales volume to drop by 63% QoQ. Buyers and sellers also decreased, falling by 65% and 85%, respectively. It’s difficult to compare this to the broader market given that BSC NFT activity spiked during Q2’23 and Q3’23, while Ethereum’s (the largest market) NFT activity spiked in Q1’23. Regardless, BSC and Ethereum saw activity start to pick up near the end of Q4’23, which may continue into 2024 as the next stage of the market cycle begins. Gaming continues to be a significant sector of BSC, attracting users and generating transfer volume. However, individual games on BSC struggled to generate activity in both areas simultaneously. Of the top five games by volume, only BLCR and Burger Cities attracted over 100,000 unique active wallets in Q4. The games with the highest volume, Alien Worlds and Galactic Arena, accounted for the lowest numbers of unique active wallets (11,000 and 1,000, respectively). Regardless, the top five games by volume generated $30.9 million in transfer volume in Q4, up 70% QoQ from the previous quarter’s $18.2 million. opBNB is an EVM-compatible optimistic rollup that helps scale execution throughput for BSC. After launching in the middle of Q3, opBNB had just short of $5 million bridged to its ecosystem from BSC. In Q4, almost $25 million was bridged to opBNB, resulting in a total of $29 million bridged to the new chain. Throughout Q4, opBNB saw very few outflows of value. In addition to liquidity being added to opBNB, in mid-December, the rollup processed a record 71 million transactions in a single day, driven by inscription-based activity similar to what drove BSC transactions. Development The number of unique contract deployers on BSC fell 10% QoQ and 19% YoY, primarily reflecting the state of developers in the broader market. The number of monthly active developers saw a 24% decline over the past year. Regardless, development on BSC remains relatively strong. According to Electric Capital’s Developer report, it is one of 17 ecosystems that drew in over 1,000 new developers. Among other EVM chains, BSC received the largest percentage (37%) of Ethereum’s multichain contract deployers and is the second-most popular EVM chain — behind Ethereum — for deploying initial new contract code, receiving 19% of initial deployments. Qualitative Analysis Launch of BNB Greenfield BNB Greenfield launched on mainnet in October 2023. It is a blockchain and storage network that synergizes its natively offered decentralized cloud storage with the smart contract functionality of BNB Smart Chain (BSC). As such, it can be utilized for a wide range of uses, including decentralized hosting, IP infrastructure, data management, and more. Currently, some Web3-native and AI-focused projects are leveraging the joint infrastructure to power their protocols. Though BNB Greenfield does not support a generalized application layer like the EVM, it includes a native cross-chain bridge between itself and BSC. The bridge enables developers to integrate BSC smart contracts with BNB Greenfield’s decentralized storage services. BNB Greenfield and opBNB also underwent upgrades in Q4 to achieve the same type of compatibility. By the end of the quarter, the network boasted 13 active validators and 190GB of uploaded storage. opBNB Progress update Following its launch in mid-August, opBNB DAU reached over 2 million in Q4. Additionally, opBNB emerged as a leader in adding total transactions during 2023 among L2s, reaching a daily high of 71 million transactions in late December. While undergoing all this growth, opBNB provided stable fees for users, often under $0.0008. The new rollup has proven to be an active chain that maintains low costs and handles high activity. Sunsetting BNB Beacon Chain BNB Beacon Chain was used as BNB Chain’s staking and governance layer. However, bridging between BSC and BNB Beacon Chain adds complexity and introduces security vulnerabilities. For this reason, BNB Chain plans to migrate BNB Beacon Chain functionality to BSC. Through a series of hard forks and upgrades, BNB Chain plans to sunset BNB Beacon Chain by June 2024. Technical Developments BNB Chain continued improving BSC throughout Q4. The main technical developments are listed below. Hotfix Hard Fork — This hard fork upgrade went live on December 7, 2023. It fixed bugs that could have led to block synchronization failures in some BSC client implementations or disrupted block building for validators. Kepler Hard Fork — This hard fork is planned to go live on January 23, 2024. It will introduce incentive optimizations for fast finality and implement EVM compatibility aligning with Ethereum’s Shanghai Upgrade. It will also implement the following BEPs: BEP-319 aims to move the reward adjustment logic from BEP-126 (which enabled sub-8-second finality on BSC) to a smart contract. There, validator rewards pertaining to the Fast Finality feature will be governable through community voting. It will also ensure more balance in reward distribution and extend the deadline to submit malicious voting evidence. Shanghai-focused BEPs include BEP-216, BEP-217, BEP-311, and BEP-312. These BEPs aim to make smart contract development more efficient and economical, preventing excessive resource consumption during contract creation, reducing gas costs for complex transactions, and enhancing security. Proposal for Standardizing Proposer-Builder Separation (PBS) — Still in discussion, BEP-322 aims to address the fragmentation of MEV (maximal extractable value) solutions on BSC. Of the 40 total active validators, 23 have adopted MEV solutions, some with different providers. The different architectures of various solutions make it difficult for validators to synchronize with different MEV providers. Additionally, without BSC client support, MEV services remain unstable. BEP-322 proposes a unifying solution to improve transparency, encourage competition through multiple MEV integrations, and stabilize the products. Content Authenticity Initiative BNB Chain joined Adobe’s Content Authenticity Initiative (CAI) in November 2023. CAI is an open-source standard and suite of tools designed to establish content authenticity and provenance. Its users can enable provenance signals in their products and identify when AI was used to generate or alter content. These standards will be important for BNB Chain, as BNB Greenfield will be used as a storage layer for much of the data-heavy content in the ecosystem. The integration of the CAI Content Credentials will enhance transparency, data ownership, and content verification on the network. AvengerDAO AvengerDAO recently released its annual report for BNB Chain, providing an in-depth analysis of the security events that unfolded on BNB Smart Chain (BSC) during 2023. It revealed that fiat losses dropped by 64% QoQ from $43.7 million in Q3 to $15.6 million in Q4 2023. This improvement was largely due to a 51% reduction in hacks, experiencing 86 in Q4 compared to 130 in Q3. Closing Summary In Q4, BNB Chain launched the mainnet of BNB Greenfield, a blockchain with a native storage network that synergizes decentralized cloud storage with the smart contract functionality of BNB Smart Chain (BSC). Additionally, BSC saw QoQ improvements in multiple metrics like revenue (+27%), market capitalization (+48%), transactions (+30% QoQ), and active validators (+25% QoQ). BSC processed a record 32 million transactions in a single day while maintaining gas fees 74% below the quarter average. As crypto enters the next stage of the market cycle, BSC will be positioned to capture value as it launches new products and implements more developments to enhance the robustness of its core protocol. ——
Source: Micah Casella — Published: 2024-01-23T13:15:00Z0x Q4 2023 Brief
Key Insights 0x’s API consumption volume increased 40% QoQ, growing to $3.7 billion in Q4. 0x daily application integrations grew 16% QoQ and 86% YoY, reaching a daily active average of 93 — its highest level in the past year. 0x’s daily average unique traders grew by 41% YoY to nearly 15,000, despite falling 17% QoQ. 0x achieved a rate of failed transactions (revert rate) of only 4%, its lowest in the past year and the lowest in the industry. 0x opened beta access to Tx Relay API, allowing developers to embed gasless trading and MEV protection into their apps on Ethereum and Polygon. 0x’s key partners include Coinbase Wallet and Robinhood. Primer 0x is an integrated suite of decentralized finance (DeFi) infrastructure APIs that enables developers and teams to build financial products on crypto rails. Through the 0x APIs (offchain routing) and the 0x Protocol (onchain settlement via an open-source protocol), 0x connects Makers and Takers to facilitate the trading of digital assets. While Takers demand liquidity of digital assets on 0x, Makers are the parties that supply that liquidity. Onchain makers include AMMs and DEXs, while offchain makers are professional market makers that provide RFQ (Request-for-Quote) liquidity to 0x. 0x’s flagship product, Swap API, enables developers to deliver the best-executed price to users directly in their applications. It does this by aggregating liquidity from 100+ sources, including decentralized exchanges (DEXs) and private market makers through the 0x RFQ, and its proprietary smart order routing. The best-executed price is different from the quoted price in that it is the best rate when the trade is realized, as opposed to the quoted rate subject to price slippage. Swap API is available on nine EVM-compatible blockchains, including Ethereum, BNB Smart Chain (BSC), Polygon, Avalanche, Optimism, Fantom, Celo, Arbitrum, and Base. The 0x platform also includes the 0x Dashboard, a developer experience tool with instant API keys, analytics, and monetization controls; Tx Relay API, which enables developers to enhance user experience to reduce drop-offs in the trading process (currently in beta on Ethereum and Polygon); and Orderbook API, which enables developers to add limit orders to their DeFi applications (available on Ethereum, Polygon, and BSC). 0x’s products have been powering the backend processes for DeFi since it launched) in 2017. Website / X (Twitter) / Discord Key Metrics Performance Analysis Volume and Trades 0x API volume increased by 40% QoQ, from $2.7 billion to $3.7 billion. This growth coincided with 0x adding support for notable liquidity sources like Camelot (one of Arbitrum’s largest liquidity sources) and PancakeSwap V3 (BNB Smart Chain’s highest-volume DEX). As far as growing volume share, RFQ trades and Uniswap trades saw the largest QoQ gains, increasing by 4% and 5%, respectively. RFQ trades will likely increase as a percentage of volume, as prices rebound from the turmoil of the past year and as users seek decentralized solutions to harmful MEV. Ethereum’s share of 0x volume was 78% in Q4, its lowest level in the past year. Aside from this 3% drop, most other protocols remained relatively unchanged in terms of the share of volume processed. However, the relative share of trades continued to change. Ethereum recovered the losses of its trade share from the previous quarter, reaching 23% in Q4. Meanwhile, Polygon facilitated 32% of trades, while BSC accounted for 24%. Though Optimism had a strong Q3, accounting for 14% of trades, it dropped to 6% in Q4, while Arbitrum stayed at 7% and Base grew its share of trades to 5%. The distribution of 0x trade and volume share suggests that the largest-volume traders, outside of Ethereum, trade on Arbitrum. 0x performed roughly 3x above the industry average (which includes 12 protocols) in terms of servicing daily unique traders in Q4, despite decreasing by 17% QoQ. In Q4, Coinbase launched gasless trading powered by 0x’s Tx Relay API for the Coinbase Wallet, and Portal launched a Developer Marketplace that uses 0x to power its swap feature. These integrations will likely enable 0x APIs to reach more users, potentially growing the number of daily unique traders in the future. RFQ Trades On 0x, offchain liquidity is sourced from professional market makers via the 0x Request-for-Quote (“RFQ”) system. The RFQ system enables traders to request real-time quotes from market makers. Using the RFQ system, traders can avoid slippage, mitigate the risk of MEV attacks, and ensure optimized trade execution. RFQ is best utilized on non-pegged pairs, including some of the most highly traded pairs such as USDC-WETH, USDT-WETH, USDC-WBTC, WBTC-WETH, and DAI-WETH. RFQ volume on available pairs grew 4% QoQ despite RFQ transactions falling by 2% QoQ. In the final week of the quarter, the volume of RFQ transactions spiked to a record of over 80% on two consecutive days. RFQ became dominant on pairs where it’s available, growing its share from 34% to 70% throughout the year. In terms of raw RFQ volume and transactions, Q4 saw increases of 111% and 30%, respectively. The growth may be a factor of increased usage of products implementing 0x APIs that offer this feature, such as Matcha’s Matcha Auto and Coinbase’s Coinbase Wallet. Application Integrations The number of applications using 0x increased for the fourth consecutive quarter, reaching a daily average of 93, up 16% QoQ and 86% YoY. As the market started to rebound in Q4, daily transactions increased by 6% QoQ. As of writing, Coinbase is the top application for driving the most trades through 0x APIs. In Q4, 0x was implemented into Portal’s Developer Marketplace, which focuses on offering third-party integrations for crypto-focused functionality through its SDK. The 0x implementation aims to make it easier for developers to add swap integrations into their applications. This partnership with Portal may lead to increased application integrations and transactions for 0x in the coming quarters. Qualitative Analysis 0x had a productive Q4 as it shipped new developments for itself and Matcha, a DEX aggregator developed by 0x. Developments and Integrations 0x opened beta access to the Tx Relay API, which enables builders to offer users gasless swaps. It also ensures protection from MEV, more reliable transactions, and smoother interactions by removing transaction approvals. Coinbase launched gasless trading to users in Coinbase Wallet on Ethereum and Polygon, powered by Tx Relay API. Portal launched its Developer Marketplace, which offers third-party integrations for crypto-focused features through its SDK, and used 0x to power its swap integrations. 0x updated its paid plans to offer more flexible and accessible options. This update to 0x’s paid plans increases the API accessibility for teams that don’t require swap functionality, enabling them to affordably retrieve price data. Increasing the liquidity sources on its Swap API, 0x added support for Camelot DEX (one of Arbitrum’s largest liquidity sources) and PancakeSwap V3 (BNB Smart Chain’s highest-volume DEX). Matcha Developments Added liquidity support for Camelot DEX and PancakeSwap V3 Added support for Phantom Wallet. Added a trade history feature that enables Matcha users to view their completed swaps and filled limit orders. Increased token coverage to over 5 million tokens. Launched cross-chain swaps available on seven chains. Implemented limit order updates that enhance usability. Closing Summary 0x had a productive Q4. It opened up access to its Tx Relay API, added support for high-quality liquidity sources, and implemented a series of updates on Matcha. Throughout the quarter, 0x also experienced a 40% increase in volume, a 16% growth in application integrations, and the lowest rate of failed trades (reverts) at only 4%. And, throughout the past year, unique traders grew by 133%, and the share of RFQ transactions more than doubled. If 0x continues adding notable integrations (like Coinbase Wallet and Portal’s Developer Marketplace in Q4) and improving its own products, it will be primed to capture value in the next stage of the market cycle. ——
Source: Micah Casella — Published: 2024-01-22T13:15:00ZState of TRON Q4 2023
Key Insights TRX's market capitalization increased to $9.4 billion, up 87% YoY from $5 billion. TRX remains one of the top cryptoassets by market capitalization. Q4 revenue in USD was up 14% QoQ from $105 million to $119 million. As for all of 2023, the only networks that had higher revenues than TRON were Ethereum and Bitcoin. Total stake increased 4% YoY to 46.1 billion TRX. Stake 2.0 utilization continues to grow, with 30% of the staked supply choosing this option. USDT on TRON built off its strong 2023 and grew 11% in Q4. At quarter end, 50% of all issued USDT was on TRON. stUSDT on TRON grew to the second largest RWA protocol in Q4. Over $2.2 billion USDT has been deposited to the protocol. Primer on TRON TRON (TRX) is a public open-sourced blockchain network using a Delegated-Proof-of-Stake (DPoS) mechanism. It utilizes an election mechanism that determines who maintains the network. All TRX stakers vote onchain on which candidates they want to become Super Representatives. In each epoch, the top 27 most voted-for candidates become Super Representatives within the active set and take turns producing blocks. An election occurs every six hours. The TRON Virtual Machine (TVM) powers applications on the network and uses “Energy” and “Bandwidth” instead of gas, like its Ethereum Virtual Machine (EVM) counterpart. Bandwidth is gas spent on transactions whereas energy is gas spent on smart contract calls. Energy and Bandwidth can be acquired by staking TRX or by burning TRX to pay for the Energy/Bandwidth required to execute a smart contract call or transaction. The TVM is EVM-compatible and offers developers affordable and fast smart contract execution. Website / X (Twitter) / Discord Key Metrics Financial Overview The circulating market cap of TRX continued its grind up in Q4’23, rising 18% to $9.4 billion. Despite the growth, TRX underperformed the broader crypto market, which grew by 54% in Q4. Because of this underperformance, TRX’s rank amongst all cryptocurrencies dropped two spots to #12. All in all, Q4 capped off a strong year for TRX’s price performance as it finished the year up 87% from $5 billion to $9.4 billion. The performance is worth noting as price was likely additionally suppressed due to concerns from the Securities and Exchange Commission (SEC) alleging that TRX was a security in Q1. TRON utilizes a resource model to execute transactions onchain. To summarize, the resource model is based on distributing Bandwidth and Energy to stakers. As long as stakers have acquired enough resources, they can use those resources to transfer tokens and execute smart contracts for free. Users must cover transaction fees with TRX if they utilize more computing power than their resources. Furthermore, all TRX used to pay transaction fees is burned. As such, revenues for TRON are derived from TRX token burns from transaction fees. Q4’23 was TRON’s best quarter yet in terms of USD revenue, increasing by 14% to $119 million. November in particular saw 407 million TRX ($41.6 million) burned. In USD terms, November set an all-time high (ATH) for monthly revenue, beating out May 2023 ($40 million). Furthermore, Q4 revenue was up YoY in both USD (+148%) and TRX (+44%). Over the past year, TRON brought in $424 million in fees, ranking #3 across all networks in fee generation. The only networks with more fees in 2023 were Ethereum ($2.5 billion) and Bitcoin ($797.9 million). Ultimately, the resource model parameter changes likely improved TRX’s value, supporting the price of TRX throughout 2023. The circulating supply of TRX is affected by two parameters. As previously mentioned, all transaction fees paid in TRX are burned, which leads to deflationary pressure on the supply of TRX. Additionally, new TRX enters the circulating token supply as rewards for stakers and block producers. These rewards work out to roughly 5.06 million TRX minted per day. Therefore, the circulating supply of TRX will decrease over time, as long as more than 5.06 million TRX is burned daily. Over Q4’23, the circulating supply of TRX decreased from 89 billion to 88 billion QoQ, making it one of the few deflationary Layer-1 networks. Over the full year, circulating supply decreased by 3%. To stake TRX on TRON, users can choose between Stake 1.0 and Stake 2.0. The new staking mechanism, Stake 2.0 (TIP-467), went live in April. It implemented a new layer to separate low-frequency staking operations and high-frequency resource delegating operations. It also introduced resource re-delegating without unstaking and improved resource utilization. Of note, while all newly staked TRX since the upgrade is staked via Stake 2.0, TRX previously staked via Stake 1.0 remains valid.Across both staking options, the staking ratio (the proportion of TRX’s total supply actively being staked) essentially remained the same, decreasing slightly to 52% in Q4. However, more users continued to switch to Stake 2.0 over 1.0 in Q4. Stake 2.0 ended the quarter with 14 billion TRX staked (+33% QoQ), whereas Stake 1.0 finished with 32 billion TRX staked (-12% QoQ). As previously mentioned, new TRX is minted as rewards for stakers and block producers. TRON incentivizes participants in its staking mechanism through a combination of the following: Block Reward - Super Representatives earn 16 TRX for each block produced (subject to change through onchain governance). After producing a block, the Super Representative’s chosen commission ratio is kept, while the remaining TRX is distributed amongst the representative’s associated voters. Vote Reward - The 28th to 127th most voted-for Super Representatives become Super Representative Partners for the next epoch. While partners do not participate in block production, they still receive voting rewards, as well as the TRX stakers that voted for said partners. For every block produced, 160 TRX is rewarded to Super Representatives and Super Representative Partners in proportion to their respective TRX stakers’ votes. The average annualized staking yield from these rewards slightly decreased throughout 2023. In Q1, the staking yield averaged 4.3%, but by Q4, it had dropped to 4.0%. Nonetheless, staking yields for TRX remained an attractive option for TRX holders throughout the year, as evidenced by the 9% increase in eligible supply staked YoY. Network Overview Usage In Q4’23, daily active addresses remained flat, slightly decreasing QoQ by 2% to 1.5 million. Notably, active addresses remain low compared to 2022. There were 1.7 million daily active addresses in Q4’22, down 12% YoY. Daily new addresses were also slightly down Q4, decreasing 2% to 185,000. Daily new addresses are also down YoY as there were 203,000 daily new addresses in Q4’22. Average daily transactions followed a similar pattern as account activity and decreased by 2% to 4.9 million over Q4. This decrease was driven entirely by “staking/unstaking” transactions (down 14% QoQ) and “other” transactions (down 10% QoQ). “Other” transactions include account creation, SR account creation, account permissions update, proposal initiation, and other non-smart contract interactions on the network. TRX transfers and USDT contract calls continue to represent the bulk of transactions on TRON, combining for over 75% of transactions in Q4. The transaction category with the most growth in Q4 was “other” contract calls (all contract calls not including USDT contract calls), which grew by 103% QoQ from 112,000 daily transactions to 226,000. Bandwidth is the gas spent on transactions while energy is the gas spent on contract calls. Users can stake TRX to acquire either resource accordingly: The amount of bandwidth obtained from an account’s stake = (the amount of TRX staked for obtaining bandwidth / the total amount of TRX staked for obtaining bandwidth in the whole network 43,200,000,000) The amount of energy obtained from an account’s stake = (the amount of TRX staked for obtaining energy / the total amount of TRX staked for obtaining energy in the whole network 90,000,000,000) The vast majority of TRX in Q4 was staked for bandwidth. However, the amount staked was down 4% QoQ from 41.38 billion to 39.83 billion. As for energy, staking increased 15% QoQ from 5.45 billion to 6.24 billion. Furthermore, bandwidth staking decreased by 1% YoY while energy staking increased by 66% YoY. The amount staked for each resource moved in tandem with consumption. Daily bandwidth consumption was down 37% YoY from 1.9 billion to 1.2 billion while daily energy consumption was up 61% YoY from 36 billion to 58 billion. Security and Decentralization TRON uses a Delegated Proof-of-Stake (DPoS) election mechanism and the Practical Byzantine Fault Tolerance (PBFT) consensus algorithm to secure the network. A DPoS election occurs every six hours, in which 27 Super Representatives (SRs) take turns producing blocks. Those who wish to run a node on TRON can pay 9,999 TRX to become an SR candidate. There may be concerns about having only 27 SRs participating in securing the network. But, at the end of Q4, over 400 SR candidates (up from ~380 in Q4’22) received votes. The growing number of SR candidates should challenge the voting population to distribute votes to new candidates. Additionally, no singular entity received more than 10% of all votes. Although a democratic voting system for block production and a growing set of SR candidates may be beneficial, neither one fully does away with centralization risks. Metrics such as the geographic diversity of nodes may also factor into a network’s level of centralization. Many Layer-1 networks struggle with the geographical concentration of their nodes. Too many nodes in the same location could jeopardize the health of a network due to geopolitical risks, regulations, and acts of nature, among other reasons. As of December 31, TRON nodes were distributed across more than 75 geographic locations around the globe, with the highest concentration in China (~21%). In order to take over the network through a two-thirds attack, a malicious actor would need to control 18 of the 27 SRs. To do this, the malicious actor would need to essentially control two thirds of the total stake. At the end of the quarter, this threshold was 31 billion TRX ($3 billion) Ecosystem Overview DeFi TVL on TRON saw signs of strength in Q4’23, rising by 20% QoQ from $6.6 billion to $8.1 billion. However, TVL denominated in TRX was flat, remaining at 76 billion TRX. By the end of Q4, TRON remained the second-highest network by TVL and more than double the TVL of the third-highest network, BNB Chain ($3.46 billion). TRON’s most prominent protocols by TVL, JustLend, JustStables, and SUN continue to represent over 99% of TVL on TRON. Of the three though, only JustLend increased its TVL dominance (17% QoQ). JustLend increased its TVL in USD by 40%, QoQ while JustStables and SUN decreased by 21% and 34% QoQ, respectively. The growth in TVL on JustLend was partly driven by new deposits, namely stablecoins. There were significant inflows of wstUSDT deposits in October ($492 million) and USDT deposits in December ($53 million). Additionally, JustLend TVL benefited from the price appreciation of deposited volatile cryptoassets, such as BTC and TRX. However, the appetite for borrowing on TRON remains quite small. Although borrows on JustLend increased by 26% QoQ from $86 million to $107 million, they still represent less than 2% of the protocol’s TVL. DEX volumes on TRON decreased for three consecutive quarters prior to Q4, following broader trends within the market, but bounced back this quarter. The average daily DEX volume on TRON increased by 42% QoQ to $9 million. DEX volumes still struggled YoY though, decreasing 62% from $24 million. Furthermore, essentially all DEX volumes on TRON come from SUN. In June 2023, SUN introduced concentrated liquidity (CL) to its SunSwap V2 AMM. As a result of this feature, SunSwap V2 AMM volumes surpassed SunSwap V1 AMM’s volume in November for the first time since CL was introduced ($199 million versus $149 million). Stablecoins Stablecoins continue to be TRON’s killer product as its market cap increased 11% QoQ from $44.5 billion to $49.3 billion. USDT represents a staggering 94% of all stablecoins on TRON. As such, TRON has greatly benefited from USDT’s growth in 2023. At the beginning of the year, there was $31.7 billion USDT on TRON. By the end of the year, this amount increased by $14 billion to $46.3 billion (46% YoY). Additionally, approximately 50% of all USDT in circulation is on TRON. Other stablecoins that increased QoQ on TRON include USDD (up 22% QoQ to $706 million) and USDJ (up 6% QoQ to $71.2 million). TUSD (down 31% QoQ to $1.9 billion), USDC (down 30% QoQ to $283 million), and HUSD (down 4% to $203,000) all lost market share in Q4. Zooming out, the biggest gainer in percentage terms on TRON in 2023 was TUSD, growing 646% YoY from $251 million. The biggest loser in percentage terms on TRON in 2023 was USDC, falling 75% YoY from $1.1 billion. RWAs TRON announced the launch of its first real-world asset (RWA) platform, stUSDT, in Q3. stUSDT is a receipt token that users will receive upon staking USDT. USDT staked in the stUSDT-RWA contract will be allocated to real-world assets. Users will then receive continuous yield from those assets through a rebase mechanism. stUSDT has seen consistent growth. In its first year of existence, it reached a TVL of $2.2 billion on TRON alone. Furthermore, it is one of two RWA protocols that has over $2 billion in TVL, with the other being Maker RWA. Lastly, as of December 31, 2023, over $30 million in yield had been rewarded from stUSDT on TRON, with a median APY of 4.74%. Development Although Q4 was a quiet quarter for development on TRON, there were some notable headlines. On October 4, 2023, TRON announced that they had joined Google Cloud's BigQuery service. BigQuery is a serverless data warehouse that allows users and developers to analyze TRON data in real time without utilizing an individual node. On October 25, 2023, TRON mainnet was upgraded to GreatVoyage-v4.7.3(Chilon). Chilon is a non-mandatory upgrade that improves the development experience on TRON by (i) fastening the speed associated with node startup and initialization, and (ii) optimizing the performance of network infrastructure. A full list of changes associated with the update can be found here. Finally, on December 6, 2023, Justin Sun announced four key initiatives for TRON, one of which is a $100 million developer fund. Although details have not been formalized, its funding could be related to the $1 billion TRON DAO Ecosystem Fund. Ecosystem Growth TRON DAO continues implementing strategies to grow the ecosystem beyond stablecoins and JustLend, with initiatives such as the TRON DAO Grants Program, a $100 million AI development fund, and the TRON Grand Hackathon seasons. During Q4, the Grand Hackathon Season 5 attracted over 3,500 participants. It also awarded 500,000 USDD in prizes to winning teams across five different tracks, including Artistry, AI, Web3, DeFi, and Builder. Judges selected the following first-place qualifiers for Season 5: LoopNFT - Artistry Track ScannerBot - AI Track Bounce - Web3 Track DebitLLama - DeFi Track Tronsave - Builder Track Each of the aforementioned teams received a first-place prize of 25,000 USDD. Furthermore, the community selected the following first-place qualifiers for Season 5: AsTRONauts - Artistry Track TronDevGPT - AI Track JustMoney Invoice - Web3 Track Wish Me Luck - DeFi Track TronHub Microsites - Builder Track Each of the aforementioned teams received a community-pick prize of $7,000. Some teams even qualified for a prize across all five tracks. Outside of the Hackathon, TRON announced a new partnership with blockchain-based AI project ChainGPT. ChainGPT will be integrating with TRON to provide users with a toolkit that allows for the easy deployment of smart contracts and NFTs on the TRON network. Additionally, ChainGPT’s AI model was fed TRON data, enabling its chatbot to interact with TRON users. Furthermore, several projects on TRON will also be integrating with ChainGPT for their product, including DexCheck, GT Protocol, and AITECH. Lastly, on December 6, 2023, Justin Sun announced four key initiatives for TRON: Enhancing inscription support on TRON Integrating TRON with BRC-20 Launching a $100 million developer fund Reducing energy costs on TRON to attract more users and developers. As a part of these key initiatives, TRON DAO is considering adding a new track for Season 6 of the Grand Hackathon, “Inscription Section.” Although no formal plans have been announced yet, TRON DAO will likely aim to advance the key initiatives laid out by Justin Sun. Closing Summary Q4 wrapped up an impressive year on TRON, as it cemented itself as one of the top smart contract platforms in the space. Revenues in USD hit new highs in Q4’23, coming in at $119 million. Outside of Ethereum and Bitcoin, no other network made more in fees than TRON. Because of the high revenues, TRX was also able to claim its place as one of the few deflationary tokens, with its supply decreasing by 3% in 2023. TRON’s killer product, and one of crypto’s killer products, continues to be the affordable and fast transfers of USDT. As of writing, $49.3 billion USDT in total is issued on TRON, representing 50% of all USDT in existence. Additionally, the introduction of RWA protocols in the second half of 2023, like stUSDT, represents another opportunity for TRON to benefit from its massive share of the USDT supply. TRON looks to grow in 2024 with several key initiatives outlined by Justin Sun. The main focus is to attract more crypto developers, through both direct incentivization ($100 million developer fund) and an improved developer experience.
Source: AJC — Published: 2024-01-19T14:54:00ZState of Filecoin Q4 2023
Key Insights Filecoin’s storage market continued to grow in Q4'23, as active deals were up 23% QoQ and 414% YoY. Simultaneously, storage utilization grew from 13% in Q3’23 to 18% in Q4’23, as Filecoin’s storage capacity continued to decrease 15% QoQ. As of the end of 2023, over 1,800 clients have onboarded datasets on Filecoin, of which 465 were over 1,000 TiB in size, up 10% QoQ and 196% YoY. The Filecoin Virtual Machine (FVM) brought Ethereum-style smart contracts to enable new use cases. Since the FVM launch of FVM in March 2023, the TVL reached over $230 million by the end of 2023. The proposal to deploy Uniswap V3 on FVM was successfully executed and will likely usher in a new phase of DeFi applications built on the Filecoin network. The FIP0001v2 community initiative was launched to improve and scale the Filecoin Improvement Process (FIPs) and governance process. Primer Relying on centralized data storage has a major shortcoming: it's hard to systematically verify the integrity of the stored data. The Filecoin storage network is a peer-to-peer version of Amazon S3. It’s built on top of the InterPlanetary File System (IPFS), which serves as the Filecoin network’s distributed data storage and sharing layer. Filecoin regularly verifies the storage of data and uses deals that price the storage based on supply and demand dynamics, instead of a fixed pricing structure. A storage deal is like a contract with a service level agreement (SLA) — users pay fees to storage providers to store data for a specified duration. To keep data safe, Filecoin uses a cryptoeconomic incentive model that regularly verifies the storage with zero-knowledge proofs. To incentivize storage providers to participate in deals, Filecoin rewards them with FIL, the network's native token. Storage providers are also slashed in the event they either fail to provide reliable uptime or act maliciously against the network. To retrieve data, Filecoin users pay a retrieval provider to fetch the data. Unlike storage deals, which involve transactions onchain, retrieval deals use payment channels to settle payments offchain, resulting in faster retrieval. Besides storage and retrieval, Filecoin aims to offer an open market where compute power can be contracted to run over data, providing more efficient alternatives to traditional centralized systems. Key protocol upgrades to enable compute-over-data services include Smart Contracts (the Filecoin Virtual Machine – FVM) and Scaling (Interplanetary Consensus). The launch of the FVM in March 2023 brought Ethereum-style smart contracts to enable new use cases on Filecoin, including liquid staking, perpetual storage, and data-intensive compute. Website / X (Twitter) Key Metrics Performance Analysis The Filecoin blockchain is used to store data decentrally by two parties: The demand side, i.e., storage users in need of data storage The supply side, i.e., storage providers with excess capacity of the network. Usage The amount of data stored in active deals between storage users and storage providers gauges the demand for Filecoin storage from both Web2 and Web3 clients. Deals In Q4’23, Filecoin continued its adoption of decentralized storage by means of active deal growth. Nearly 1,700 PiB was stored on the Filecoin network through active deals in Q4'23, up 23% QoQ from 1,400 PiB in Q3’23 and up more than 4x YoY from 332 PiB in Q4’22. Simultaneously, daily new deals decreased 26% QoQ, after a sustained growth over the past four consecutive quarters. While still positive, this slowdown in new deal growth corresponds to an overall reduction in rewards to storage providers (as discussed later in the Supply-Side Revenue section). Moreover, new deals being added corresponded to an increase in the utilization of the Filecoin network. Utilization vs. Capacity Filecoin’s storage utilization relative to the total available storage capacity increased to 17.6% in Q4'23, up from 12.6% in Q3’23. While this increase is a positive sign in terms of Filecoin’s adoption through active storage deals, it requires the context of the network’s capacity. In Q4’23, Filecoin experienced a 15% QoQ decline in average raw byte storage capacity to 9.4 EiB. This gradual decline started approximately one year ago, after average raw byte storage capacity reached its all-time high at nearly 17 EiB in Q3’22. The decreasing average raw byte storage capacity was further reflected by the drop in the total number of storage providers reaching continuously declining to 3,390 by the end of Q4’23, after reaching an all-time high of over 4,100 in Q3’22. Clients As per Messari’s guide on decentralized storage networks, Filecoin is geared toward providing cold storage solutions (e.g., archival and recovery) for enterprises and developers. Its competitive pricing and ease of access help attract Web2 clients seeking cost-effective alternatives for storing large amounts of archival data. Active efforts beyond cold storage are driven by: Banyan, Lighthouse, RIBS, Retriev, Seal, and Flamenco. As of the end of Q4'23, a total of 1,808 clients have onboarded datasets on Filecoin. Of those clients, 465 onboarded large datasets (e.g., datasets that exceed 1,000 TiB in storage size), up 10% from 421 in Q3’23. An industry breakdown of the active storage by large dataset clients reveals the industries that leverage Filecoin most are Technology (35%) and Natural Resources (31%). To encourage usage via active deals, several storage services are being offered, including: NFT.Storage, Web3.Storage, Seal, Banyan, and Steeldome. According to Filecoin’s client explorer, its major clients range from the City of New York and the USC Shoah Foundation to the Web3 platform OpenSea and the Layer-1 network Solana. Further notable efforts that leverage the Filecoin network include: The Victor Chang Cardiac Research Institute safeguarding and sharing research data. Democracy’s Library storing datasets collected by the Internet Archive at the end of administration. SETI Institute using Filecoin to store astronomical research data. UC Berkeley collaborating with Seal Storage for storing physics research. GenRAIT leveragingEstuary to store critical genomics data on Filecoin. The research center Starling Lab storing sensitive digital records of human history. Ewesion (China's fastest growing host of graphic files) using Filecoin for data preservation. DeSci Labs using decentralized data storage on Filecoin to enable research to be reproduced and independently verified by other researchers. An overview of featured clients leveraging the Filecoin network can be accessed here. Retrievals To serve storage retrieval needs, a content delivery network (CDN) for Filecoin and IPFS – called Project Saturn – is currently being developed. Saturn aims to serve Filecoin’s retrieval market through fast and low-cost content delivery. Its node operators are incentivized to fulfill retrieval requests by earning FIL from a monthly pool of approximately 30,000 FIL. Simultaneously, the FILStation app is bringing decentralized retrievals to desktops, and the SPARK module allowing retrieval checks on the network is now available on FILStation. In terms of retrieval performance, the goal of Saturn is to provide reliable content retrieval for both Web2 and Web3 use cases. It’s focused on improving the speed and performance of retrievals, with the majority of data being mirrored from IPFS. A deep dive into Saturn’s decentralized CDN, its traction to date, and its roadmap is available here. An overview of Saturn’s node performance is available in the Saturn dashboard. FVM Usage The Filecoin Virtual Machine (FVM) brought Ethereum-style smart contracts to Filecoin. Since its launch in March 2023, the TVL reached over $230 million by the end of 2023. DeFi apps give storage providers greater access to FIL, potentially making data onboarding more efficient. As of December 31, 2023, more than 2,700 unique contracts were deployed on FVM and used by over 22,000 monthly active users. These users collectively generated over 1.8 million transactions. According to the FVM Explorer, total DeFi net deposits accounted for 14.2 million FIL (approx. $85.2 million), distributed as follows: 9.1 million FIL in GLIF, 3.8 million FIL in stFIL, 2.8 million FIL in SFT Protocol, and over 1.9 million FIL in HashKing. Simultaneously, total DeFi net borrows accounted for 12.3 million FIL (approx. $73.8 million) as of December 31, 2023, according to the FVM DeFi leaderboard. Both monthly net deposits and borrows showed resilience throughout Q4’23. The proposal to deploy Uniswap V3 on FVM was passed and successfully executed in October. The deployment of Uniswap contracts on the FVM will likely usher in a new phase of DeFi applications built on the Filecoin network. As Filecoin continues to acquire new users and onboard valuable datasets, it may serve as a base for developing monetizable FVM-enabled use cases around data. Revenue Filecoin's revenue framework is similar to Ethereum's because its gas system is based on EIP-1559. This gas system consists of network fees that are burned to compensate for the resources used. Both storage users and storage providers generate revenue. Protocol Revenue As per Messari's revenue analysis, Filecoin's protocol revenue represents the sum of: Base fees – Determined by blockspace congestion and required by any storage proof. Batch fees – Used for bundling storage proofs. Overestimation fees – Required to optimize gas usage. Penalty fees – Collected for storage provider failures. While demand for Filecoin storage grew, protocol revenue from FIL fees decreased 58% in Q4'23 to 0.3 million FIL (down 58% in USD terms to $1.3 million). This decline in protocol revenue is in line with the overall decline in demand-side revenue across the decentralized cloud storage space. The main contributor to the decline in Filecoin’s demand-side revenue is base fees, down 80% QoQ in FIL terms. Filecoin is actively working on reducing costs for onboarding data on its network, e.g., through the Decentralized Storage Alliance (DSA) initiative to reduce decentralized storage costs by 40%. Supply-Side Revenue Filecoin's supply-side revenue consists of: Block rewards disbursed by the network to storage providers. Storage deal payments that are anchored via legal contracts. “Tips” to speed up transactions. Block rewards accounted for more than 99.9% of supply-side revenue in Q2'23, while “tips” accounted for only a small portion. The minting mechanism of new FIL tokens relies on both: An exponential decay model (30% of tokens): Block rewards are highest initially to stimulate participation and then decrease exponentially over time. A baseline model (70% of tokens): Block rewards are allocated as storage capacity grows. By combining these models, Filecoin can maintain participation after block reward distribution in the early stages of the network (see exponential decay model). It also helps continuously reward additional value created for the network through increased storage capacity (see baseline model). Supply-side revenue in FIL decreased 15% in Q4'23 to 12.6 million FIL (down 4% in USD terms). The decrease was driven by an overall reduction of FIL reward issuance due to the exponential decay model and the baseline minting model. The decrease in FIL reward issuance will likely continue in the coming quarters. For an in-depth discussion and various simulations of future FIL issuance, please refer to Messari’s investigation on the FIL circulating supply. Ecosystem Overview The Filecoin ecosystem has been actively developing a funnel of builders. It has regularly engaged in hackathons and accelerators to help early-stage projects and teams receive funding from Protocol Labs or affiliated entities. The ecosystem is channeled toward onboarding various use cases in different sectors: namely, data infrastructure, media streaming, metaverse, and gaming.As of December 2023, over 100 known projects were developed within the Filecoin ecosystem. Most projects that leverage Filecoin offer data services: Banyan: Web2-like decentralized storage for enterprises beyond archival. Lighthouse: Perpetual data storage service with a one-time payment pricing model. Numbers Protocol: Preserve data authenticity for digital media and generative AI. Seal Storage: immutable data storage solutions.Steeldome: data protection and data storage solutions. Berty: Secure messaging and social media application. Dether: Cash on- / off-ramp and diverse financial transactions. Tableland: SQL-based cloud database. Basinv2: data management and collaboration, used by Tableland, the WeatherXM network, and the Bacalhau computer network. Media and entertainment-focused protocols include: Mona: 3D art gallery in the metaverse. Huddle01: Decentralized video conferencing. OP Games: NFT minting for games. FileMarket: Web3 shop builder and marketplace. Several use cases aim to leverage Filecoin’s infrastructure to power highly specific data needs: Cryptosat: Uses mini-satellites to prevent side-channel attacks and allow for secure verifiability. ZKsig NFTs: Access control to marketplace. DataMarket: Data purchase and checkout functionalities. Qualitative Analysis Key Developments Filecoin Watermelon Upgrade (V21) The Watermelon upgrade (V21) was activated successfully on December 12, 2023. The upgrade simplifies storage provider operations and introduces improvements to the Filecoin protocol and to the FVM. Sushi Deployment on Filecoin Sushi is the first DEX to be deployed on Filecoin. Users of Sushi V2 and V3 will be able to trade and provide liquidity on the Filecoin network without bridging or native FIL tokens needed. Filecoin MetaMask Wallet The Filecoin MetaMask wallet launched in Q4’23. It allows users to connect to Filecoin decentralized apps using MetaMask, manage Filecoin accounts, send FIL to both native and FEVM accounts, and gain FEVM transaction insights. Universal Privacy Alliance Protocol Labs and the Filecoin Foundation joined the Universal Privacy Alliance (UPA) alongside Nym, Oasis, and Aztec. The UPA aims to promote "privacy by design" in technology and create a legal fund to support privacy-centric practices in the industry. Key Events FIL Bangalore and ETHIndia Members of the IPFS, Filecoin, FVM, and libp2p ecosystems took part in the FILBangalore and ETHIndia in December 2023. Over 150 submissions have been sent for the Filecoin projects track. Simultaneously, Pragma saw over 70 submissions to the Filecoin projects track. FIL Dev Summit FIL Dev Summit featured dedicated tracks on Filecon retrievals and data availability. While the retrieval track focused on improving data retrieval, the data availability track focused on how to effectively structure data and transfer it efficiently. LabWeek 2023 Protocol Labs’ annual gathering — LabWeek 2023 — featured discussions on InterPlanetary Consensus (IPC), Filecoin’s DeFi growth unlocked by the Filecoin Virtual Machine (FVM), and new Filecoin projects and developer toolings. Simultaneously, the FilecoinPlus Day introduced key changes to the Notary election process. Key Governance Decisions Uniswap V3 Deployed on FVM The proposal to deploy Uniswap V3 on FVM was passed and successfully executed in October. The deployment of Uniswap contracts on the FVM will likely usher in a new phase of DeFi applications built on the Filecoin network. As Filecoin continues to acquire new users and onboard valuable datasets, it may serve as a base for developing monetizable FVM-enabled use cases around data. FIP0001v2 FIP0001v2 is a coordination effort to improve and scale Filecoin’s governance. The FIP0001v2 draft proposes five distinct types of Filecoin Improvement Proposals (FIPs): namely, technical FIPs, cryptoeconomic FIPs, community FIPs, security FIPs, and Filecoin Request for Comment (FRC). Detailed information can be found in the FIP0001v2 draft. Closing Summary Data storage on Filecoin experienced significant growth in Q4'23, with active storage deals increasing by 23% QoQ and 414% YoY. As Filecoin’s storage capacity continued to decrease 15% QoQ, storage utilization grew from 13% in Q3’23 to 18% in Q4’23. As of the end of 2023, over 1,800 clients have onboarded datasets on Filecoin, of which 465 were over 1,000 TiB in size, up 10% QoQ and 196% YoY. Revenue from storage fees decreased 58% in FIL terms in Q4'23 (down 58% in USD terms), in line with the overall decline in demand-side revenue across the decentralized cloud storage space. The proposal to deploy Uniswap V3 on FVM was successfully executed and will likely usher in a new phase of DeFi applications built on the Filecoin network. As Filecoin continues to acquire new users and onboard valuable datasets, it may serve as a base for developing monetizable FVM-enabled use cases around data. Prominent examples include perpetual storage (similar to Arweave), undercollateralized loans to storage providers, and decentralized computing. Should Filecoin continue to onboard demand, it stands a chance at becoming a prominent provider of decentralized storage and cloud services for Web3 and traditional applications.
Source: Mihai Grigore — Published: 2024-01-19T14:00:58ZState of EOS Q4 2023
Key Insights Driven by inscriptions activity, EOS Native sustained almost 14.9 million transactions on December 11, with EOS EVM reaching almost 17.7 million on December 10. After falling 93% in Q3, EOS EVM’s DeFi TVL grew almost 3,000% QoQ to $2.2 million. The growth was also driven by the mid-October integration of USDT into the EOS Trustless Bridge. Virtual property game Upland announced a $7 million fundraise, led by EOS Network Ventures. Upland was the most popular application on EOS Native in Q4, averaging 21,000 daily active addresses. The ENF, ENV, and EOS Labs in Q4 furthered ecosystem growth via partnerships, grants, and investments, including with Spirit Blockchain Capital, CoinTR, PassPay, EOS Stable Coin Chain, UBOX, Atem Network, and EZ Swap. A major consensus mechanism upgrade originally slated for Q4 was postponed to 2024. The upgrade will bring several improvements to EOS Native including expanding the block producer count beyond 21 and bringing near-instant finality. Primer EOS (EOS) is a Delegated Proof-of-Stake (DPoS) Layer-1 blockchain built using the open-source Antelope protocol. EOS’s founding team Block.one raised around $4.1 billion in a 2017-18 ICO but slowly stopped supporting the network through core development and ecosystem funding. A community-led effort driven by the non-profit EOS Network Foundation ensued to take over ownership of the project to prevent further decay of the protocol codebase and the EOS ecosystem. The grassroots effort has driven several technical upgrades, including an IBC implementation, EVM solution, and new consensus mechanism (estimated 2024 launch). For a full primer on EOS, refer to our Initiation of Coverage report. Website / X (Twitter) / Discord Key Metrics Financial Analysis As a whole, the crypto market rebounded in Q4’23. $EOS was no exception – its circulating market cap increased 49% QoQ to $951 million. However, EOS’s market cap growth was outpaced by other tokens, as its market cap rank fell from 55th to 74th QoQ. Onchain EOS activity similarly increased in Q4, especially in December. This drove total EOS revenue up 222% QoQ to 78,000 $EOS ($61,000). EOS revenue is defined as the fees collected by EOS’s Resource Exchange (REX). EOS’s unique resource model separates bandwidth and storage costs into two transaction fees. Other networks typically bundle these costs into one transaction fee. Through REX, users can pay a fee to boost their available bandwidth for 24 hours and trade the storage resource (for a more in-depth explanation, refer to the EOS Initiation of Coverage report). REX then distributes these fees to EOS stakers. The EOS protocol mints the $EOS token at around a 3% annual inflation rate, which it distributes to validators (1%) and the EOS Network Foundation (2%). In Q4’22, the inflation rate spiked to 30% due to the funding of the newly created EOS Network Ventures with roughly 68 million EOS — the amount that had previously been burned in two portions in 2019 and 2020. Together, the EOS Network Foundation (ENF) and EOS Network Ventures (ENV) have $40 million in $EOS in their onchain accounts. Last quarter, a third independent entity, EOS Labs, was founded. The ENF pledged to allocate a quarter of its $EOS allocation from inflation to EOS Labs. The various growth initiatives of all three organizations are covered in more detail in the Ecosystem Growth section. When the EOS EVM launched at the beginning of Q2’23, it added another element to $EOS’s tokenomics. EOS EVM is an EVM execution environment deployed as a smart contract on EOS native, similar to Aurora on NEAR. EOS EVM uses $EOS as its gas token. Permissionless relayers (dubbed “miners”) are responsible for accepting valid EOS EVM transactions, wrapping them into EOS native transactions, and submitting them to the EOS native ledger. Relayers currently receive 10% of the EOS EVM transaction fee, with the remaining 90% accruing in the eosio.evm contract. Gas fees collected in eosio.evm are allocated for the purchase of resources like RAM and CPU, token burns, and subsidies for specific projects including inscriptions. At the moment, both the ENF and Noah, a decentralized exchange (DEX) on the EOS EVM, are running miners. Near the end of December, a proposal passed to withdraw over 108,000 $EOS ($92,000) from the eosio.evm account, which was then used to purchase RAM resources for the EVM. RAM is a network resource that measures the network’s data storage capabilities. RAM is a finite resource that can be bought and sold against EOS. The RAM/EOS market is priced using the Bancor liquidity algorithm. The market has a 0.5% fee which is collected and redistributed to REX stakers. With no plans to release the RAM bought for the EVM, purchasing RAM has a similar effect to burning $EOS tokens. In December, a proposal was also passed to stop RAM inflation. The EOS network initially launched an allocation of 64 gigabytes of RAM and has since reached 409 gigabytes. With RAM becoming more scarce, more users have been buying RAM, leading to more protocol-owned liquidity and fees for REX stakers. Network Analysis Usage EOS Native Daily transactions began increasing in Q4 and then spiked in mid-December due to Inscriptions. On December 10 and 11, EOS Native sustained over 22 million transactions. The network remained resilient, although there were some challenges with RPC nodes. In total, average daily transactions grew 107% QoQ to 1.7 million. However, daily active addresses did not follow the same trend as transactions. Average daily active addresses decreased by 4% QoQ to 27,000. There were 205,000 total unique active addresses in Q4’23, a 0.7% QoQ increase. Engagement levels, measured by the number of days each address was active, were also very similar to Q3. In Q4’23, 26% of active addresses were active for only one day, compared to 25% in Q3’23. Also, 75% of active addresses were active for 10 days or less in Q4’23, the same as Q3’23. Monthly new addresses fell to yearly lows of 15,000 in October and November before rebounding in December to 24,000. While the October and November cohorts of new addresses were smaller, these addresses were retained at a higher rate than previous 2023 cohorts, on average. Those two cohorts’ one-month retention rate averaged 18.5%, compared to 15.5% on average for the January - September cohorts. EOS EVM After relatively low activity since its launch on April 13, activity on the EOS EVM spiked in mid-December due to Inscriptions minted through EOSS. On December 10, it sustained almost 17.7 million transactions. This drove average daily transactions up 30,000% QoQ to 316,000. Average daily new addresses also grew 1,200% QoQ to 3,300. Users can bridge to the EVM either through the trustless EOS Native EOS EVM bridge or through third-party bridges connecting the EVM to other networks. When the EOS Trustless Bridge launched, it only supported $EOS transfers. In mid-October, the EOS EVM V0.6.0 upgrade allowed developers to map any EOS Native token to an ERC-20 version on the EOS EVM. This was first done for EOS USDT, giving EOS EVM users access to a non-wrapped version of USDT (EOS Native’s USDT is a native Tether integration). After a slow Q2, volume in the EOS Trustless Bridge increased by 2,789% QoQ to $8.4 million, with 63% of that being inbound volume (EOS Native - EOS EVM). Note that this metric only includes $EOS and USDT transfers, although other EOS Native tokens have been added. Around 23% of this volume was in USDT, with the majority of bridge transfers still occurring in $EOS. As noted above, other third-party bridges have integrated EOS EVM, including Meson and NerveNetwork. Soon after the EOS trustless Bridge USDT integration, Meson reenabled USDT swapping between EOS EVM and the over 30 networks it supports. In November, Meson partnered with the ENF for a Galxe campaign to incentivize USDT bridging. Security and Decentralization EOS validators earn block rewards funded by 1% annual inflation. Of this 1%: 25% is allocated to validators in proportion to the number of blocks they produce. 75% is allocated to validators in proportion to the number of votes they receive from $EOS holders. Only the top 21 validators (“active block producers”) with the most voting power participate in consensus in a given round. Thus, the 25% of the 1% inflation only rewards active BPs. However, validators outside the top 21 (“standby BPs”) are still rewarded from the 75% portion of the 1% inflation if they meet certain criteria. At the end of Q4’23, there were 61 validators earning validator rewards. At the end of the quarter, there were over 148 million $EOS ($104 million) staked and voting for validators, a 17% QoQ decrease. This represented around 13% of the circulating supply. Note that the same contract includes both staking for validator delegation/voting and acquiring network resources. An additional 107 million $EOS was staked but not used for voting for validators. Around two-thirds of this comes from tokens that were yet to vest to the original EOS contributor Block.one (B1). Block producers froze the vesting contract due to B1’s lack of contribution back to EOS. There are currently no plans to unfreeze, burn, or do anything else with these tokens. In EOS’s Delegated Proof-of-Stake (DPoS) model, a tokenholder does not delegate tokens toward one validator; instead, they stake their tokens and then can vote for up to 30 validators. Each validator would then receive that tokenholder’s full amount as voting power. For example, if a tokenholder had 1 million voting power and voted for 30 validators, each validator would have 1 million voting power. Due to this system, it is impossible to precisely measure how much stake is delegated to all validators versus the top 21 (active BPs). Geographic diversity is an important factor in the resiliency of a validator network. Of the active BPs at the end of the quarter, the Cayman Islands was the most popular hosting location, with four validators, followed by Hong Kong with three. Upgrades and Roadmap One of the biggest core Antelope developments is the upcoming “Instant Finality” upgrade. This upgrade will implement a modified variant of HotStuff, a BFT-based protocol developed by VMware. The upgrade will bring several improvements to EOS Native including the ability to expand the validator count beyond 21 and bringing near-instant finality, discussed in more detail in the Q3 report. Instant Finality was initially estimated to launch in Q4 as part of the Antelope Leap 5.0 upgrade. While Leap 5 was released in early October, the ENF announced that Instant Finality will be postponed to Leap 6. The Leap 5 upgrade still brought several notable features including: Relaxed constraints allowing smart contracts to send larger payloads and execute more complex actions. A speed increase, offering a 4x speed post for certain requests and enabling parallel processing. Efficiency improvements, reducing state memory consumption by around 20%. Control enhancements, providing node operators with more customization options that enhance overall network control and security. In mid-October, EOS EVM V0.6.0 went live on mainnet, bringing increased interoperability between EOS Native and EOS EVM. The upgrade added support for ERC-20 tokens to the EOS Trustless bridge, as noted above, and enabled smart contracts on the two networks to call each other cross-chain. In mid-December, EOS EVM V0.7.0 went live on testnet. The upgrade introduced WebSocket support, a crucial communication channel allowing applications to surface real-time blockchain data. Future planned upgrades for the EOS EVM, highlighted in the EOS EVM roadmap released in September, include EIP compatibility starting with EIP-1559 and EIP-4337, trustless bridge front-end refresh, RPC scalability enhancements, and more. Ecosystem Analysis Popular Contracts Virtual property game Upland is the most popular EOS contract group by daily active addresses. In Q4’23, Upland averaged 21,000 daily active addresses, a 4% QoQ decrease. The EOS System contract, which handles functions such as delegation and resource management, was the second most popular contract group. It averaged 2,100 daily active addresses in the quarter, a 19% QoQ decrease. Rounding out the top six contract groups by daily active addresses were MMO strategy game Prospectors, NFT marketplace AtomicHub, RPG game Crypto Dynasty, and NFT staking game Wombat Dungeon Master. AtomicHub was the only contract group in the top six whose average daily active addresses increased QoQ, at 5%. This chart includes only contract calls from addresses on the same day that the address is created (“newly created addresses”). It highlights what addresses do when they join the network, revealing several noticeable differences from the above analysis on contract calls from all addresses. Among top contract groups, AtomicHub had the largest QoQ increase in market share of newly created addresses, up 135% to 8%. This was driven by two spikes on December 15 and December 20. EOS System’s increase in market share of newly created addresses indicates that a higher percentage of new addresses did not interact with ecosystem applications immediately upon joining the network. This chart again only looks at contract calls from a subset of addresses; here, power addresses. A power address is defined as one that is active for over 25 days in the quarter, which was the cut-off for the 90th percentile of addresses by number of days active. Throughout the quarter, Upland had an average 85% share of power addresses among contract groups. Of its 21,000 average daily active addresses, over 15,000 were power addresses (72%). A large percentage of the average daily active addresses of Prospectors and Crypto Dynasty similarly turned out to be power addresses. This chart re-examines all addresses (rather than just newly created or power addresses), but it counts an address’s first interaction with a contract group. This analysis reveals the number of daily new addresses for each contract group. The EOS System led contract groups with an average of 131 daily new addresses, a 32% QoQ increase. The EOS System will likely always have the highest number of new addresses since most new EOS addresses need to interact with it upon joining the network. AtomicHub’s average daily new addresses grew 7% QoQ to 52. The growth was driven by 418 new addresses on December 15 and 915 on December 20. DeFi As expected in a market upturn, DeFi TVL in USD increased on both EOS Native and EOS EVM. EOS Native’s DeFi TVL grew 25% QoQ to $45 million, ranking it roughly 46th among all networks. After falling 93% in Q3, EOS EVM’s DeFi TVL grew almost 3,000% QoQ to $2.2 million. The growth was also driven by the integration of USDT into the EOS Trustless Bridge. As noted last quarter, many EOS EVM DeFi protocols were waiting for the upgrade before conducting liquidity incentive programs. Just over half of EOS Native’s TVL is in Defibox, a platform featuring swapping and lending capabilities. The majority of the rest is in DEX and fiat onramp PayCash. AMM Noah Swap accounted for nearly 100% of DeFi TVL on EOS EVM. In October, Noah conducted its third airdrop round, distributing NOAH tokens to liquidity providers and traders. At the end of November, Noah and Meson partnered to enable cross-chain swaps and cross-chain USDT deposits directly into Noah. Other DeFi-related events include the upgrade of DeFi analytics platform Defeye and Zeepr’s launch of its decentralized perps protocol on EOS EVM. Average daily DEX volume on EOS Native grew 110% QoQ to $913,000. PayCash accounted for 67% of DEX volume, compared to Defibox at 33%. EOS Native’s stablecoin market cap increased 21% QoQ to $76 million, reaching yearly highs. This ranks EOS Native roughly 17th among all networks. This figure is entirely composed of USDT. As noted above, EOS is one of fourteen networks natively supported by Tether. There are also some EOS native stablecoins, namely USN, which are not included in this data. USN is an overcollateralized stablecoin generated through staking various tokens on Defibox. At the end of the quarter, USN’s market cap was around $862,000, a slight QoQ increase. In Q4, several notable partnerships were made with stablecoin issuers and infrastructure providers. Near the end of November, PassPay announced an alliance with the ENF and EOS Labs. PassPay is a payments protocol that issues JPYW, a stablecoin pegged to the Japanese Yen. In mid-December, ENF and EOS Labs partnered with the EOS Stable Coin Chain (ESCC). ESCC is a blockchain deployed as a smart contract on EOS Native using a custom implementation of the EOS EVM architecture. ESCC is designed for stablecoin use cases, with features such as gas fees being paid in stablecoins. Its testnet launched soon after quarter end. NFTs, Gaming, and Other The most popular dapps by address activity on EOS are gaming-related, including Upland, Prospectors, Crypto Dynasty, and Dungeon Master. On October 20, Upland announced that it raised $7 million in a fundraising round, with participation from EOS Network Ventures. In the announcement, Upland noted that it plans to launch a token on Ethereum. After its launch in mid-September, PlayZap has been one of the most popular applications on EOS EVM. PlayZap is a multichain arcade game platform with play-to-earn mechanics. It has over 100,000 downloads on the Google Play store. Its daily active addresses on EOS EVM increased from 1,000 at the beginning of the quarter to almost 7,000 by the end. Near the end of the quarter, PlayZap announced a $1 million grant and investment program for Web2 game developers to convert their games into Web3 games with PlayZap PlayKit and SDK. PlayZap plans to launch a web version in Q1. Near the end of November, multichain NFT marketplace UBOX partnered with the ENF to launch on the EOS EVM. UBOX soon after released the EOS Landmark NFT drop, which sold out in mid-December, raising over $240,000. UBOX states that Landmark NFT utility includes UBOX ChainPass community membership, access to UBOX events, and airdrops from UBOX-partnered projects. UBOX then launched Round 2 of the Landmark NFT drop near the end of December. In mid-December, EOS Labs partnered with Atem Network, a multichain decentralized content creation protocol. At the end of the quarter, multichain NFT and Inscription marketplace EZ Swap launched on the EOS EVM. EZ Swap also announced that it raised $1 million in funding, led by EOS Network Ventures. Development Ecosystem development, measured via the number of unique contracts called and new contracts, began back on an upward trend in Q4. The number of unique contracts called throughout the quarter increased by 2% QoQ to 884. After growing 19% in Q3, the number of new contracts called in the quarter grew again, by 2% QoQ to 51. In mid-November, Greymass released developer toolkit Wharf 1.0 to streamline development on Antelope-based blockchains. Wharf 1.0 brought an update to the Session Kit and launched the Contract Kit and Account Kit. The Session Kit allows developers to easily enable users to connect to a web app with their wallet, establish a session on the blockchain, and access other features. Its V1.0 launched in early August. The Contract Kit helps developers interact with smart contracts, reading and writing the data they need. It also features a Command Line tool which helps developers automatically generate code to build applications. The Account Kit provides APIs for developers to query information about Antelope user accounts. It also includes tools for resource management, including the ability to abstract away resource management from end users. Beyond the Wharfkit, Wharf 1.0 also includes core Antelope libraries, plugins, APIs, and utilities. Growth EOS ecosystem growth is furthered by the ENF, ENV, and EOS Labs, which formed in Q3. The three entities continued to form partnerships, give out grants, and make investments in Q4 as detailed throughout the report. Other notable partnerships and investments include: Spirit Blockchain Capital: Spirit Blockchain Capital is an investment firm focused on bridging traditional capital markets with blockchain technology. In early December, ENV announced that it invested in SBC. The partnership aims to increase RWA adoption on EOS. CoinTR: CoinTR is a Turkish crypto exchange. It partnered with ENF and EOS Labs at the end of November to further EOS adoption in Turkey through a Turkish Web3 incubator launch, $EOS staking pool on CoinTR, ecosystem support, and more. The seventh and final season of Pomelo, an open-source public good crowdfunding platform, concluded in December. EOS Labs provided matching funds for Season 7, taking over from the ENF. Pomelo Season 7 featured 107 approved grants, with EOS Labs distributing $150,000 in matching funds. Top grant recipients building on EOS Native include Totoro, eoseyes, Pink cat eating papaya, DAOBOX and, EOS Chinese Community on Weibo. Those on EOS EVM include Metahub, Noah Swap, EVMNS, Rubingoo, and EOS Support. As open-source software, Pomelo could continue in the future, but there are no plans for EOS Labs or the ENF to continue providing matching bonuses. Ongoing grants and incentive programs include ENF’s EOS EVM Incentive Program, which offers up to $50,000 per qualifying EOS EVM project as well as marketing and development support on top of the grant, and ENV’s commitment to invest $20 million into EVM projects and GameFi projects (across both EOS Native and EVM). Closing Summary Q4 featured a bounce-back quarter for EOS, with many of its key metrics increasing QoQ. The integration of USDT into the EOS Trustless Bridge spurred growth on the EOS EVM. Its TVL grew almost 3,000% QoQ to $2.2 million, and the mid-December Inscriptions craze further drove activity. EOS EVM’s average daily transactions grew over 30,000% QoQ to 316,000, driven by almost 17.7 million transactions on December 10. EOS Native similarly sustained almost 14.9 million transactions on December 11. Upland was the most popular application on EOS Native in Q4, averaging 21,000 daily active addresses. It announced a $7 million fundraise led by EOS Network Ventures. Other notable partnerships, grants, and investments from the ENF, ENV, and EOS Labs in Q4 included Spirit Blockchain Capital, CoinTR, PassPay, EOS Stable Coin Chain, UBOX, Atem Network, and EZ Swap. Meanwhile, the Instant Finality upgrade was postponed to 2024, after being slated for Q4’23. This upgrade, in addition to EOS’s continued growth efforts, will likely serve as a catalyst in the new year.
Source: Peter Horton — Published: 2024-01-18T15:00:00ZAlgorand Q4 2023 Brief
Key Insights Algorand's market cap outpaced the broader crypto market cap, growing by 123% compared to 53% QoQ. Algorand added 1.9 million new addresses in Q4 2023, a 72% increase QoQ. Algorand saw transactions rise by 58% QoQ, largely driven by the 43% increase in native ALGO transactions. Continuing the xGov grant program in Q4, xGov participants approved 18 grant applications for a total funding of 1.5 million ALGO ($332,000). Algorand’s DeFi TVL grew by 109% QoQ, recovering from the shutdown of Algofi the previous quarter and reaching its second-highest level from the past year. Primer Algorand (ALGO) is a smart contract platform employing a variant of the Proof-of-Stake (PoS) consensus mechanism, termed Pure Proof-of-Stake (PPoS). The protocol was founded by Turing award-winning computer scientist Silvio Micali, also known for co-inventing Zero-Knowledge proofs, Verifiable Random Functions (VRF), and probabilistic encryption. Unlike other PoS smart contract protocols, Algorand currently does not reward nodes that participate in consensus, nor does it include a staking lockup or slashing mechanism. However, Algorand plans to incentivize consensus in the future. Similar to relying on stake weight in consensus, Algorand PPoS randomly selects consensus nodes based on their ALGO balances using a Verifiable Random Function (VRF), where having a larger balance increases the holder’s chance of selection. Algorand incorporates a system of peer-to-peer relay nodes and non-relay nodes, which can be configured as archival nodes or to participate in consensus. Algorand’s PPoS consensus protocol ensures that only one block per consensus round can be included in the chain. This process makes Algorand essentially unforkable, where the probability of forking the Algorand blockchain is roughly 10-18. Algorand’s smart contract execution layer is powered by the Algorand Virtual Machine (AVM). The AVM supports applications developed in TEAL, an assembly-level programming language. With the developer preview now live, Algorand supports native Python smart contract development. Algorand Technologies, the founding entity, is behind most of the network’s development. The Algorand Foundation is a not-for-profit organization focused on ecosystem initiatives like governance, funding Algorand-based projects, building developer tooling, and encouraging grassroots development. The Algorand ecosystem features a growing set of projects across many sectors, including DeFi, RWAs, payments, and gaming. Website / X (Twitter) / Discord Key Metrics Performance Analysis Market Cap & Revenue Building off the momentum of the general crypto market cap growing by 53% in Q4, Algorand’s market cap grew by 123%. With transactions increasing by 58% QoQ, fee revenue was up 60%, to its highest level in a year in ALGO terms, and revenue measured in USD grew by 143%. The outperformance of Algorand against the market may be a result of the constant development throughout the ecosystem. Multiple novel applications launched on Algorand in Q4 encompassing subjects such as a regulated and programmable euro, tokenized farmland, and a developer marketplace for selling code snippets. Addresses & Transactions In Q4, Algorand added 1.9 million new addresses, up 72% QoQ. It also saw transactions grow by 58% QoQ. Toward the end of the quarter, transactions spiked over 5.5 million, the highest number over the past year. Aiding the spike in total transactions, ALGO transactions increased by 43% QoQ. The growth may be a result of sticky applications like Lofty.ai, which consistently sees over 7,000 monthly active users, and TravelX, which passed a milestone of issuing over 2 million NFT plane tickets (over 1 million issued in Q4 alone). Staked ALGO Staking ALGO for governance is different from most other chains. First, users must “commit” a certain amount to governance. If their ALGO balance falls below their commitment, then their entire stake is considered unstaked or uncommitted. Instead of directly participating in governance through the Algorand Foundation’s interface, users can also participate via Folks Finance’s Liquid Governance program, Algorand’s largest DeFi protocol as of the past two quarters. Its Liquid Governance program enables users to participate in governance by staking (not committing) ALGO in exchange for gALGO, a liquid governance token. Q4 had the lowest amount of staked ALGO of any quarter over the past year, dropping 49% YoY. This is likely a result of the decreasing amount of rewards per governance period. For context, 70.5 million ALGO was awarded to governance participants in Q4 2022. In Q4 2023, only 32 million ALGO was awarded. Since Q4’22, ALGO rewards have been decreasing by roughly 9.6 million ALGO per governance period. The declining metric may be pointing to users preferring to use the native asset as opposed to committing it to governance — as evidenced by the 58% QoQ increase in transcations. Stablecoins Algorand’s stablecoin market cap has continued to decline throughout the past year with essentially no recovery. It fell by 43% QoQ and 74% YoY. Though both USDT and USDC have declined since last year, USDT experienced a more severe fall on Algorand, with over $100 million being withdrawn in Q3. These outflows did not go into USDC; they left the ecosystem. In Q4, Quantoz launched EURD on Algorand and issued over 1 million euro-backed tokens, equivalent to $1.1 million. EURD accounts for 1.4% of the stablecoin market cap on Algorand. DeFi Algorand’s DeFi TVL grew by 109% despite previously falling for two straight quarters. Since the start of Algofi’s shutdown in Q3’23, Algorand DeFi recovered to its second-highest level from the past year, increasing 12% YoY. Meanwhile, Folks Finance grew its market share from 55% to 58%, more than doubling its USD value. Pact and Tinyman also grew in USD value, each accounting for roughly 14% of the DeFi TVL market share in Q4’23. Qualitative Analysis Governance The Algorand Foundation hosts two governance programs, Algorand Community Governance and xGov. The Community Governance program occurs on a quarterly basis and encompasses developments in the Algorand ecosystem. Governance voters that opt-in to xGov can do so during any quarter for a 12-month term with at least four voting periods. xGov voting encompasses the allocation of funding to grant applicants. Staking ALGO for xGov is not risk-free like Community Governance. xGov participants who do not vote will forfeit their staked amount, with the total amount forfeited being rewarded to participants who completed their xGov term. Although Governance Period 8 (GP8) occurred in Q3, proposed measures had implications in Q4. During GP8, four measures were proposed. The outcomes of each measure are listed below. ALGO from governance rewards will be allocated to the xGov Community Grants program after the initial 2 million ALGO allocation has been exhausted. Up to 2 million ALGO per quarter will be allocated to the xGov Community Grants program The NFT Rewards program will run again in Q4 with a modification that allows marketplaces to keep the revenue generated as fees through the rewards program. 500,000 ALGO will be allocated to the NFT Rewards program in Q4. Governance Period 9 (GP9) occurred in Q4. During GP9, four measures were proposed. The outcomes of each measure are listed below. 15 million ALGO will be allocated to funding DeFi and the Targeted DeFi Rewards program. 7.5 million ALGO (of the 15 million allocated to funding DeFi) will be allocated to the Targeted DeFi Rewards program in Q1 2024. The NFT Rewards program will run again in Q1 2024 with no modifications. 650,000 ALGO will be allocated to the NFT Rewards program in Q1 2024. xGov Period 2 occurred in November and December and saw 77% participation from unique accounts. Of the 23 grant applications, 18 were approved for 1.5 million ALGO in total. Projects funded encompass the following: Analytics: A dashboard that tracks structured selling by Algorand Technologies, an Algorand blockchain monitoring and insights platform Consumer Uses: A wallet manager and browser, automated market makers (AMMs) with concentrated liquidity, the prize pool for a gaming tournament, tax reporting tools, a wallet chat application, an Algorand Standard Asset (ASA) burning application, a liquidity aggregator and lending platform, a loyalty program, an invoicing service, and a payment scheduler Developer Infrastructure: A Discord verification system, NFT game integration, an escrow service, a multichain protocol based on State Proofs, API development Developments Algorand launched the initial release of Python on Algorand, enabling developers to preview the pending AlgoKit 2.0 release. Algorand released AlgoKit 1.8.2, which features a Python template and an AVM (Algorand Virtual Machine) debugger for VS code. Ecosystem Highlights Tokenization Landtoken, an Argentina-based project, launched on the Algorand blockchain, enabling users to invest in tokenized farmland. Licensed by the Dutch Central Bank, Quantoz launched a programmable digital Euro on Algorand and issued over 1 million EURD on the network. Investments & Partnerships Algorand Ventures announced an investment in HesabPay, an interoperable digital payments platform in Afghanistan. HesabPay was built on Algorand as a solution to the humanitarian aid crisis; it enables users to digitally receive and manage aid from the World Food Programme and other organizations. Algorand Ventures invested in Vestige Labs. Vestige has developed multiple projects on Algorand, such as a DeFi explorer, DEX aggregator, decentralized token vaults, and developer tooling. It is also currently building a margin lending protocol. Crust Network, a service layer for IPFS, plans to implement decentralized hosting and storage solutions on Algorand in Q1 2024. It aims to enable users to deploy storage smart contracts to Algorand, add support for Crust Files, and add support for Crust Cloud and Web3 storage buckets. Launches Gora Network launched a developer marketplace that enables software developers to sell code snippets or entire programs to interested parties. The Algorand Foundation partnered with the United Nations Development Programme (UNDP) to launch an education program called the Algorand Blockchain Academy. With Flybondi, TravelX launched a peer-to-peer marketplace for NFT plane tickets that enables users to resell tickets, change passenger names, and give them away. Allo, a new Algorand explorer, launched amid the announcement that AlgoExplorer, Algorand’s main explorer, will sunset. Achievements Lofty.ai, an Algorand-based tokenized fractional real estate investment application, started Q4 with 148 tokenized properties and 7,000 monthly active users. TravelX served over two million passengers with its NFT plane tickets and also partnered with Viva Aerobus to issue plane tickets and launch products on Algorand. Warnings Infrastructure and API provider Purestake discontinued its Algorand API service at the start of 2024. This move affected multiple projects on Algorand, including, but not limited to, GoalSeeker (block explorer) and AlgoSigner (browser extension). Closing Summary Algorand’s developments throughout the bear market may have positioned the protocol to capture outsized value in the coming cycle. While the market was teased with bullish sentiment in Q4, Algorand outpaced the broader market valuation, growing its market cap by 123% QoQ compared to the broader market’s 53% increase over the same time period. Network-wise, Algorand added 1.9 million new addresses and saw QoQ increases across transactions (+58%), revenue (+60%), grant funding (+5,000%), and DeFi TVL (+109%). With the pending launch of AlgoKit 2.0, Algorand plans to improve the developer experience and developer relations to attract more builders, increasing the potential for more potent applications to be deployed to the ecosystem.
Source: Micah Casella — Published: 2024-01-18T13:15:00ZState of WAX Q4 2023
Key Insights Funko’s licensed Back to the Future collection led WAX collections with over $1 million in total Q4 sales volume. As a whole, WAX’s average daily NFT volume decreased by 32% QoQ to $54,000. WAX Labs announced $WAX tokenomics updates planned for Q1’24. An optional gas fee will be introduced to augment staking for network resources. The network will stop collecting a 2% fee on NFT volume and bridging fees to Ethereum for liquidity rewards. WAX’s stablecoin market cap increased by 823% QoQ to $243,000. The growth was largely driven by USDT bridged by Alcor Exchange from EOS via Antelope IBC. $WAX’s circulating market cap grew by 67% QoQ to $236 million, ranking it 187th among all tokens A reduction in the amount of network resources available for free caused onchain activity to decrease. Average daily active transactions and addresses fell QoQ by 51% and 25%, respectively. Primer Worldwide Asset eXchange (WAX) is a Layer-1 (L1) network geared toward gaming and NFT use cases. WAX launched in June 2019 following a token generation event (TGE) that raised around $60 million at the end of 2017. The network is built using the open-source Antelope framework (formerly EOSIO), which features Delegated Proof-of-Stake consensus, smart contract programming in C++, a unique resource model with bandwidth and state storage components, and a smart contract accounts model with similar effects to account abstraction. On top of this core Antelope stack, WAX Labs built other services, including a cloud-based wallet, an NFT creator and marketplace, an onchain random number generator, and a block explorer. These services were built to provide a more familiar Web2 experience on top of the core blockchain protocol. For a full primer on WAX, refer to our Initiation of Coverage report. Website / X (Twitter) / Discord Key Metrics Financial Overview As a whole, the crypto market rebounded in Q4’23. $WAX was no exception – its circulating market cap increased 67% QoQ to $236 million. However, $WAX was outpaced by other tokens, as its market cap rank fell from 160th to 187th QoQ. WAX’s onchain activity did not follow the market trend in Q4. After an increase last quarter, total quarterly revenue in $WAX decreased 54% QoQ to 0.7 million ($45,000). WAX has a unique resource model where $WAX ($WAX on the WAX network, $WAXP on the Ethereum network) can often be recouped by the user if they no longer require bandwidth or state storage resources. Thus, WAX does not collect fees through gas fees like many other networks. The existing system functions as such: WAX’s revenue comes from a 2% tax on NFT secondary sales backed by a “gentlemen’s agreement” with NFT marketplaces. WAX burns 20% of this revenue and bridges the remaining 80% to Ethereum to distribute to liquidity providers (see the DeFi section for more details). The WAX protocol mints $WAX at a 5% annual inflation rate which it distributes to validators (2%), delegators (2%), and its treasury (1%). However, WAX’s fee collection system and general tokenomics are set to change in Q1 2024. Under the new system: WAX will no longer collect a 2% tax on NFT secondary sales and will discontinue the Ethereum DeFi rewards system. Instead, fees will come from a new PowerUp mechanism, which will function more similarly to traditional transaction gas fees. In order to currently transact, users need to reserve network bandwidth by staking $WAX. With PowerUp, users will be able to also just pay a small $WAX fee per transaction if they don’t have any bandwidth. A similar PowerUp resource model was adopted by EOS in early 2021; however, EOS discontinued staking for bandwidth, relying entirely on PowerUp, whereas WAX will keep it and offer PowerUp as an additional option. The WAX protocol will continue distributing $WAX to validators, delegators, and its treasury at an equivalent rate of 5% network inflation. The relative distribution to each bucket also remains the same. Rather than minting new tokens for rewards and then burning fees, fees will replace minted tokens as rewards. Any fees exceeding the equivalent of 5% network inflation will be burned. Although there is a slight technical difference, the overall inflation rate follows the same logic as before: it starts at 5% and any fees burned reduce the overall rate. The major difference is that fees are now collected from an optional gas fee instead of a tax on NFT volume. Furthermore, all fees go towards reducing inflation, whereas before only 20% of fees were burned, with the other 80% being used as liquidity rewards for $WAX pools on Ethereum. The new tokenomics system is planned to go live in Q1, and it will be continuously evaluated for further optimizations in future quarters. Network Overview Usage In preparation for the PowerUp implementation in Q1 2024, WAX developers made some resource adjustments, which led to a reduction in onchain activity. As noted, users need to reserve network bandwidth by staking $WAX in order to transact. Network bandwidth is represented by NET, a space-denominated resource that measures WAX’s throughput capacity in bytes, and CPU, a time-denominated resource that measures the processing time of a transaction in microseconds. Both NET and CPU are regenerable resources that users receive proportional to their share of stake. From September 11 to November 28, the parameter controlling the target CPU usage per block was reduced from 25% to 15% in 10 different 1% intervals. With less bandwidth available per block, the resource became relatively more expensive. As a result, daily transactions decreased from around 18 million to 6 million. As a whole, average daily transactions fell by 51% QoQ to 8.4 million. However, average daily active addresses fell by less: down 25% to 225,000. The higher drop in transactions relative to addresses indicates that the increase in resource cost mostly affected high-transacting addresses. As detailed in the Popular Contracts section below, these inactive power addresses were mostly related to P2E games. Indeed, Q4 active addresses tended to be active for fewer days in Q4 than Q3 active addresses were in Q3. In Q4, there was a total of over 1 million unique active addresses, a 16% QoQ increase. However, 45% of these addresses were active for only one day in the quarter, compared to 14% in Q3. Furthermore, 2.8% of addresses (29,000) were active every day in Q4, compared to 10% (92,000) in Q3. There was also an anomalous 4.5% of Q4 active addresses active for exactly 54 days in the quarter. There were 58 days from the start of the quarter to the last reduction in the target CPU available on November 28. Thus, the addresses active for exactly 54 days in the quarter were likely power addresses that stopped transacting due to the resource changes. After an 81% increase last quarter, average daily new addresses fell 47% QoQ to 1,500. Retention rates also dropped. The October and November cohorts of new addresses had an average one-month retention rate of 49%, compared to 65% on average from the January to September cohorts. Security and Decentralization At the end of the quarter, there were 69 validators with WAX voting power; however, only the top 21 with the most voting power can participate in consensus in a given round. Staked $WAX decreased 0.5% QoQ to 1.9 billion $WAX. However, with $WAX’s price appreciation, staked $WAX denominated in USD increased 65% QoQ to $131 million. Not all of these staked tokens are necessarily delegated to validators, though; they could just be staked in WAX’s resource model and not used for voting for validators. In WAX’s Delegated Proof-of-Stake (DPoS) model, a tokenholder does not delegate tokens toward one validator; instead, they stake their tokens and then can vote for up to 30 validators. Each validator would then receive that tokenholder’s full amount as voting power. For example, if a tokenholder has 1 million voting power and votes for 30 validators, each validator would have 1 million voting power. Due to this system, it is impossible to precisely measure how much stake is delegated to all validators versus the top 21 (participating validators). Geographic diversity is an important factor in the resiliency of a validator network. Of the participating validators at the end of the quarter, Europe was the most popular hosting region with nine validators. Upgrades and Roadmap Near the end of the year, WAX Labs published its 2024 roadmap. Beyond the tokenomics update, key features planned for Q4 include: Antelope Leap 5.0 Upgrade (est. Q2 2024): The Antelope Leap protocol powering WAX (along with other networks including EOS, UX Network, and Telos) upgraded to version 5.0 in early October. The Leap 5 upgrade brought several notable features, including relaxed constraints allowing for larger transactions, sync latency optimization, node memory and multithreading improvements, and a new method for managing state memory. WAX plans to update to Antelope Leap 5.0 in Q2 2024. Antelope Instant Finality (est. Q4 2024): The Antelope Instant Finality feature was initially planned to be included in the 5.0 upgrade but was postponed to Leap 6.0. The Instant Finality upgrade will implement a modified variant of HotStuff, a BFT-based protocol developed by VMware. The upgrade will bring several improvements to the WAX network including expanding the validator count beyond 21 and bringing near-instant finality, discussed in more detail in the Q3 report. WAX Labs estimates that the WAX network will feature Instant Finality in Q4 2024. WAX Side Chain Launchers (est. Q2-Q3 2024): WAX developers are working on a framework that enables developers to launch sidechains connected via Antelope IBC to WAX and other Antelope networks. WAX Labs anticipates this feature will be ready in Q2 2024. There is also an EVM Side Chain Launcher planned for Q3 2024, which will enable EVM developers to more easily participate in the WAX ecosystem. Cloud Wallet Updates: WAX Labs is planning several updates to the Cloud Wallet throughout 2024, including a mobile app for iOS and Android, Unity SDK 2.0, social features, and further optimizations. In Q4, Wallet Connect support was introduced into the Cloud Wallet. Ecosystem Overview Popular Contracts Play-to-Earn (P2E) games Alien Worlds and Farmers World account for the majority share of WAX daily active addresses among contract groups. From November 21 to 23, Alien Worlds’ daily active addresses fell from 115,000 to 66,000, where it remained for the rest of the quarter. Although Farmers World’s average daily active addresses decreased by 17% QoQ, its market share increased by 10% due to Alien Worlds’ decrease. Farmers World continues to see notable activity despite the team selling the entire treasury (worth around $50 million at the time) and halting all development and communication almost two years ago. Taco is a platform featuring several P2E games, including Acryptia and Brigade, as well as a DEX, an NFT marketplace, and more. Its average daily active addresses increased by 130% QoQ to 12,000. Its market share among WAX contract groups grew by 206% to 4.7%. The WAX System contract averaged 12,000 daily active addresses this quarter, down from 16,000 last quarter. It manages functions such as staking, delegation, and resource management. Many NFT marketplaces and projects that conduct primary drops use the same set of contracts in their backend. We grouped these into the “NFT Marketplaces” bucket. As a group, these contracts averaged almost 11,000 daily active addresses this quarter, down 24% QoQ Rounding out the top six was NFT-based game Dungeon Master, which averaged 9,000 daily active addresses in Q4. This chart includes only contract calls from addresses on the same day that the address is created (“newly created addresses”). It highlights what addresses are doing when they join the network, and the results offer several noticeable differences from the above analysis on contract calls from all addresses. As expected with the decline in total new addresses, newly created addresses decreased for many WAX contract groups. The two exceptions in the top six contract groups were the Cloud Wallet Manager and Taco. As noted above, a Cloud Wallet update at the end of July enabled addresses to easily take control of their admin key. This Cloud Wallet Manager averaged 150 daily newly created addresses, a 122% QoQ increase. In total, over 15,000 Cloud Wallet addresses claimed control over their admin key in Q4. Taco’s average daily newly created addresses grew by 516% QoQ to 17. Its market share among WAX contract groups increased by almost 1,600% QoQ. The “Other” group’s market share of newly created addresses fell by 82% QoQ to 5.8%, indicating that most new addresses are interacting with one of the top six contract groups. This chart again only looks at contract calls from a subset of addresses; here, power addresses. Power addresses are defined as addresses that were active for over 67 days in the quarter. Out of the over 1 million total active addresses in Q4’23, just over 100,000 were power addresses. P2E games Alien Worlds, Farmers Worlds, and Taco led WAX contract groups in average daily power addresses on top of all addresses. Specifically, 46% of Alien Worlds’ daily active addresses were power addresses, 28% of Farmers World’s were power addresses, and 94% of Taco’s were power addresses. High-click Play-to-Earn games are prime for bot usage because they incentivize repeatedly clicking buttons. As such, the nature of these games could be accounting for the large number of power addresses for these dapps. It should be noted that bot activity occurs on many games and is not exclusive to WAX. WAX Labs has been consciously working to reduce low-value bot activity. In June, WAX Labs integrated an AI/ML tool called TRUST into the WAX Cloud Wallet. Made by the NFT marketplace Chain Champs, TRUST analyzes an address’s transaction history and scores how likely it is to be a bot. TRUST scores are publicly available through the Cloud Wallet interface, on an API, and onchain through a smart contract. As a result, WAX dapps can use the scores within their own smart contracts to help track and prevent bot usage. This chart re-examines all addresses (rather than just newly created or power addresses), but it only counts an address’s first interaction with a contract group. This analysis reveals the number of daily new addresses for each contract group. Of the top six contract groups, Spinnia World, a spin-to-earn game, was the only one whose average daily new addresses increased QoQ. Its average daily new addresses grew by almost 14,000% QoQ to 314. NFTs and Gaming In the past quarter, WAX averaged $54,000 in daily NFT sales volume, a 32% QoQ decrease. Average daily sales decreased by less: down 19% QoQ to 16,000. The spikes in NFT volume and number of sales were driven by Funko drops, which are explored in more detail below. According to CryptoSlam!, WAX ranked 15th among blockchains, excluding Bitcoin, in total Q4’23 NFT volume, compared to 12th last quarter. In the number of sales, it remained ranked 7th. It should be noted that CryptoSlam! only includes secondary sales data, unlike the above data which includes primary sales. Average daily NFT buyers decreased by 22% QoQ to 1,100, and similarly, average daily NFT sellers decreased by 25% QoQ to 2,200. Funko collections averaged $32,000 in daily sales volume, 60% of total WAX NFT volume. Funko is a toy company that sells licensed pop culture collectibles. In Q3’21, it partnered with WAX to launch digital collectibles, some of which are redeemable for physical toys. Funko sells these digital collectibles in pack drops, which explains the significant spikes in WAX NFT sales volume. In Q4’23, Funko held five drops featuring licensed collectibles from WB 100th Anniversary, Back to the Future, Funkoween, The Powerpuff Girls, and Disney’s Mickey and Friends. Back to the Future was Funko’s most popular drop this quarter, with over $1 million in total Q4 sales volume. Despite its decrease in active addresses this quarter, Alien Worlds’ average daily NFT sales volume increased by 7% QoQ to 5,100. Dungeon Master is an NFT staking game on WAX and EOS created by gaming platform Wombat, which also features an in-house wallet. Its average daily NFT volume decreased by 4% QoQ to 3,400. Last quarter, Wombat acquired AtomicHub, the most popular NFT marketplace on WAX by secondary sales volume. As noted above, WAX’s tokenomics are changing, including the removal of a 2% tax on NFT secondary sales backed by a “gentlemen’s agreement” with NFT marketplaces. In its place, AtomicHub announced that it plans to add a 1% fee on secondary sales into its smart contracts. Its NFT standard smart contracts originally developed by Pink.gg are also used by other marketplaces including Nefty Blocks and NFTHive. Fees collected will be used to buy back and burn the native tokens of each marketplace (WOMBAT for AtomicHub, NEFTY for NeftyBlocks, and HONEY for NFTHive), as well as an ecosystem pool. AtomicHub also added template buy offers this quarter, which was soon after added by NeftyBlocks as well. Other NeftyBlocks updates from this quarter include NFT locking, a redesigned home page, and improved pack UX. Rounding out the top six collections by Q4 sales volume were Taco, NFT Battle Miners, and Realm. After growing by 50% last quarter, Taco’s average daily NFT sales volume increased again by 88% QoQ to $2,200. Near the end of the quarter, Taco launched Season 5 of play-to-earn NFT game Acryptia. NFT Battle Miner’s average daily NFT sales volume grew by 161% QoQ to $1,800. NFT Battle Miners is an NFT-based PVP card game. It launched Season 3 of Shadow Depths in early December. Realm is a play-to-earn NFT game. Its Season 10 launched at the end of November. Other NFT and gaming-related events include: BC Brawlers: In mid-October, BC Brawlers became available to play on the Epic Game Store. BC Brawlers is a PVP card game developed by WAX Labs that launched at the end of 2021. Soon after, WAX partnered with Amazon Prime Gaming to offer in-game perks to BC Brawlers players. In November and December, BC Brawlers offered Rounds 2 and 3 of gaming loot through Prime Gaming. Despite the exciting partnerships, BC Brawlers’ average daily NFT collection continued to see declined volume, down to $61 in Q4. B’Ape Beats Festival: In mid-December, WAX Ape Rave Club dropped a new 10k PFP project, WAX B’Apes, which sold out. Holders could then participate in the crafting event, competing to create the rarest NFT. NFT collections launched by WAX Ape Rave Club averaged $616 in average daily Q4 sales volume. Uncut Partnership: In mid-October, WAX Labs announced a partnership with Uncut, an NFT-powered social network on WAX. The partnership will directly integrate Uncut with the Cloud Wallet. To celebrate the partnership, users who connected their wallet to Uncut received a Barbarians NFT. And even more, including the WAX Bee Crafting Event, Music Mogul Showdown, representation at MCM Comic Con, the XMas Game Fest, and FGL NFT’s Masters of Mechaworld. DeFi DeFi TVL in USD increased 239% QoQ to $651,000, ranking WAX 160th among all chains. Denominated in $WAX, DeFi TVL grew by 104% QoQ, indicating that the USD TVL growth was not only due to $WAX’s price appreciation. The increase in TVL largely came from a spike in Alcor Exchange deposits in mid-November. In mid-October, Alcor Exchange introduced farming rewards for its WAX/USDT pool, with 180,000 $WAX to be distributed over a 90-day period. The USDT is bridged from EOS via Antelope IBC. Antelope IBC is an inter-blockchain protocol developed by UX Network core development team 0rigin, with funding from the Antelope Coalition (the collection of teams from WAX, EOS, UX Network, and Telos). In Q2, WAX integrated Antelope IBC into the network, connecting it with all the other Antelope networks. Previously, the only stablecoins on WAX were brought over from Ethereum by WAX Labs via a two-of-four multisig bridge (consisting of WAX’s president, COO, CTO, and blockchain lead). USDT on EOS is a native integration, and the IBC bridge does not introduce further trust assumptions beyond the validator set of each network. Thus, USDT bridged via Antelope IBC from EOS provides a more secure stablecoin option. Largely driven by Alcor’s bridging of EOS USDT, WAX’s stablecoin market cap increased by 823% QoQ to $243,000. Under the new WAX tokenomics system, fees will no longer be bridged to Ethereum to distribute to liquidity providers in a WAX-ETH Uniswap V2 pool. While there’s still over $4.8 million in the pool, there will no longer be additional liquidity rewards from WAX fees. The final WAX DeFi epoch concluded in late December. In total, 54.3 million $WAX was burned via the WAX DeFi system ($3.8 million based on $WAX’s price at the end of Q4). Development and Growth While the number of total unique active contracts called remained steady in the past year, new contracts continued to decline. Total active contracts increased by 2% QoQ to 1,300. Meanwhile, new contracts fell 30% QoQ to 80. The network will continue tapping into its treasury to incentivize new builders on WAX. Its treasury currently stands at $5.9 million and is projected to grow at a yearly rate of $2.4 million, based on current prices from its allocation of 1% network inflation. In mid-November, Greymass released developer toolkit Wharf 1.0 to streamline development on Antelope-based blockchains. Wharf 1.0 brought an update to the Session Kit and launched the Contract Kit and Account Kit. The Session Kit allows developers to easily enable users to connect to a web app with their wallet, establish a session on the blockchain, and other features. Its V1.0 launched in early August. The Contract Kit helps developers interact with smart contracts, reading and writing the data they need. It also features a Command Line tool which helps developers automatically generate code to build applications. The Account Kit provides APIs for developers to query information about Antelope user accounts. It also includes tools for resource management, including the ability to abstract away resource management from end users. Beyond the Wharfkit, Wharf 1.0 also includes core Antelope libraries, plugins, APIs, and utilities. WAX Labs plans to increase developer education through a Developer Guides Series in 2024. In Q1, the Tic Tac Token Series will provide a comprehensive guide to onchain game development, teaching developers how to use tools like WAX’s built-in Random Number Generator. In Q2, the Slide Puzzle Series will focus on blockchain state synchronization and integration architecture patterns. Closing Summary While $WAX’s market cap increased by 67% QoQ to $236 million, many other of WAX’s key metrics decreased QoQ. Onchain activity was lower in Q4, with average daily transactions dropping by 51% QoQ to 8.4 million and average daily active addresses falling by 25% QoQ to 225,000. The decreases were due to a reduction in the amount of network resources available for free. Average daily NFT activity also fell by 32% QoQ to $54,000. On the other hand, WAX’s DeFi ecosystem picked up in Q4. Its DeFi TVL grew by 239% QoQ to $651,000. Growth was driven by Alcor Exchange’s WAX/USDT pool. Alcor facilitated the bridging of USDT from EOS via Antelope IBC. WAX’s stablecoin market cap increased by 823% QoQ to $243,000. Near the end of the year, WAX Labs released its 2024 roadmap. Notably, $WAX tokenomics are set to change in Q1 2024. Fees will no longer come from a 2% tax on NFT secondary sales volume. Instead, the fees will come from a more traditional transaction gas fee model, with all fees burned. Other catalysts in 2024 include integrating new Antelope Leap upgrades and Cloud Wallet updates.
Source: Peter Horton — Published: 2024-01-17T15:00:00ZtanX Q4 2023 Brief
Key Insights Launched in mid-2023, tanX's first-year trading volume exceeded $1.2 billion. The platform has been actively hosting trading competitions and utilizing the Salt Score to support this growth. tanX recorded 5 million cumulative transactions and 6,000 addresses. Activity spiked in early September following a flurry of announcements and has stabilized since. tanX announced $16.5 million in Series A funding. The round included Pantera Capital, Spartan Group, StarkWare, Goodwater Capital, Elevation Capital, Protofund, and Upsparks. tanX is live on Ethereum, Optimism, Polygon, Scroll, and Starknet, with announced expansions to Arbitrum, Manta, Monad, Linea, and others. The majority of activity still predominantly occurs on Ethereum. tanX caters to institutional clients. Its orderbook APIs are designed to fulfill the complex needs of high-frequency traders, OTC desks, exchanges, and brokers. The protocol rebranded to tanX in December 2023, formerly known as Brine Finance. Primer tanX, formerly known as Brine Finance, is a Cross-chain Orderbook DEX amalgamating qualities of centralized and decentralized exchanges. It leverages ZK Proofs and STARK Proofs to ensure privacy and security. Key features include scalability, low trading fees, rapid order execution, and end-to-end decentralization. tanX eliminates gas fees for trades, supports various order types, and offers simple APIs for a wide range of use cases. tanX caters to both retail and institutional clients with its focus on a secure, efficient, and compliant trading environment. The native token of tanX is not live yet, but tanX is hosting a SALT Score campaign to incentivize participation and reward community members. Additionally, tanX has successfully completed a Series A funding round, raising $16.5 million from notable investors including Pantera Capital, Spartan Group, StarkWare, Goodwater Capital, Elevation Capital, Protofund, and Upsparks. Originally launched on Ethereum, tanX has expanded to include Optimism, Polygon, Scroll, and Starknet, with announced expansions to Arbitrum, Manta, Monad, Linea, and others. This report will specifically focus on the Ethereum deployment of tanX, as it is the primary hub of user activity and transaction volume to date. Website / Twitter / Discord Key Metrics Addresses In early September, tanX experienced a notable increase in activity due to new feature launches, strategic partnerships, and the introduction of the SALT Score trading system. This, coupled with reduced trading fees to 0.02% and a top 5 ranking on DeFiLlama by DEX volumes, elevated its profile. The platform's momentum was further accelerated by a $16.5 million Series A announcement. Addresses interacting with TanX normalized in October, following the spike from the rewards announcement in September. TanX maintains active addresses above historical averages, with 107 daily active addresses in Q4. The platform has amassed a cumulative total of 6,000 addresses. Transactions Since launching on Ethereum mainnet in April 2023, tanX has recorded over 5 million transactions. Transaction activity spiked in early September, paralleling the increase in active addresses, albeit to a lesser extent. In Q4 2023, transaction numbers stabilized, with an average of 21,000 daily transactions, representing a -16% QoQ change. The tanX Salt Score and Trading Competitions have contributed to this growth. The Salt Score system rewards users based on their on-chain interactions, social activity within the tanX community, and trading activity, encouraging participation in various trading competitions. These competitions offer an environment where traders can test and refine their skills against others, engage in different markets, and earn points for rewards and exclusive platform features. Volume tanX has aims to increase its trading volume by adding to its more than 25 institutional partners, expanding its range of trading pairs, and extending support for additional ecosystems. tanX has hosted multiple trading competitions in tandem with the Salt Score to catalyze activity. As a result, tanX's trading volume has surpassed $1.2 billion dollars in its first year, with a daily average of $5.5 million in Q4 2023. TVL Upon its mid-2023 launch, tanX experienced an immediate spike in TVL, reaching $450,000. The TVL peaked at $800,000 in November. tanX concluded Q4 2023 with a TVL of $550,000. Institutional Focus TanX, with its institutional focus, offers OTC desks and exchanges execution and integrations, while allowing them to retain custody of their assets. Banks and brokers can execute KYC-compliant trades with pre-approved partners and process international transactions. tanX ensures privacy and security using ZK Proofs and STARK Proofs, and is characterized by scalability, low trading fees, rapid order execution, and decentralization. Additionally, tanX eliminates gas fees, supports various order types, and provides simple APIs. Additional Highlights Announced a partnership with Solus Finance and hosted a joint AMA. Launched the "Seasoned Trader" AMA series with trader Aryan to cover various trading strategies. Introduced SafeGate, a self-custodial wallet boasting advanced encryption for heightened security across multiple blockchains. Debuted Dropmate, an autonomous validity network, to automate web3 actions with data control and security through zero-knowledge proofs and multi-party computation. Revealed the upcoming release of Brinerd NFTs on the Galxe platform. Announced upcoming launches on Arbitrum, Manta, Monad, Linea, and others. Underwent a rebranding from Brine Finance to tanX. Closing Summary Since its launch in mid-2023, tanX has achieved substantial growth, recording over $1.2 billion in trading volume. This surge in activity, particularly from September onwards, was ignited by a series of product releases and the announcement of Series A funding. The platform has actively engaged its community through multiple trading competitions and the Salt Score system. The native token is yet to be launched, with no public details on its functionality and release date, but it is assumed the Salt Score system will influence community allocations. Looking ahead, tanX's 2024 roadmap reflects a commitment to growth and diversification within the competitive Dex sector. The platform is strategically enhancing its market presence through initiatives focused on expanding its institutional clientele and integrating features like the self-custodial MPC wallet SafeGate and autonomous validity network (e.g. automatic airdrop farming) via Dropmate. These efforts are complemented by unique product offerings and ongoing community engagement.
Source: Nicholas Garcia — Published: 2024-01-17T14:30:00ZMoonbeam Q4 2023 Brief
Key Insights Moonbeam's XCM activity hit an all-time high. The all-time high of 185 messages per day represents a 108% increase QoQ, driven by enhanced ecosystem activity and strategic integrations. Network usage experienced a significant uptick. Daily active addresses increased 54% QoQ to 5,000, and daily transactions increased 14% QoQ to 52,000. Referendum 139 extended Moonbeam's parachain slot. The slot was secured for 162,800 DOT, which was self-funded by the Moonbeam team. Moonbeam maintained a strong developer presence. Data from Electric Capital indicated that Moonbeam's ecosystem was supported by 250 monthly active developers, including 85 in full-time roles. The Moonbeam ecosystem surpassed 300 projects. Primer Moonbeam (GLMR) is a Layer-1 parachain on the Polkadot Network, serving as an EVM-compatible smart contract platform. It provides an Ethereum Virtual Machine (EVM) implementation and a Web3 API, enabling straightforward deployment of Solidity contracts and protocol interfaces with minimal modifications. Its primary features include cross-chain integration, staking, and on-chain governance. The network includes multiple deployments: Moonbeam on Polkadot (December 2021), Moonriver on Kusama (June 2021), and Moonbase Alpha on TestNet (September 2020). This structure ensures safe and rapid updates to Moonbeam's mainnet. Moonbeam's technology stack, built with Rust and Substrate, provides a robust development environment. It boasts Ethereum compatibility, offering a full EVM implementation and Web3 RPC API, which integrates existing Ethereum tools and applications. As a key player in the Polkadot ecosystem, Moonbeam provides developers with an accessible route to leverage Polkadot's network effects while utilizing Ethereum tooling and compatibility. Website / X (Twitter) / Telegram Key Metrics Market Capitalization In Q4 2023, the entire crypto market cap experienced an increase, largely driven by anticipation surrounding the spot BTC ETFs. GLMR participated in the overall market rally and saw additional gains, attributed to the culmination of Moonbeam Ignite, enhanced network usage, and increased XCM activity. The circulating market cap for Moonbeam ended the quarter at $370 million, and the fully diluted market cap adjusted to $503 million. Moonriver (MOVR) re-rated to represent a meaningful percentage of Kusama (KSM’s) market cap (55%), with a valuation of $236 million compared to KSM's $431 million. In contrast, GLMR's market cap remained at a small percentage of DOT's market cap (3%), with GLMR's valuation at $370 million against DOT's $11 billion. These comparative valuations highlight Moonbeam's relative positioning within the broader ecosystem and indicate areas of growth. GLMR Token and Revenue In Q4 2023, Moonbeam reported revenue of 387,000 GLMR, down 5% QoQ. The revenue in USD was $126,000, representing an increase of +123% QoQ. This uptick was further amplified by the increase in GLMR's price. GLMR is the native token of the Moonbeam network. It serves multiple functions, such as rewarding collators, enabling onchain governance, and paying for network transaction fees. The token experiences an annual inflation of 5%, with no maximum supply. Of the transaction fees generated on the Moonbeam network, 80% are burned, with the remaining 20% directed to the network's Treasury. The proportion of GLMR staked has consistently risen over several quarters, culminating in 37% of its total supply being staked by the end of Q4. The quarter also saw significant developments affecting the Polkadot ecosystem's tokenomics. The final 99 million DOT from the first batch of slot auctions were unlocked. Furthermore, Referendum 139 successfully extended Moonbeam's parachain slot through June 2025 for 162,800 DOT. Usage and Development In Q4 2023, Moonbeam's network activity reflected strong growth. Daily active addresses reached 5,000 (+54% QoQ), with daily new addresses at 1,300 (+45% QoQ) and daily returning addresses at 3,700 (+57% QoQ). Transaction volume increased to 52,000 daily transactions (+14% QoQ). Key developments and community initiatives included: 300 Ecosystem Projects: Surpassed 300 projects deployed on the network. Moonbeam Network Partners With DUX Grupo RÃO: Initiated Brazil’s largest Web3 Loyalty Program, aiming to integrate approximately 1 million users. Moonbeam Partners With W3bLock and World Jiu-Jitsu Certifier: Launched a global registration platform for Brazilian Jiu-Jitsu practitioners and instructors. The Lunar Gaming Festival: Celebrated gaming in the Moonbeam ecosystem with a community-led festival featuring a prize pool. Moonbeam Ignite Wrap Up: Concluded the Moonbeam Ignite programs with participation from Gamma, BeamSwap, Moonwell, and more. Moonsong Labs Establishment: Announced a new venture focused on Web3 protocol development aiming to broaden and expand the Moonbeam ecosystem, led by Moonbeam Founder Derek Yoo. In October, data from Electric Capital revealed that Moonbeam maintained a significant developer presence, with 250 monthly active developers participating in its ecosystem. Among these, 85 were engaged on a full-time basis. XCM In Q4 2023, Moonbeam's Cross-Consensus Messaging (XCM) activity reached an all-time high with 185 messages per day, a 108% increase QoQ, driven by increased ecosystem activity and strategic integrations. Noteworthy XCM developments include: Strategic Integrations: OriginTrail and Subsocial, making their native tokens available on their respective parachains. Runtime Enhancements: Improvements in Moonbeam's runtime, notably the XCM Transactor precompile, have facilitated the efficient transmission of XCM messages from within the EVM. In Q3, Moonbeam introduced Moonbeam Routed Liquidity (MRL), utilizing Wormhole as the core message-passing protocol and Carrier/Automata as the message-relaying service. MRL enables parachains to access bridge liquidity from various ecosystems, including Ethereum, Solana, Polygon, and Avalanche, without requiring a Moonbeam account or direct involvement. Since its inception, MRL has facilitated a total net volume of $10.1 million over 842 transactions. Total Value Locked For Q4 2023, the Total Value Locked (TVL) in USD on Moonbeam was recorded at $70 million, representing a 34% increase QoQ from $53 million. In the same period, the TVL in GLMR decreased by 31%, totaling 154 million GLMR compared to 224 million GLMR in the previous quarter. The Liquid Staking TVL in USD also saw a 70% decrease to $363,000, with Lido being the only liquid staking protocol on Moonbeam. Additionally, the MixBytes team announced the discontinuation of their development and technical support for Lido on Polkadot and Kusama, as they actively explore the possibility of providing technical support for a dedicated DotSama native liquid staking solution. The leading protocols by TVL on Moonbeam are: Moonwell (Lending): $49 million TVL, +18% QoQ. Prime Protocol (Lending): $9 million TVL, +142% QoQ. StellaSwap (DEX): $7 million TVL, +80% QoQ. BeamSwap (DEX): $3 million TVL, +214% QoQ. FraxSwap (DEX): $2 million TVL, 36% QoQ. Uniswap V3 launched on Moonbeam at the end of Q3, yet it has struggled to establish a substantial foothold in the ecosystem. As of the final quarter, it ranks 11th in Total Value Locked (TVL) with a TVL of $185,000. Moreover, it trails significantly in trading volume compared to other protocols on the network. Notably, Stellaswap leads by volume, accounting for 61% of the total volume on Moonbeam. Stablecoins In Q4 2023, Moonbeam's stablecoin market cap reported no significant change from the previous quarter, maintaining a value of $7.7 million. This level has persisted since April 2023. During Q3, the Polkadot network introduced support for Native USDC, thereby extending its availability to Moonbeam via XCM. This addition allows Moonbeam protocols to incorporate USDC into their products and services. However, despite the availability of native USDC, its adoption within the Moonbeam ecosystem has not shown a marked increase. Frax continues to hold a dominant position in the ecosystem's stablecoin market, with a market cap of $5 million, representing 69% of Moonbeam's total stablecoin market cap. In terms of broader stablecoin market standings, Moonbeam is ranked approximately 40th, indicating its position relative to other ecosystems. Closing Summary In the fourth quarter of 2023, the Moonbeam ecosystem saw substantial growth and development. Cross-consensus messaging (XCM) activity reached an all-time high, driven by increased ecosystem engagement and strategic integrations. Network usage also surged, with daily active addresses rising by 54% QoQ to 5,000, and daily transactions increasing by 14% QoQ to 52,000. GLMR's market capitalization benefited from the broader market rally and heightened network activity, marking a 110% QoQ increase. Looking ahead, Moonbeam is well-positioned for further growth. With over 300 projects in its ecosystem, Moonbeam has a diverse community of projects. The network maintains a strong developer presence, with 85 full-time developers. Furthermore, Moonbeam's extension of its parachain slot confirms its commitment to the Polkadot ecosystem for the next two years. It will be paramount for the Polkadot ecosystem to attract more activity to ensure the continued success of the Moonbeam protocol.
Source: Nicholas Garcia — Published: 2024-01-15T14:30:00ZState of Solana Q4 2023
Key Insights Solana sustained QoQ growth across many metrics in Q4, including market cap (423%), average daily fee payers (102%), DeFi TVL (303%), average daily DEX volume (961%), and average daily NFT volume (359%). Solana Foundation’s annual Breakpoint conference helped drive growth, with many big announcements and launches from teams including Jupiter perps and token, Frankendancer, Backpack Exchange, and Render’s migration. JTO’s airdrop and BONK’s Coinbase listing further spurred onchain activity in December. Catalysts in Q1 and beyond include Jupiter’s airdrop, token extensions, and continued progress on the launches of Firedancer and TinyDancer. Primer Solana (SOL) is an integrated, open-source blockchain with the goal of synchronizing global information at the speed of light. Solana optimizes for latency and throughput, sacrificing some verifiability. It seeks to accomplish this through features such as its novel timestamp mechanism called Proof-of-History (PoH), block propagation protocol Turbine, and parallel transaction processing. Since mainnet launch in March 2020, several network upgrades have brought further network performance and resilience, including QUIC, stake-weighted Quality of Service (QoS), and local fee markets. Network and ecosystem development and growth are supported by the non-profit Solana Foundation, Solana Labs, as well as other third-party organizations including Helius and Superteam. Solana Labs has raised over $335 million in private and public token sales. The Solana ecosystem features a growing set of projects across many sectors, including DeFi, consumer, DePIN, payments, and privacy. Website / Twitter Key Metrics Financial Analysis SOL was one of the leaders of the Q4 crypto market rally. It ended 2023 with a market cap of $43.8 billion, increasing 423% QoQ and 1,106% YoY. In Q4, it surpassed ADA, USDC, and XRP in market cap, ranking it 5th among all tokens. SOL began the year ranked 17th in market cap. Revenue, which measures all fees collected by the protocol, increased by 19% QoQ in SOL terms. With SOL’s price appreciation, total quarterly revenue in USD more than tripled to $13.7 million. Half of these fees are burned, while the other half are distributed to the block producer. At the moment, these burned tokens have not significantly reduced inflation, which stood at 5.6% at the end of the quarter. This inflation rate strictly measures new tokens issued for validator rewards and does not consider other token unlocks. The inflation rate is set to continue decreasing by 15% every epoch year until it settles at 1.5%. As of writing, 71.5% of the SOL supply eligible to be staked is staked, with these holders opting out of dilution from issuance. Note that tokens held by Solana Labs or the Foundation are not all counted as circulating despite not being locked. With the uptick in fees, the annualized real yield rate for SOL stakers increased 58% QoQ to 1.7%. One of the main SOL-related stories in Q3 was what would happen with Alameda/FTX’s SOL, now controlled by the FTX Estate. Alameda and FTX bought over 57 million SOL from the Solana Foundation and Solana Labs. However, these tokens are subject to various unlock schedules, with the average unlock date being in Q4’25 — though the locked accounts could be sold over the counter. Chainsplainer ashpool concluded their coverage of FTX Estate’s SOL management, noting that the FTX Estate has unstaked and transferred most of its unlocked SOL. Upcoming unlocks can be viewed on Solana Compass and Gelato. Network Analysis Usage Network activity, measured by non-vote transactions and fee payers, rose along with SOL’s price. Daily fee payers hovered between 80,000-100,000 for most of 2023. Solana Foundation’s Breakpoint conference spurred the first leg of growth at the end of October into November. Further events, including JTO’s airdrop and Coinbase’s BONK listing, compounded into further growth. In total, average daily fee payers grew 102% QoQ to 190,000, and average daily non-vote transactions grew 65% QoQ to 41 million. New fee payers followed a similar growth trend, reaching yearly highs when ignoring anomalous activity in Q2 from an unknown program. Average daily new fee payers increased 176% QoQ and 88% YoY to 32,000. November’s new fee payer cohort had the highest one-month retention rate of any Solana 2023 cohort at 25.6%. The increased activity in December spurred more transactions to include a priority fee for inclusion, and consequently, the average transaction fee increased 175% QoQ to 0.000025 SOL ($0.002). The daily priority fee rate reached a yearly high of almost 69% on December 26, while the daily average transaction fee peaked on December 27 at 0.001 SOL, 4x the average Q4 fee and 11x the average Q3 fee. However, the median fee remained steadier. The highest daily median fee was 0.00000623 SOL, less than 1.25x the fixed base transaction fee of 0.000005 SOL which serves as the median on most days. The discrepancy between the relative rises in average and median transaction fees indicates that local fee markets are successfully preventing global fee spikes. Of course, Solana’s fee markets are not perfect. Discussions about improving them intensified in Q4. There are several inefficiencies being discussed by the community with debated solutions, including the following. Problem: Inefficient Resource Pricing and Allocation Potential Solution: Base Fees Determined by Compute Units Solana compute units (CUs) estimate the computation required to validate a transaction, similar to Ethereum gas units. Each transaction requests a certain number of CUs. Each block has a global maximum of 48 million CUs and a per-account maximum of 12 million CUs. Unlike in Ethereum, Solana’s base fee is not determined by compute units. It’s instead determined by the number of signatures, with most transactions having one signature. While each transaction requests CUs, actual usage is known only after execution. This leads to a general lack of compute optimization incentives: transactions often request more CUs than they need, and developers don’t build programs with compute minimization top-of-mind. One proposed solution is to price transactions based on CUs. Problem: Out-of-Protocol Side Deals Potential Solution: Allocate 100% of Priority Fees to Validators Half of each priority fee is burned, and the other half is sent to the leader. This differs from Ethereum where 100% of the priority fee is sent to the block producer. Burning half of each transaction fee promotes out-of-protocol side deals with validators like Jito auctions. The potential solution here is straightforward: give 100% of priority fees to validators. This was officially proposed last week in SIMD-0096. Problem: Existing Spam Incentives Potential Solution: Scheduler Upgrades (V1.18) and Economic Upgrades (PRAW, Write Account EMA) Although several upgrades have alleviated spam, they have not removed it. With the increased activity in December, a majority of compute went toward failed transactions. There is some debate regarding the best way to further mitigate spam. Some attribute it mostly to inefficiencies with Solana’s scheduler (block-building mechanism), while others believe that economic upgrades are necessary. Scheduler: Solana’s scheduler features continuous block building using parallel threads. It thus lacks a global transaction order, making priority fees less effective in determining order. The absence of deterministic ordering based on priority fees leads to partial reliance on FIFO and variance of what thread a transaction lands in (network jitter). This incentivizes spamming transactions for preferred inclusion. There are planned upgrades to the scheduler, expected for V1.18, that should increase transaction ordering’s dependence on priority fees instead of randomness, alleviating spam. Economic: Solana’s parallel execution engine requires upfront, user-declared knowledge of dependencies. Transactions that declare dependencies on the same account can’t be executed in parallel. However, there are no penalties if a transaction doesn’t end up accessing the specified account. This leads to a spam problem where transactions specify an account they don’t end up using. The spam worsens the experience for others whose transactions actually access the account. It also worsens overall network performance: the more accounts specified, the higher the likelihood of contention that leads to replay spikes. To address this, there have been proposals to introduce dynamic, per-account write lock fees. At a very high level, the fee system would be an adaptation of EIP-1559 for local fee markets. There are further debates as to whether the pricing curve should be set by each account owner or a global parameter. Mango Markets developers proposed the former in SIMD-0016: Program Rebatable Account Write Fees (PRAW). The PRAW proposal is over a year old and still actively discussed. In a recent post, Anatoly proposed the latter, with write lock fees for each account adjusting based on their exponential moving average of CUs used per block. In both proposals, at least half of the write lock fee would accrue back to the write account. Beyond alleviating spam, these proposals also address how much sovereignty apps on a shared blockchain state should have. While there is some debate that the write lock spam issue can mostly be alleviated by scheduler improvements, it would not address the potential need to give apps more sovereignty. Security and Decentralization Staked SOL fell 19 million QoQ (5%), largely driven by the FTX Estate unstaking around 20 million SOL. With SOL’s price appreciation, total staked in USD terms grew 399% QoQ to $41 billion, ranking Solana second among all networks behind Ethereum. FTX Estate’s unstaking hurt Solana’s Nakamoto coefficient, as Alameda/FTX staked to a wide spread of validators. At 22, Solana’s Nakamoto coefficient is the lowest it’s been in over a year, although it still remains above the median of other networks. Solana’s Nakamoto coefficient is benefitted by the Solana Foundation Delegation Program, which is currently delegating 68 million SOL. In early December, the Foundation proposed changes to the program to help participating validators become more self-sufficient over time. The Nakamoto coefficient is the minimum number of nodes needed to break liveness. The metric can also be measured across other dimensions important to the resilience of a validator network, including distribution of stake by location, hosting provider, and clients. Solana network’s 2,020 total validators are hosted in 34 countries, up 21% YoY. The United States leads with 30% of all stake. At just under the 33.3% threshold, Solana has a geographic Nakamoto coefficient of 2. The Solana Foundation noted in its October validator report that it plans to address the U.S.’s increase in stake share in the past year. Right at the end of the year, Superfast’s Cape Town validator node went live. The validator node is the network’s first in Africa. Solana validators are hosted in 309 unique data centers, up 10% YoY. Solana has a data center Nakamoto coefficient of 7. As detailed in the validator report, Solana has a hosting provider Nakamoto coefficient of 3, comprised of TeraSwitch, AWS, and OVH. Solana currently has two clients: the original Solana Labs client and an MEV-optimized fork by Jito Labs. Currently, 48% of stake is running the Jito client, up 51% QoQ and 534% YoY. However, it does not offer the same client diversity as a client written from scratch. To that end, there are two upcoming clients being written from scratch: Firedancer and Sig. Firedancer is being developed by Jump Crypto in C. At Breakpoint, Jump announced that an early version of Firedancer called “Frankendancer” is live on testnet. Frankendancer runs the new C-based code for “transaction propagation” functions like sending transactions among validators and verifying signatures. It maintains the original Solana Labs client code for the runtime (transaction processing) and consensus mechanisms. The team also discussed mechanism details on one of the first components needed for Firedancer to reach 8 million TPS. Firedancer previously sustained over 1 million TPS in a testing environment, while the Labs client had around 55,000 TPS in a similar environment. Outside of Firedancer, the Syndica team discussed details on Sig, a fourth validator client optimizing RPC reads in order to decrease slot lag, i.e., the lag time in between two blocks finalizing. In other words, Sig aims to reduce latency by making certain types of user requests flow from user to validator more fluidly. It’s also focused on readability and simplicity, hoping to be more accessible to developers. With Firedancer getting closer to launch, discussions surrounding its impact on client diversity have heated up. Some have argued that Firedancer can bring either client diversity or higher throughput in the short term, but not both. Anatoly and others contend that if more than a third of validators run Firedancer as the primary client with Solana Labs/Jito client as a secondary client, it will benefit client diversity without sacrificing Firedancer’s performance advantages. The secondary client can verify downloaded blocks which is easier to do than running a full data propagating node. If a bug or failure occurs in the Firedancer client, validators can fall back on the secondary client. Thus, it will bring the safety benefits of client diversity. But for the liveness benefits, another high-performance client would be necessary. Light client TinyDancer is also in active development. TinyDancer will improve the trustlessness of the network by allowing users to verify the state without having to run a full node themselves. The merge of SIMD 64: Transaction Receipts near the end of October brought light clients a step closer. SIMD 64 inserts into the core protocol a mechanism for validating the status of a confirmed transaction, removing the need to trust an RPC. While exploring ways to build rollups on Solana, Sovereign Labs developed a proof-of-concept to enable Simple Payment Verification (SPV) light clients on Solana without any Solana consensus changes. Performance, Upgrades, and Roadmap The Solana network is currently on its longest streak without a network outage, standing at 309 days as of December 31, 2023. The streak is the result of new technical features rolled out in the past year, such as QUIC, stake-weighted QoS,-Instead%20of%20validators), and local fee markets, as well as improvements to the network upgrade process. While this does not mean Solana will never go down again, it is worth recognizing the successful developer work to improve upon a widely criticized issue. After a successful V1.16 upgrade at the end of Q3, the V1.17 upgrade is planned for a Q1’24 mainnet launch. It will bring further ZK support, potentially including Poseidon syscalls, as well as making resiliency and performance updates like better estimation of compute units. Beyond Firedancer and potential fee market changes, other upcoming features include Token Extensions, Program Runtime V2, and potential consensus/execution optimizations via Multiple Concurrent Leaders and Asynchronous Execution. Token Extensions Token extensions are part of a new SPL token standard enabling a set of configurable features for token issuers. They were designed largely based on feedback from discussions with enterprises and financial institutions, but they have use cases in more crypto-native DeFi and consumer applications as well. There are more than a dozen extensions, notably: Confidential transfers: Confidential transfers have garnered most of the token extension-related buzz. If a token creator enables this extension, a transfer’s source, destination, and token remain public. However, the transfer amount is hidden from everyone except the source, destination, and an optional third-party auditor that can be added by the issuer. Transfer fees: Token issuers can add protocol-enforced fees on every token transfer. Options include a fixed fee, variable fee, and fee cap for each transfer. The extension has already been implemented by tokens like Bonk Earn (BERN). Transfer hooks: Transfer hooks add more programmable logic to transfers beyond transfer fees. They allow token issuers to add conditions for a token transfer to succeed. Examples of said logic could be whether or not an account holds a KYC token (which in turn could be created through the non-transferrable tokens extension), is on a certain compliance-related list, transacted before 2023, and so on. Permanent delegate: The permanent delegate extension gives the token issuer complete authority over the token. The token issuer could burn or transfer any amount of the token at its will, even if the token is held by another account. The extension is best used for tokens representing offchain assets or data where the token issuer has to comply with regulatory requirements. This extension could be used maliciously, but infrastructure providers are already adding features to warn users if enabled. See Solana’s docs and Helius’s blog for more information on the other extensions. The features these extensions enable are largely possible on other networks but currently require either developers building the infrastructure themselves or permissioned environments. Implementing them directly into the token program layer thus has several advantages: Infrastructure Support: All major wallets, applications, and other infrastructure providers will support token extensions. It would be more difficult for a project building its own solution to reach this level of ecosystem infrastructure support. Composability: Tokens and applications that would otherwise have to be walled off in permissioned environments can co-exist on Solana mainnet with existing permissionless token experiences. Users don’t need to bridge, and applications and infrastructure providers don’t need to support another network. Token extensions are live in Solana’s open-source code, but before recommending its use, the Foundation and Labs are awaiting final steps, such as security audits. Token extensions will likely launch officially in mid-January, although the confidential transfers extension will require some further upgrades in 1.17 and 1.18 before being fully enabled. Several tokens and applications have already experimented with token extensions. As noted above, BERN uses transfer fees to enforce a 6.9% fee on every transfer, which goes toward BERN holders, a burn, a developer fund, and BONK DAO. FluxBeam is a DEX that supports token extensions. It also has a telegram bot service FluxBot and a UI tool for creating and managing extensions. Another Hyperdrive project, The Vault, uses token extensions such as transfer hooks to create a staked SOL derivative where the stake rewards are separated from the derivative token. Lastly, major infrastructure providers, including Phantom, Solflare, Metaplex, and Helius, added support in Q4 for token extensions in preparation for the official launch in January. Runtime V2 In a nutshell, the Solana program runtime is the part of the Sealevel Virtual Machine (SVM) that allows Solana validators to execute programs (smart contracts). At Breakpoint, Solana Labs engineers showcased Program Runtime V2. Upgrades in Runtime V2 are centered on cost and API accessibility improvements via software optimizations. As the average cost to execute a program decreases, the design space for programs increases. Engineers can fit more instructions into one program call, allowing for increased program complexity. Increased maximum program complexity leads to increased freedom for application developers. Multiple Concurrent Leaders and Asynchronous Execution Solana developers and researchers have also been working on longer-term initiatives to further increase throughput and reduce latency. Anatoly Yakovenko, co-founder of Solana and CEO of Solana Labs, recently shared future projects he’s most excited by, including: Multiple Concurrent Leaders: Slot leaders are responsible for producing blocks during a time interval. Right now, each slot has one leader. Anatoly proposes that multiple leaders per slot would reduce average latency, MEV, and censorship risks. There are still open questions, including how to split bandwidth between the leaders and deal with forks. Asynchronous Execution: Asynchronous execution aims to streamline transaction processing by decoupling execution from consensus. Current slot leaders manage transaction execution and scheduling (building and propagating blocks). Instead, slot leaders could focus solely on scheduling. Non-slot leader validators could also forgo immediate execution. A sub-committee of validators would just form consensus on fork choices. Removing execution from the critical consensus path could reduce block times, enhance efficiency, and alleviate issues like execution-related latency spikes. Validators would asynchronously execute transactions within a set interval like an epoch. Full nodes would still be able to execute transactions in real time to service end users. To learn more, refer to Anatoly’s recent write-up. He believes asynchronous execution is a rare design with “virtually no trade-offs.” Ecosystem Analysis DeFi Solana DeFi TVL increased 303% QoQ and 505% YoY to $1.5 billion. Lending protocol MarginFi’s TVL grew 1,404% QoQ to $337 million, going from the sixth largest to the top Solana DeFi protocol by TVL. When it launched its points program on July 3, MarginFi only had $3.2 million in TVL. In Q4, it launched several UX upgrades, including a PWA and a simplified UI. It also teased YBX, an upcoming LST-backed stablecoin. Lending protocol Solend’s TVL grew 323% QoQ to $242 million, with its market share growing 5% QoQ. Season 1 of its points program launched in August and ended in early December with a tease for Season 2. Unlike MarginFi, Solend already had a native token. Thus, its points program was and still is tied to SLND tokens, among other rewards, rather than a potential airdrop. Solend also launched a native Android app, available in the Solana dApp store. Kamino joined the lending competition this quarter with its 2.0 upgrade that included a new borrow/lend protocol. Since its launch in mid-November, Kamino Lend has amassed $139 million in TVL. Its TVL roughly doubled in the days after Kamino announced plans to launch a points program for a future airdrop. Kamino 2.0 also brought single-click leverage tools for SOL staking yield (looping xSOL/SOL) and going long/short tokens against USDC. Its original liquidity vaults product ended the year with $88 million in TVL (though not counted in Solana’s figures to avoid double-counting). DeFi volume also grew notably, with average daily spot DEX volume increasing by 1,116% QoQ to $359 million. Of the Q4 volumes, 45% used liquidity from Orca, followed by Raydium at a 29% market share. Orca and Raydium were also third and fifth in Solana TVL, at $190 million and $133 million, respectively. Although it averaged 0.8% of daily DEX TVL market share, Phoenix averaged over 9% of DEX volume market share. Phoenix is a fully onchain central limit order book that has received praise for its capital-efficient design. BONK-SOL accounted for the fourth-highest token pair trading volume in Q4, following SOL-stable and stable-stable pairs. The pair had almost $1.3 billion in total Q4 volume, an 11,000% QoQ increase. BONK is a memecoin that was airdropped to Solana developers as a 2022 Christmas gift. In mid-December, Coinbase listed BONK. Its $238 million first-day Coinbase trading volume was the 12th highest in the exchange’s history. On average, 57% of DEX spot volume was routed via the Jupiter swap aggregator. Jupiter was among the most talked about DeFi protocols in all crypto in Q3. The excitement was sparked by its announcements at Breakpoint, unveiling a new GMX style perps product (launched shortly after Breakpoint), a new liquid-staked SOL-backed stablecoin (yet to launch), and an airdrop. The first of four airdrop rounds (equaling 40% of the total supply) is planned for January. The airdrop’s criteria were finalized after being refined several times following community feedback. Since its launch, Jupiter perps have averaged $53 million daily trading volume. The other main Solana perps player is Drift, which was one of Solana’s fastest-growing DeFi protocols in Q3. Its growth continued in Q4, with its average daily perps volume increasing ~10x to $23 million. In its Breakpoint presentation, Drift announced a $23.5 million Series A fundraise. After being relatively flat for most of 2023, Solana’s stablecoin market cap grew by over $300 million QoQ, largely driven by an increase in USDC supply in December. USDC liquidity and interoperability on Solana should continue to grow from Circle’s Cross-Chain Transfer Protocol (CCTP). CCTP allows USDC to be transferred across networks without needing wrapped USDC. In early November, it launched on Solana’s devnet, with an estimated mainnet launch in the first half of 2024. Circle also launched euro-backed stablecoin EURC on Solana in mid-December. Near the end of the quarter, Paxos announced that it plans to expand its NYDFS-regulated USDP stablecoin program to Solana in mid-January. Doing so makes Solana the second network to support USDP after Ethereum. Other notable DeFi-related events include Parcl V3 and points, Cube Exchange’s $9 million fundraise and Litepaper release, Ondo’s expansion to Solana, Hashflow’s expansion to Solana, Zeta points, OpenBook V2, Lulo Flexlend, Rain.fi's update, SDX's launch, Starport's litepaper release, Meteora Stimulus Package, Cypher’s IDO, Fluidity’s launch, LiquidProp private beta launch, and Flash.Trade’s launch. Liquid Staking With 72% of eligible SOL supply staked, liquid staking protocols will be critical in enabling an ecosystem built on yield-bearing SOL. Incentive programs have been successful recently in growing the amount of total SOL stake that is liquid-staked. This rate grew 49% QoQ but is still relatively low at 4.3%. Jito has been driving Solana's liquid staking growth. After introducing a points system in mid-September, Jito launched its token JTO in early December, airdropping 10% of the total supply to JitoSOL holders, Jito client validators, and Jito MEV searchers. With less than 10,000 eligible wallets and a distribution that favored smaller wallets, the minimum airdropped amount was almost $10,000 based on JTO’s price at the end of the quarter. JTO was listed on Coinbase the day it launched and was the exchange’s most highly-traded new listing since APE in March 2022 (before being quickly surpassed by BONK). Jito Foundation released its constitution, which proposes a governance framework for a JTO DAO, among other things. Jito’s TVL in SOL terms grew 164% QoQ to 6.4 million SOL. Its market share grew by 85% QoQ to 38%, just behind Marinade. Jito’s growth was benefitted by Lido sunsetting its Solana instance following a governance vote. Lido had a 24% market share at the end of Q3, which fell to below 2% by the end of Q4. As noted above, Jito’s MEV Solana client also witnessed growth, with 48% of stake running the client, up 51% QoQ. MEV has also recently been picking up with the increase in onchain activity. At Breakpoint, Jito unveiled StakeNet, an open-source protocol for decentralizing Solana staking pool operations. Currently, all Solana staking pools are managed by centralized actors that store historical validator data from onchain snapshots and offchain sources like validator gossip in their own offchain servers. They then use their own delegation logic and parameters to rebalance stake between validators and add or remove validators from the set. StakeNet puts all of this onchain. It introduces a network of keepers that run a validator history and steward program. The validatory history program stores onchain up to three years of cryptographically verified data for every Solana validator. The steward program manages the delegation logic and validator scoring to operate the stake pool. With everything onchain, the delegation logic and parameters can then be adjusted through onchain governance. When it goes live, Jito will adopt StakeNet, with the hope that other staking pools will, too. While its market share fell 12%, Marinade’s TVL in SOL terms still grew 26% QoQ. Marinade already has a native token MNDE, but last quarter it launched a rewards program to compete with the growth of newer, tokenless protocols. Last quarter, Marinade also launched Marinade Native, a native staking product to compliment Marinade’s liquid staking. Marinade Native is a stake automation platform that routes stake to 100+ top-performing validators without a performance fee or introducing any smart contract risk. Marinade Native has amassed $416 million in TVL. Near the end of the year, Marinade introduced Protected Staking Rewards (PSR). Under PSR, validators will need to put up a SOL bond to be eligible to receive Marinade stake. If a validator has downtime or suffers other performance issues that affect its staking rewards, the SOL bond will be used to cover any losses for Marinade stakers. Blaze has continued its ongoing BLZE airdrop, which began in August. After growing by 1,234% QoQ in Q3, its TVL in SOL grew 344% in Q4, ending with a 12% market share. MarginFi launched its own liquid-staking protocol at the end of Q3. The LST routes stake to three validators run by the MarginFi team. Its liquid staking TVL in SOL grew 1,886% QoQ, cracking the top five of liquid staking protocols. As noted above, the MarginFi team has teased the launch of a liquid-staked, SOL-backed stablecoin. The liquid-staking ecosystem is being further strengthened by Sanctum, which offers liquidity and stability to Solana’s liquid staking and DeFi ecosystems. In early December, Sanctum unveiled 2.0, bringing new products such as single-validator LSTs, an upgraded multi-LST liquidity pool, and a zero-fee flash loan program. As LSTs in Solana DeFi protocols grow, LST liquidity will become increasingly important, especially if users leverage them against SOL. This dynamic became evident in mid-December when a user sold around $8 million worth of Marinade’s mSOL, causing its price to dip below SOL. While Sanctum provides a liquidity pool unifying LSTs, mSOL is still in the process of integrating it. The temporary depeg also caused a debate between several lending protocols over best risk management and liquidation practices. Consumer NFTs Average daily NFT volume increased 356% QoQ to $4.8 million. Removing Bitcoin, Solana’s market share of NFT volume grew from 9% to 26% QoQ. NFT marketplace Tensor’s market share of volume compared to Magic Eden grew to over 80% in early December, although Magic Eden reclaimed a majority share by the end of the quarter. Tensor started the year with a 1.2% market share. The top collections by total Q4 trading volume include Mad Lads (613,000 SOL), Tensorians (510,000 SOL), and Claynosaurz (171,000 SOL). These collections all represent the transitioning PFP NFT meta towards brand-building and practical applications. Mads Lads were launched by the team behind the Backpack wallet and exchange. The Backpack Exchange was announced during Breakpoint and opened sign-ups in mid-November. Projects like Pyth, Dymension, Wormhole, and Monad have announced or teased an airdrop to Mad Lads holders, with holders also hoping for a Backpack Exchange airdrop. Tensorians are the native project of Tensor. They offer holders benefits like points for the expected Tensor airdrop and perks from partner projects. Claynosaurz has been experimenting with IP rights, creating content, and launching merchandise, similar to Pudgy Penguins on Ethereum. Many notable Solana NFT collections saw significant QoQ increases in their floor price denominated in SOL. Mad Lads’ floor market cap grew 142% QoQ to 1.3 million SOL ($135 million), while Tensorians’ grew 517% QoQ to 0.8 million SOL ($80 million). The two projects are now Solana’s top collections by floor market cap. Social and Creator Platforms Compressed NFTs (cNFTs) have been the first successful use case of state compression, which was introduced at the beginning of Q2. State compression provides a cost-efficient method for storing data onchain by hashing data into Merkle trees and posting its root hash onchain. Depending on the composability level, the cost to mint and store 1 million cNFTs ranges from 5.3 to 63.7 SOL compared to 24,000 SOL without compression. cNFTs enable new use cases across consumer, DePIN, and other sectors. DRiP is the foremost example of a consumer application that is only possible with cNFTs. DRiP partners with artists for free NFT art mints, with collection sizes much larger than the normal 10,000. DRiP minted over 35 million cNFTs in Q4, with another 4 million minted by Dialect, Helium, and other projcects. At the beginning of the quarter, DRiP launched Droplets to power its in-app economy. Originally, Droplets were distributed to users depending on various engagement levels and were automatically spent when users received a collectible from the platform. At the beginning of December, DRiP revamped the system, bringing Droplets 2.0. Users can still receive Droplets for free — but only through a spin-to-win mechanism that refreshes every six hours. Users can now also purchase Droplets with tokens or fiat (powered by Sphere). Lastly, users can directly gift Droplets to creators for potential perks. Droplets are converted to USDC and paid out to creators. DRIP paid out $143,000 to creators in Q4, with $84,000 in December alone. Other notable events include: Access Fundraise: Creator monetization platform Access Protocol announced a $1.2 million seed round. Nina Protocol V2: Digitally native music platform Nina launched its V2 in mid-November, enabling artists to sign up with an email address and release music for sale or free. Nina uses Arweave and Solana to store music releases and facilitate transactions, with artists keeping 100% of their sales. Boba Guys Passport: Bubble tea chain Boba Guys launched a loyalty program built on Solana, minting cNFTs with the help of NFT tooling company Crossmint. So far, there have been 8,124 cNFTs minted for the program. SolLinked Masquerade: SolLinked added a “Masquerade” feature. Masquerade is a chat room where users can prove their onchain holdings in a privacy-preserving manner through Elusiv. Solarplex In-Post Minting: Web3 social media platform Solarplex added an in-post minting feature. It allows users to easily create an NFT and embed it into a post. Anyone who likes the post automatically collects the NFT. Gaming Gaming has quieted down as a predominant Solana-specific narrative, but there was still a lot of discussion and several updates at Breakpoint. Star Atlas is a highly-anticipated game building on Solana. At Breakpoint, it unveiled gameplay features and a demo of its upcoming 2.2 release. At the end of last quarter, Star Atlas launched a 2D open-world game SAGE Labs. With every action taking place onchain, Star Atlas accounted for around 8% of total Q4 Solana transactions. Open-source onchain gaming framework Magicblock detailed its vision for a Solana native gaming engine (more on how those work and why they're important here). Other discussions at Breakpoint were held on the evolution of and mechanism design within the gaming space, as well as user acquisition strategies to maximize those designs. In mid-December, Magicblock co-hosted the second Solana Speedrun along with Lamport DAO and the Solana Foundation. The gaming-focused hackathon offered up to $10,000 in prizes. DePIN Solana is becoming a hub for DePIN applications, hosting Helium, Hivemapper, Render, Teleport, and GenesysGo, among others. Notable Q3 events include: Render Migration: At the beginning of November, decentralized compute network Render successfully completed the migration of its core onchain infrastructure, including its native token, from Ethereum and Polygon to Solana. The Render Foundation stated that Solana enables new capabilities for the protocol, such as real-time streaming, dynamic NFTs, and composability with onchain order books. Helium Mobile $20 Phone Plan: In early December, Helium Mobile launched its nationwide $20 per month phone plan with unlimited data, talk, and text in partnership with T-Mobile. It also released the indoor and outdoor Helium Mobile Hotspot, allowing users to help create wireless coverage in return for MOBILE rewards. Hivemapper Updates: Hivemapper aims to create a decentralized global map. Hivemapper Inc. announced that it has begun licensing map data on behalf of paying customers. Later in the quarter, Hivemapper released Scout, an open-source UI toolkit for monitoring street locations in real-time using Hivemapper dashcam imagery. Potential use cases include monitoring construction work zones, gas station prices, and advertising billboards. Teleport iOS App: Decentralized rideshare protocol Teleport launched its iOS app at the end of October. Teleport will begin operating in cities with at least one local rideshare operator and enough drivers and riders. Io.net Public Beta: Decentralized GPU aggregator io.net launched its public beta during Breakpoint. Io.net has aggregated GPUs from Render, Filecoin, and its own network to establish a decentralized cloud catering specifically to machine learning needs. It plans to launch its own token in Q1 2024. IoTeX Integration: Sensor network platform IoTeX integrated its W3bstream SDKs with Solana. W3bstream connects IoT devices equipped with use case-specific sensors (such as Hivemapper dashcams) to onchain contracts using zk-proofs. Nosana’s AI Pivot: In mid-October, decentralized GPU network Nosana announced a pivot from CI/CD use cases to AI inference. Its platform is currently in private beta with over 100 GPU nodes and 47,000 completed inferences. Payments With low transaction costs, sub-second finality, and a network of several thousand nodes, Solana promises to help power mainstream payment flows — so says Visa, which expanded its USDC settlement pilot to Solana last quarter. Beyond Visa’s announcement, another major payment-related win last quarter was the integration of Solana Pay into Shopify. Payments platform Helio announced in December that it would be taking over operations of the Solana Pay Shopify plugin. Other notable events from Solana-native payments infrastructure companies and applications this quarter include: Sphere Early Access: Solana Summer Camp Hackathon winner Sphere launched early access to its payments solution in early December. Sphere’s features include offramping, onchain subscriptions, universal checkout, and more. It already powers payment flows for several Solana ecosystem projects, including Squads, io.net, DRiP, and Helium Mobile. Code Open Source: Payments app and protocol Code, which is now focused on building a micropayments solution, open-sourced its entire codebase at the end of November. Elusiv Payroll App: After launching private token swaps last quarter, Elusiv opened its private payroll app to waitlist sign-ups. TipLink Powering IRL Events: TipLink allows users to send or claim Solana assets with a link or QR code. At Breakpoint, over 15 teams used TipLink to distribute over 5,000 claimed assets. TipLink also powered NFT distribution through QR codes at ‘Artists in Residence’ at Art Basel Miami Beach. Infrastructure Notable infrastructure-related events from Q4 include: Squads V4, Fundraise, and Fuse: Over $2.5 billion of assets are secured in Squads’ multisig protocol. At the beginning of the quarter, Squads launched V4, bringing a UX redesign and new features, including browser extension wallet SquadsX. Soon after, it announced a $5.7 million strategic round led by Placeholder. At Breakpoint, Squads Labs announced smart wallet Fuse at Breakpoint. Fuse is a PDA wallet powered by the Squads multisig protocol. It has an expected launch in Q1 2024. Pyth Airdrop: Pyth is the predominant price feed oracle for Solana DeFi protocols. In November, it released a retrospective airdrop with over 86,000 wallets across 27 blockchains eligible. Instead of creating a claim contract on each blockchain, Pyth airdropped all tokens on Solana. Although there were some issues due to a lack of liquidity, the Solana network performed relatively well. Solana Mobile Updates: The Solana Mobile team announced several updates at Breakpoint, including new generalizations so any chain may integrate Solana mobile. The updates also introduced the capability for wallet apps to directly integrate into Safari via extensions and the capability for new gaming SDKs using Unity and Unreal Engine to more easily integrate mobile wallets. Solana Mobile’s Saga Phone had disappointing sales numbers but then quickly sold out once people realized that a BONK airdrop claimable by Saga phone users was worth more than the cost of the phone following a surge in BONK’s price. Several other projects have since airdropped to Saga phone users. Phantom Cross-Chain Swapper: Leading Solana wallet Phantom launched a bridge allowing users to transfer and swap tokens between Solana, Ethereum, and Polygon directly within their wallet. The bridging is powered by Li.Fi and several other protocols, with the swap functionality powered by Jupiter and 0x. Wormhole Fundraise: Cross-chain protocol Wormhole announced a $225 million fundraising round at a $2.5 billion valuation. Wormhole is one of the leading protocols for cross-chain connectivity with Solana. Helius Updates: Developer tooling company Helius had several updates in Q4, including launching transaction websockets and a priority fee API, as well as supporting fungible tokens (SPL, Token Extensions, cNFTs, and inscriptions) in its Digital Asset Standard API. Backpack Exchange and Wallet Updates: The team behind the Backpack wallet launched a centralized exchange, Backpack Exchange, in mid-November. The exchange’s wallet lives on Solana, enhancing transparency. Backpack also added an NFT collection locking feature, launched its mobile wallet on the Apple and Google Play stores, and open-sourced the Backpack Wallet Extension. Underdog Embedded Wallets: Underdog Protocol is an API for NFT-related needs. In late November, it launched an embedded wallet tool. This enables users to claim and manage NFTs with a social login instead of needing to first create a Web3 wallet. Other developments: Light’s ZK Anchor, Armada’s launch, SolanaFM’s Quantum launch, ‘create-solana-dapp’ tool update, Google Cloud BigQuery support, Ironforge’s RPC Gateway, Vybe token pages, MPCVault integration, Trezor support, Space Operator’s open beta, SNIPER’s upgrade, and Eclipse testnet launch. Growth Ecosystem growth is furthered by grants, hackathons, accelerators, and other initiatives put together by the Solana Foundation and independent organizations like Lamport DAO and Superteam. Notable events in Q4 include: Breakpoint: The Solana Foundation hosted its annual conference from October 30 to September 3 in Amsterdam. There were over 3,000 attendees and 100+ presentations. Many teams used the opportunity to make big announcements, as detailed throughout this report. Breakpoint 2024 will take place from September 19 to September 21 in Singapore. Hyperdrive Hackathon: Solana Foundation’s online Hyperdrive Hackathon ended in mid-October, with the winners being announced at Breakpoint. AI-powered telegram chatbot Fluxbot took home the Grand Champion prize ($50,000). Other track winners ($30,000 each) were: Mobile Consumer Track: SolLinked, a pay-to-access, people-as-a-service starting with email. Crypto Infrastructure Track: epPlex, a protocol for minting self-destructing NFTs. AI Track: Wysdom, a Notion-like platform for collaborative Web3 development and research. Gaming and Entertainment Track: Solciv, a fully onchain strategy game inspired by Sid Meier’s Civilization. Finance and Payments Track: Starport (formerly known as Alexandria), a consolidated central limit order book where orders can be filled with multiple assets while avoiding multi-hop trading fees. Physical Infra Networks Track: Shaga, a P2P network for gaming computers. DAOs and Network States Track: Pubkey Link, an open-source Discord verification bot service. In total, over 7,000 participants submitted 907 projects, a record-breaking amount for Solana Foundation hackathons. Solana Labs Incubator: Solana Labs launched an incubator for existing Solana projects or Web2 and Web3 projects considering Solana. The incubator offers support for development, fundraising, marketing, and more. Hong Kong Hacker House: The 2023 Solana Hacker Houses Tour wrapped up with the Solana x Circle Hong Kong Hacker House in mid-November. Thirteen teams participated in the VC Pitch and Demo Day to close the event. RetroPGF Round 1: OpenBlock Labs partnered with the Solana Foundation to launch a Solana Retroactive Public Goods Funding (RetroPGF), with $250,000 worth of SOL in prizes. Top recipients included OpenBook, Cubik, and SOLfees, among others. MtnDAO V5 Announcement: The fifth edition of month-long hacker house mtndao was announced, taking place in Salt Lake City during the month of February 2024. Solana Crossroads announcement: Step Finance’s ambassador program Solana Allstars announced the second annual Solana Crossroads conference, taking place in Istanbul in May 2024. Closing Summary Solana closed out a bounce-back year with a strong Q4. Solana Foundation’s annual Breakpoint conference helped drive growth, featuring many big announcements and launches from teams including Jupiter perps and token, Frankendancer, Backpack Exchange, and Render’s migration. JTO’s airdrop and BONK’s Coinbase listing further spurred onchain activity in December. All said, Solana’s market cap increased 423% QoQ, average daily fee payers 102% QoQ, DeFi TVL 303% QoQ, average daily DEX volume 961% QoQ, average daily NFT volume 359% QoQ, and stablecoin market cap 21% QoQ. Upcoming catalysts in Q1 will include Jupiter’s airdrop, token extensions, and continued progress on the launches of Firedancer and TinyDancer.
Source: Peter Horton — Published: 2024-01-11T15:00:00ZState of TUSD Q4 2023
Key Insights Supply fell for the first time this year to 2.3 billion, though the number of holders remained largely unchanged. Transfer volume also had its slowest quarter of the year as TUSD’s prominence in TRON’s DeFi ecosystem waned in Q4. TUSD continued to lead in transparency, leveraging Chainlink’s Proof of Reserves and adding a new partner at the end of the quarter to offer daily reserve attestations. Primer TrueUSD (TUSD) is a fully collateralized stablecoin that offers the security of real-world assets combined with the efficiency of blockchain technology. TUSD implements smart contracts for the minting and redemption processes, ensuring real-time onchain verification of the funds backing the coin. This process is reinforced by The Network Firm LLP, a U.S.-based auditing firm specializing in cryptocurrencies, as well as Chainlink's Proof of Reserve, which provides additional transparency and trust in the available reserves. Archblock (formerly TrustToken) was created in 2017 and launched TrueUSD (TUSD) in March 2018. It aimed to support crypto trading and serve as a stable store of value and medium of exchange for global transactions. In December 2020, TrustToken announced a transaction in which “ownership of TUSD is moving over to an Asia-based consortium.” Per the CEO, “the acquisition of TUSD was led by Techteryx.” Effective July 13, 2023, Techteryx took over all offshore operations, including minting and redeeming, while Archblock continued to service U.S.-based customers. TrueUSD has established itself on a global scale, with listings on multiple exchanges such as Binance, HTX, and Upbit, facilitating trade across over 160 markets and 20+ OTC desks across five continents. Website / X (Twitter) / Telegram Key Metrics Performance Analysis Supply and Reserves TUSD supply grew significantly in the first half of the year, starting at around 750 million in circulation and ending the year with over 2.3 billion. In the fourth quarter, TUSD on TRON decreased by 30%, and TUSD on Ethereum fell by 61% to end the year with 1.9 billion TUSD on TRON and 196 million TUSD on Ethereum. As the chart reflects, redemptions of TUSD tend to be large rather than gradual, like this burn of 122 million TUSD on December 7. With an official announcement in February of 2023, TUSD began reporting on its reserves through Chainlink’s Proof of Reserve. The move put TUSD among the leaders in stablecoin transparency. TUSD uses a third-party attestation that oracle providers can then report onchain. The Network Firm is the third party that is providing the data. Chainlink’s Proof of Reserve has three ways to report the data: self, third party, or straight from the custodian. The data comes from The Network Firm and is relayed to the blockchain by 16 oracles, with a minimum requirement of 11. On December 28, TrueUSD announced another partnership to increase reserve transparency. TUSD will now have daily reserve attestations from MooreHK, a Hong Kong-based accounting and consulting firm. Peg TUSD averaged a daily range under half of one cent in 2023, with a median daily range of $0.0028. This highlights its stability to peg, though trailing the more liquid category leaders USDC and USDT, which had median daily ranges under $0.002 for the year. For TUSD, Q1’s volatility was largely driven by the regional banking crisis and the USDC depegging that impacted most stablecoins. In June, short-lived fears around Prime Trust, a TUSD partner bank, led to rapid selling of the stablecoin. The chart shows some December low prints, but they were on very small volume on a smaller exchange and likely reflected more the illiquid time of year than any issues or stresses on TUSD at that time. Usage: Volumes, Holders, and TRON DeFi The number of TUSD transactions peaked in Q2 this year, just before the pausing of redemptions from Prime Trust in June. Q4 still saw over $10 billion of TUSD transfers, including over $8 billion on TRON alone. Prior to December, volume was characterized by very little activity and then large spikes. For example, although the average daily volume was higher in December at $117 million than the October-November average of $77 million, the standard deviation of daily volumes was much smaller ($159 million versus $238 million standard deviation of daily volumes in October and November). The median daily volume in December was $38 million, while it was only $34 million from January to November. The return of the bull market in December and increases in trading activity should lead to more consistent usage of TUSD. Despite the supply growth of TUSD, the number of unique addresses on Ethereum and TRON holding the stablecoin barely changed in 2023. On TRON, a very large percentage of TUSD lives on Binance. At year-end, the three largest holders of TUSD were labeled Binance wallets holding 97%, 1%, and 0.8% of TUSD supply. The team is focused on growing integrations and partnerships, with an aim to further expand to new stablecoin users (discussed further in the Qualitative Analysis). Throughout the year, TUSD played a large role in TRON’s DeFi ecosystem, with hundreds of millions deposited in JustLend at various times. By year-end, however, only about 2.8 million TUSD was deposited in TRON’s largest three DeFi protocols. Nearly 49 million TUSD was in unlabeled accounts, with likely 90% of that in externally owned accounts rather than smart contracts. At the end of the year, 97% of TUSD on TRON was in CEX accounts. Qualitative Analysis Integrations and Partnerships TrueUSD (TUSD) has been actively expanding its partnerships and integrations, enhancing its ecosystem and driving the stablecoin's adoption and growth. On October 2, Binance Pay included TUSD in a promotional event offering significant discounts and token vouchers to users, which likely increased the visibility and utility of TUSD on the platform. Following up, TUSD partnered with Uquid for a Black Friday event, providing substantial discounts and rebates on purchases made with TUSD. The event further incentivized its use as a payment method for goods and services. Additionally, TUSD's utility was further extended through various strategic integrations: IvendPay incorporated TUSD into its payment system, broadening its applicability in real-world transactions. Travel platform Travala added support for TUSD, allowing for travel-related purchases with the stablecoin. On the crypto-specific front, TUSD has been supported by Binance Launchpool projects Neutron (NTRN) and Memecoin (MEME) for token farming, which may boost TUSD’s liquidity and trading volume. Biswap, a BSC-based cross-chain trading platform, also listed TUSD and created a new farm pool, enhancing its availability and liquidity. Moreover, Bybit's listing of TUSD and the introduction of zero-fee spot trading paired with a sizable prize pool serve to attract traders to the platform. These initiatives collectively demonstrate TUSD's commitment to building a strong presence in the payment, trading, and DeFi sectors. The opportunity for TUSD's usability across various platforms underscores its potential for increased adoption and the role it can play in the broader crypto economy. Private Key Security and Vendor Data Leaks TrueUSD (TUSD) has navigated through a series of security concerns following incidents involving its partners and related smart contracts. A third-party vendor's security breach reportedly exposed some user KYC and transaction data linked to TrueCoin, a service that managed TUSD until July 13, 2023. Despite this, TrueCoin's systems were declared uncompromised, and TUSD's stability and reserves remained secure. However, further scrutiny arose when blockchain intelligence firm ChainArgos highlighted a potential vulnerability related to TrueUSD's private keys. The firm pointed to the emergence of TEURO, a contract deployed using TrueUSD's private keys, suggesting a link to an acknowledged security breach by TrueUSD. The firm also raised concerns that the compromise could extend beyond data exposure to include access to TUSD's banking functions. This scenario could potentially threaten the stablecoin's peg stability and user assets. Speculations were further intensified due to significant TUSD minting activities, such as $850 million minted just before the security breach. The implication was that TrueUSD’s private keys, which are integral to the minting process, could have been compromised. The incident raised questions about the security of the reserves backing TUSD and the integrity of the minting process. TUSD has maintained its distance from TEURO, emphasizing that the address used for its deployment held no permissions over TUSD smart contracts nor any influence over the stablecoin's operations. Despite this assertion, the incidents highlighted the potential risks associated with private key security. The occurrence of these events, including the creation of a TrueChineseYuan contract and the movement of TEURO tokens across various addresses, underscored the need for vigilance and robust security protocols within blockchain projects. The situation prompted a response from TUSD. The protocol reiterated the independence of its operations from the compromised address and reassured users of the ongoing security of their assets. As the crypto community continues to digest these developments, the emphasis has been placed on exercising caution when engaging with newly deployed contracts and verifying the legitimacy of stablecoin projects. Closing Summary It was a balanced quarter for TUSD, with supply and usage falling while transparency and partnerships continued to grow. TUSD maintained its peg through a volatile year and continued building a robust reserve attestation history with Chainlink’s Proof of Reserve oracle. Volumes fell in the second half of 2023 and concentration increased, with 97% of TUSD ending the year in Binance wallets. But an end-of-year partnership with MooreHK will bring new daily reserve attestations for TUSD, another step in the pursuit of safety and transparency. TUSD will look to return to growth in usage in 2024, leveraging the integrations and partnerships developed during the bear market.
Source: John_TotalValue_Locke — Published: 2024-01-11T14:30:00ZState of 1inch Q4 2023
Key Insights 1inch dramatically increased volumes and market share in Q4’23, executing over $30 billion in volume and claiming 64% of the Ethereum DEX aggregator market share. Volume from external sources nearly doubled the fourth quarter’s from last year, likely showing the adoption of 1inch as a backend solution as well as the growth of aggregators. New products are driving transaction growth. Transactions on the Limit Order Protocol (LOP) and 1inch Fusion increased in the quarter, while transactions in the Aggregation Protocol fell. Fusion transactions rose by 66% in the fourth quarter, a strong rebound after falling 29% in the previous quarter. The amount of 1INCH staked increased, as the DAO worked to configure the resolver competition to improve token accrual through a fair and competitive market. Primer The 1inch Network (1INCH) is an all-in-one decentralized finance (DeFi) service provider operating on Ethereum, Arbitrum, Optimism, Polygon, zkSync Era, Avalanche, BNB Chain, Gnosis, Fantom, Klaytn, and Aurora. Launched in 2019, 1inch Aggregation Protocol (AP) allows users to route trades across various markets and realize the best available rate compared to any individual decentralized exchange (DEX). In late 2020, the 1inch Liquidity Protocol introduced a native automated market maker (AMM) to the network, which enabled users to provide liquidity and earn passive liquidity mining rewards. The network’s third product, the 1inch Limit Order Protocol (LOP), was introduced in June 2021 to support conditional limit and stop-loss orders with no fees. In late December 2022, the 1inch Swap Engine enabled Fusion mode, which is partially based on the existing tech, including the 1inch Limit Order Protocol and the 1inch Aggregation Protocol. This new feature empowers DeFi users to place orders with a specified price and time range without paying network fees. All three protocols, and Fusion mode, are governed by the 1inch DAO using the network’s native 1INCH token. Note: This report includes data from Ethereum, BNB Chain, Polygon, Optimism, Arbitrum, Avalanche, Gnosis Chain, Fantom, and Base. Data from zkSync, Klaytn, and Aurora are currently not included. We are working to improve access to this data. Website / Twitter / Telegram Key Metrics Performance Analysis Protocol Usage As the leading DEX aggregator, 1inch has benefited from increased trading activity in the space. Beneath the surface, the newer protocols and products from 1inch led the volume growth. While volumes on the Aggregation Protocol increased 59% from the previous quarter, volume on the limit order protocol (LOP) increased over 90% in Q4. 1inch LOP executed over $6.4 billion of trades for the first time since Q1’23. Volume through 1inch Fusion also increased by 88% in the quarter, surpassing $5 billion and showing a growing user preference for the new execution venues. Aggregation Protocol volume growth was broad, with four 1inch EVM deployments doubling their volume or more from Q3 to Q4. Aggregation Protocol volumes on mainnet increased by 45% to roughly $173 million per day. Not including Gnosis and Base, which launched at the end of Q3, Avalanche and Arbitrum volume increased the most, by 176% and 129%, respectively. Arbitrum ended the quarter accounting for 16% of 1inch Aggregation Protocol volume, responsible for $3.8 billion in Q4. In its first full quarter, 1inch’s Base deployment grew volumes to over $220 million in Q4. Fantom was the only chain that saw a fall in volume in the quarter. The average size of a transaction in USD terms grew substantially in Q4, especially for the Aggregation Protocol, as volumes rose while transactions fell nearly 3% QoQ. For the Aggregation Protocol, the fall was largely driven by Polygon, which made up 32% of 1inch transactions in Q3 but only 22% in Q4. While volumes on Fantom fell in the quarter, the number of transactions increased by 31%. The increase surpassed every other 1inch deployment besides BNB Chain and Base, which was only live for part of the third quarter. BNB Chain accounted for the most transactions in the quarter, representing 28% of 1inch transactions or over 22,000 per day. Ethereum transactions increased by 15.5% from 14,000 per day to over 16,000 per day in Q4. The Limit Order Protocol saw transactions fall on Gnosis, Optimism, and Fantom, even though transactions rose overall by 44% in the quarter. Ethereum, Arbitrum, and Polygon activity increased dramatically, with daily transactions rising 95%, 82%, and 81%, respectively. Those three EVM deployments made up 70% of 1inch LOP transactions in the fourth quarter, or nearly 8,000 per day. Fusion transactions rose by 68% in the fourth quarter, a strong rebound after falling 29% in the previous quarter. Average trade size rose on all three protocols, increasing by 60% in the Aggregation Protocol, by 35% in the LOP, and by 23% on 1inch Fusion. Fusion volumes grew 88% in the fourth quarter, and 1inch Labs resolver increased its share to 44% of volume. A new competitor, Rizzolver, began competing at the end of September and grew its market share to 26% in Q4, executing over $1.2 billion of Fusion orders. Rizzolver achieved its growth by offering the most 1INCH rewards to delegates. The top 3 resolvers executed 88% of volume in Q3, but only made up 83% of volume in Q4. However, there were fewer total successfully participating resolvers, with only 7 completing transactions in Q4 versus 12 in Q3. As discussed in depth in the Qualitative Analysis section, the DAO is focused on increasing competition for resolvers. This quarter, DAO members voted to set a cap for gas consumption for resolvers, which should enable resolvers to earn more and thus be able to pay more in rewards to stakers. Market Share Analysis In the fourth quarter, the share of 1inch trades executed on Uniswap V3 and V2 increased by 8 and 3 percentage points to 40% of trades and 8% of trade volume, respectively. Volume from 1inch on the two Uniswap versions increased from $5.6 billion in Q3 to $10 billion in Q4. The share gains largely came from Curve and Dodo, the second and now sixth most common execution venues. PancakeSwap received over $1 billion of trade volume from 1inch for the second consecutive quarter, or 7% of 1inch volume in Q4. 1inch’s fourth-quarter growth in volume was significantly higher than peers, helping it increase its market share from 59% of trades in Q3’23 to 63% in Q4’23. The only large competitor to increase share in Q4 was CoW Swap, which commanded 11% of aggregator volume on Ethereum in the quarter. ParaSwap and 0x respectively commanded 11% and 10% of aggregator volume in Q4. Treasury and Staking The 1inch DAO continued to invest its treasury and diversify its stablecoin holding, swapping 1 million USDC into DAI and depositing to earn interest as sDAI. This is the first allocation following the 1 million USDC deposited in Aave to earn interest in Q2. On the expense side, the DAO spent just over $1 million split between three different transactions. On December 30, the DAO sent $890,000 USDC to fund support services for 1inch Network users (discussed in depth in the Qualitative Analysis section). The amount of 1INCH staked increased by 7% in the fourth quarter. Staking 1INCH gives Unicorn Power (UP), which can be used to vote in governance and delegate to resolvers. Staking and delegating to resolvers create an important value accrual pathway for the token, as resolvers give 1INCH rewards to attract delegates so the resolver can compete in completing Fusion transactions. The top resolvers are currently offering over 45,000 1INCH to delegates. Qualitative Analysis Improving Resolver Competition On October 7, 1inch DAO voted to create new rules governing resolvers interacting with 1inch Fusion. In the past, only five resolvers competed to fill orders, which was insensitive to gas costs to win the transaction. As a result, the resolver business turned into a gas war, significantly increasing expenses and thus hurting resolvers’ profitability. If resolvers were more profitable, they would be able to better compensate 1INCH stakers. The core of the proposal revolves around the introduction of a smart contract-enforced gas fee limit, aimed at regulating the priority gas fees in the 1inch Fusion mode. This cap is designed to fluctuate based on the block's baseFee: BaseFee < 10.6 gwei: PriorityFee capped at 70% of the baseFee. BaseFee 10.6 - 104.1 gwei: PriorityFee capped at 50% of the baseFee. BaseFee 104.1 gwei: PriorityFee capped at 65% of the baseFee. Attempts to circumvent this limit (including direct payments to block builders) will be considered violations. The proposal also introduces a stringent penalty system for violators. Using a tiered approach, it ranges from an official warning to a substantial 365-day block from filling orders for repeat offenders. The proposal intends to lower the Unicorn Power (UP) requirement for Resolvers from 10% to 5%, in order to democratize access to the Fusion Mode ecosystem. The more lenient entry threshold has already led to more diversity and robustness within the system. From a market perspective, the changes could mean a more competitive environment with more options for stakers and hopefully increased resiliency for traders. The rationale behind these proposed changes is grounded in a pragmatic approach to tackling the high operational expenses currently faced by resolvers, primarily due to the inflated gas fees during auctions. Given that this situation often escalated into “resolver gas wars,” it has been a pain point for participants in the 1inch Network, affecting both profitability and trade rates. The proposed solution seems to be a well-considered strategy to address these challenges head-on. However, there are concerns that need to be addressed. For one, this new system might inadvertently penalize resolvers who are more gas-efficient, especially since builders tend to prioritize transactions based on total ETH paid on gas. While the proposal argues that this shouldn't be an issue as builders are incentivized to maximize fee collection, it still requires careful monitoring post-implementation. In conclusion, the proposal comprehensively addresses current challenges faced by resolvers in the 1inch network. Its success hinges on competition between resolvers and continuous monitoring to ensure its changes do not lead to unintended consequences. Higher earning resolvers should attract new resolvers, which will need to attract UP by giving rewards to 1INCH stakers. Support for an Improved User Experience The 1inch DAO has approved a proposal to fund comprehensive support services aimed at enhancing the 1inch Network ecosystem's growth and user experience. These support services encompass various aspects, including issue management and reporting across multiple communication channels, documentation management, monitoring reviews, special investigation for complex refund cases, and support for the token listing and delisting process. The 12-month subscription fee for these services amounts to $890,000. The primary motivation behind this proposal is to ensure that 1inch Network users receive efficient and responsive technical support, which is crucial for brand credibility, user retention, and network expansion. As crypto matures and the initial products grow beyond just finding product-market fit, winning the consumer becomes more important. The support services will enhance the overall experience for 1inch Network users, potentially leading to higher user satisfaction and retention. Effective customer support can establish brand credibility and reputation, contributing to the long-term success and growth of the 1inch Network ecosystem. The proposal covers various aspects of support, including bug-bounty program management and participation in conferences, which can contribute to the continuous improvement of the network. The proposal is not without risks, namely an annual subscription fee of $890,000 paid upfront. In addition, the DAO relies on the service provider to meet the specified KPIs, and there is a risk of service quality not meeting expectations, which could harm the network's reputation. In sum, the approved proposal seeks to provide valuable support services to the 1inch Network ecosystem, aiming to enhance user satisfaction and brand reputation. 1inch DAO and Network continue to focus on winning the consumer as part of its growth strategy. Closing Summary The return of the bull market in Q4’23 helped the category leader grow, as volumes soared to over $35 billion in the quarter. The work in the bear is helping, as 1inch’s limit order protocol and Fusion product drove transaction usage, while L2 deployments led volume growth. Resolver competition and market design remain in flux, as the DAO tries a new approach by setting a gas limit. The amount of 1INCH staked in the quarter increased, and $1 million from the treasury was newly invested. 1inch grew its dominant market share as the leading DEX aggregator on Ethereum in the quarter.
Source: John_TotalValue_Locke — Published: 2024-01-08T14:30:00ZState of ApeCoin Q4 2023
Key Insights APE token price grew by 41%, and the APE market cap grew by 53% QoQ. Sell pressure from an extra 24.8 million APE unlocked to non-DAO entities did not lead to a drop in APE price. ApeCoin DAO voted to cut Special Council pay in half for newly elected members, which will save the DAO roughly $375,000 in 2024. APE token transfers fell to their lowest level in a year. The 30%QoQ drop indicates that traders are holding APE more than in previous quarters. Dolphins ($500,000 – $1 million in daily trading) and seals ($100,000 – $500,000 in daily trading) grew their share of APE DEX trade volume to a collective 43%, overtaking whales (over $10 million in daily trading) and lessening whale influence in DEX trading volume of the APE token. ApeCoin DAO voted to fund $1.6 million in grants during Q4, down 92% QoQ. This shows the DAO’s move to be more selective about how it spends its treasury. Primer ApeCoin (APE) is an ERC-20 token used for governance of the ApeCoin DAO. Holding any amount of APE qualifies the holder as an ApeCoin DAO member. Members create and vote on ApeCoin Improvement Proposals (AIPs) that encompass Ecosystem Fund distribution, governance rules, partnerships, and more. Third-party developers can incorporate APE into their respective projects. APE is the adopted token of the APE Foundation, a legal entity that administers the decisions of the ApeCoin DAO. The APE Foundation also has a Special Council, called the DAO’s Board, to perform certain functions within the governance process. The operations of the APE Foundation are run by transient administrative entities elected by members of the ApeCoin DAO. The ApeCoin DAO and the APE Foundation are separate entities from Yuga Labs, the creator of the Bored Ape Yacht Club (BAYC) and associated NFTs. Below is a breakdown of the relevant entities associated with the APE token. ApeCoin DAO — A decentralized autonomous organization (DAO) made up of APE holders that create and vote on AIPs. APE Foundation — A legal entity that administers the decisions of the ApeCoin DAO. Special Council (the DAO’s Board) — Five individuals who oversee the APE Foundation’s administrators, can approve grants outside of the AIP process, and perform certain functions within the ApeCoin DAO governance process. The current Special Council members are Bored Ape G, Waabam, CaptainTrippy, Hazel, and Airvey. WebSlinger — Current administrator of the APE Foundation; started its 12-month renewal agreement on March 1, 2023. Cartan Group — The first and former administrator of the APE Foundation. Yuga Labs — A Web3 company responsible for creating the Bored Ape Yacht Club (BAYC). Yuga Labs is a contributor to ApeCoin and plans to use APE as the primary token in future projects like Otherside. The APE Foundation, the DAO’s Board, and WebSlinger are the primary entities that ensure the implementation of relevant passed ApeCoin DAO proposals (AIPs). Website / Twitter / Snapshot Key Metrics Performance Analysis Market Cap Market cap measures the price of the asset multiplied by the circulating supply. Changes in market cap give a nuanced view of the value traders prescribe to an asset with a changing supply at a given moment. APE’s market cap increased by 53% QoQ despite consistently falling throughout the past year. The valuation of the general crypto market also increased by 53% throughout the quarter. APE’s market cap ended Q4 valued at over $1 billion. A large portion of the market cap increase came from APE's price rising by 41% QoQ. The remaining increase in market value came from the unlock of 46.8 million APE included in the circulating supply. Additionally, the ApeCoin DAO spent roughly 8% ($1.6 million) of what it spent in the previous quarter ($20.3 million), reducing the amount of tradable APE committed through governance. In Q4, Yuga Labs’ ApeCoin-adjacent NFT assets also rose in floor price between 7–26%. APE Liquid Supply Liquid supply curves help determine when an increase in sell pressure may occur for certain assets (or when tokens may get dumped onto unsuspecting buyers). Specifically, they show when tokens unlock and to whom. An additional 46.8 million APE (9% of the Q3 circulating supply) was unlocked in Q4 2023. Of this, 22 million APE went to the DAO Treasury and 24.8 million APE went to non-DAO entities. The DAO issues or sells APE to fund DAO proposals contingent on them being passed. Alternatively, non-DAO entities are free to sell once their funds are unlocked. Despite the sell pressure of an additional 24.8 million APE, the price of APE increased by 41% throughout the quarter. Claimed Staking Rewards ApeCoin DAO started to issue staking rewards in Q4’22 after passing AIP-21 and AIP-22, which finalized staking parameters. APE holders and Yuga Labs’ ecosystem projects like Bored Ape Yacht Club (BAYC), Mutant Ape Yacht Club (MAYC), and Bored Ape Kennel Club (BAKC) received staking allocations. Staking was implemented in early December 2022 and will last for three years. It will ultimately distribute 175 million APE (17.5% of the max supply) to Yuga ecosystem asset and APE holders. Since staking launched, the amount of APE claimed has decreased every quarter. In Q4, 14.4 million APE was claimed, 19% less than the previous quarter. However, APE is still being claimed, compounding the sell pressure from unlocks to non-DAO entities. As many assets began to recover in Q4, this extra sell pressure did not stop the APE market cap from increasing by 53%. Other metrics like average swap size and transfer volume decreased QoQ, potentially signaling that more APE traders are holding APE going into 2024. Volume by Trade Size Volume by trade size shows the percentage of the trading volume corresponding to various trade sizes. For example, if the total volume were $200 million and two wallets traded $50 million each (a total of $100 million), then the two wallets with a volume of $50 million each (a combined $100 million) would account for 50% of the trading volume. Over the past year, the trade volume has shifted from whales (accounts with 1-day trading volumes greater than $10 million) to sharks (between $1 million and $10 million). In Q3, sharks accounted for 54% of the APE trade volume, after increasing for four consecutive quarters. Q4 marks a shift in dominance from sharks to medium-sized traders like dolphins (between $500,000 and $1 million) and seals (between $100,00 and $500,000). In general, the downward shift in volume from whales to sharks and now to medium-sized traders may indicate a stronger desire to hold the asset among large holders. In Q4, medium-sized traders collectively overtook sharks, accounting for 43% of APE’s DEX trading volume. Even after accounting for more than half of the volume in the previous quarter, shark volume fell to 37%. Despite a 41% rise in the price of APE, the average DEX swap size fell by 9%, continuing the downward trend of average swap size. A smaller average swap size may indicate that bigger APE traders are holding the asset for longer or that they are migrating to centralized exchanges (CEXs). The above data only includes onchain activity, not CEX trades. As such, its metrics may not show the full picture, given that higher volume traders may be more inclined to use CEX platforms because they usually offer assurances, protections, and incentives. For example, institutional traders often prefer to have access to advanced tools and technical support on CEXs. Additionally, CEXs are not subject to sophisticated MEV strategies like sandwich trading, which is prevalent on DEXs but can be mitigated by using DEX aggregators like Matcha. Token Velocity Token velocity shows the frequency through which an asset changes hands (or wallets). A change in token velocity can show a few things depending on the asset. If the asset can be used beyond trading, such as a token used within a game, an increase in token velocity may imply that the game encourages the adoption/use of the asset. If the asset is more speculative, then a decrease may imply that users are more interested in holding the asset or that it has low demand. In the chart below, token velocity is calculated by dividing the circulating supply by the seven-day moving average (7DMA) of transfer volume. The average transfer velocity fell from 3.6% to 3.3% QoQ. The steady decline and low volatility may be indicative of existing holders actively using the asset for governance. As APE holders anticipate the pending launch of the Otherside game — which will use APE as an in-game currency — the use cases for APE remained unchanged in Q4. The number of proposals has increased for the past four quarters. This requires more active use of the APE token in governance than previous quarters. The continuously increasing governance proposals appear to be inversely related to token velocity and may contribute to the lower volatility of token movement than from previous quarters. Token velocity will be expected to increase as Otherside launches and APE is used for in-game transfers. As the ApeCoin DAO seeks more economical alternatives to Ethereum in launching its own chain, it also anticipates token movement to increase after introducing lower gas costs for users. New APE Holders New APE holders are defined as addresses receiving APE for the first time. This metric does not include any new holders using centralized exchanges to custody their assets. The inflow of new APE holders decreased by 52%, despite the APE price rising by 41%. Although the number of holders tends to follow price action, there does not appear to be a correlation between new APE holders and price over the past three quarters. The ApeCoin DAO is aiming to raise community awareness and engagement through the approvals of AIP-301, AIP-314, AIP-335, and AIP-348. These proposals cover topics such as producing educational materials about the DAO, publishing media related to the DAO, and other community engagement initiatives. Unique Votes per Proposal Unique votes per proposal measure how many individuals are participating in governance. If new voters only hold small amounts of an asset, then the impact of their unique votes would be marginal on proposal outcomes in token-weighted governance systems like ApeCoin DAO. However, counting unique votes can show the interest within a DAO, diversity of the active holder base, and decentralization of the active holder base. During Q4, ApeCoin DAO had the largest number of proposals within any quarter, voting on 53 proposals. Despite the activity in the form of proposals, the average unique voters per proposal dropped to 306, a 34% fall QoQ. Compared to the previous quarter, the amount of funding promised fell by 92%, from $20.3 million to $1.6 million. This drop indicates that the DAO is being more conservative with the proposals it approves as the price of the treasury’s primary asset increases in value. In the future, ApeCoin DAO plans to move more of the voting process onchain. Doing so would remove central points of failure (like the reliance on Snapshot) and would add to the governance structure’s decentralization. However, implementing onchain voting would require gas fees for participation. For this reason among others, the DAO is contemplating building a separate ApeCoin chain (ApeChain) that would use APE as the native gas token and would be less expensive than Ethereum. After this move, the DAO would be in a better position to fully transition governance onchain. Governance Analysis Throughout Q4 2023, ApeCoin DAO voted on 53 proposals: 11 passed, 32 failed, and 10 were either elections or multiple choice. The failed AIPs proposed costs for implementation totaling $57.4 million (with one failed AIP requesting a reallocation of 10% of the total treasury to ETH and USDC). The total value of passed proposals and elections was $1.6 million. Eight election proposals were held throughout Q4: four nominations and four concrete elections. The election proposals determined the following positions and their compensation: Three new Special Council members (compensated at $125,000 each for a one-year term) One new Governance Working Group Steward (compensated at $108,000 for a one-year term) Two new Metaverse Working Group Stewards (will propose a budget in January 2024) Two new Marketing and Communications Working Group Stewards (will propose a budget in January 2024) The ApeCoin DAO Q3 2023 Transparency Report was published in December. The report shows that the ApeCoin DAO’s holdings could be broken down as follows (with a Dec. 1, 2023 APE price of $1.62): Treasury: 370 million APE ($599.4 million) Owes in Accounts Payable: 205,279 APE ($332,552) Reserved for Grants: 96 million APE ($155.5 million) Listed below are five proposal highlights from the quarter in order from newest to oldest. For a full overview of ApeCoin governance, including preliminary discussions, see the Messari Governor page on ApeCoin. AIP-373: Boring Security Dec. 27, 2023 In AIP-373, Boring Security requested funds to support its operations and growth while committing to enhance the visibility and reputation of ApeCoin through branding, educational initiatives, and community engagement. It plans to deploy the funds into a Uniswap V3 Liquidity Pool. The yield generated from this pool would then be used for structured withdrawals to cover its operating expenses not met by partnership income and other grants. ApeCoin DAO approved $239,000 to fund this operation, making it the second-most expensive AIP approved in Q4. Special Council Elections Dec. 20, 2023 Three seats opened up for Special Council elections in Q4. These seats were occupied by Bored Ape G, Gerry, and Vera Li. Bored Ape G ran for reelection and won along with two new Special Council members, Hazel and Airvey. Each will be compensated at $125,000 for a one-year term. This does not add any additional costs to the ApeCoin DAO. Starting on January 2024, the five Special Council members will be Waabam, CaptainTrippy, Bored Ape G, Hazel and Airvey. AIP-346: Token-Gated Stand-Up Comedy Nov. 22, 2023 In a narrow victory, APE holders voted to implement AIP-346, which proposes in-person and live-streamed comedy shows exclusively for APE holders. Committed funds will be used by Laughing Ape, Inc. to cover costs related to event hosting, talent, technology, production, and marketing. Holders only need at least one APE to be eligible for related events. ApeCoin DAO approved $180,000 to fund this operation, making it the third-most expensive AIP approved in Q4. AIP-350: Special Council Pay Adjustment Nov. 1, 2023 ApeCoin DAO’s Special Council used to receive roughly $20,833 per month ($250,000 per year) per member. With five members, this cost the DAO $1.25 million a year. In AIP-350, with three options (one keeping the status quo), APE holders voted to cut pay in half for new Special Council members. Starting January 2024, the three new Special Council members will be paid $125,000 per year each — with the two existing members finishing their terms at $250,000 per year each. Back in October, AIP-337 aimed to enact a similar measure that would have cut the Special Council pay in half, but it narrowly failed. After a bit over a month, sentiment changed among APE holders, ultimately pushing for the new pay structure. AIP-326: Payment Platform Nov. 1, 2023 With 66% support, APE holders voted to approve AIP-326. With this proposal, CR3 Labs and Vora Labs aim to create a low-code platform that would enable mobile and web game developers to implement APE-powered payments and rewards for games. The vision of this platform is to simplify the onboarding of games into crypto. In particular, it focuses on enabling builders to implement APE rewards and payments via the platform. ApeCoin DAO approved $480,000 to fund this operation, making it the most expensive AIP approved in Q4. Closing Summary In Q4 2023, ApeCoin DAO’s flagship APE token grew in price, increasing 41% QoQ. Daily average token transfers hit their lowest level in a year, indicating that traders are holding APE more than in previous quarters. Given APE has yet to be implemented as a payment token, this decrease in velocity may be positive for maintaining the value of the asset. Additionally, medium-sized APE traders have become dominant in the DEX landscape, overtaking the volume of whale-sized traders. While the average votes per governance proposal continued to decline, Q4 saw the largest number of proposals, with four pertinent election topics: Special Council elections and working group elections for governance, metaverse, and marketing/communications. ApeCoin DAO has shown its ability to cut spending, decreasing Special Council salaries and approving under $2 million in Q4, compared to $20.3 million in the previous quarter. Although the DAO still approved funding for some proposals of questionable value-add, it appears to be moving in a more selective direction for funding future initiatives.
Source: Micah Casella — Published: 2024-01-08T13:45:00ZLivepeer Q4 2023 Brief
Key Insights The usage of Livepeer transcoding network grew 13% QoQ in Q4’23, driven by a series of live-streaming video events powered by Livepeer. Livepeer demand-side revenue decreased 30% QoQ in USD terms, down 38% QoQ in ETH terms. Revenue from staking rewards grew 33% QoQ in USD terms (up 9% QoQ in LPT terms), as LPT issuance reached its highest level since the Arbitrum migration in Q1’22. The Livepeer community approved a governance proposal — called Livepeer Delta — to introduce a community-governed onchain treasury for public goods funding. Livepeer introduced an AI-powered upgrade to Livepeer docs and developer tools, as well as a revised technical roadmap. Primer Building decentralized video apps like Twitch or TikTok requires heavy infrastructure for video streaming. Based on a user’s bandwidth and device, video content needs to be processed — i.e., transcoded — into viewable formats. While cloud providers like AWS, Google, or Microsoft are commonplace solutions for video transcoding services, they incur high costs. Livepeer offers an open and permissionless transcoding marketplace — allowing anyone to contribute compute resources and to compete on price. The network is designed to reduce transcoding costs for end users by up to 10x. Within Livepeer’s decentralized transcoding network, there are three key participants: Node operators — called "Orchestrators" — route transcoding jobs. The amount of work a node operator can perform is proportional to how many Livepeer native tokens (LPT) it stakes. Node operators earn ETH fees and newly minted LPT rewards. Transcoders provide compute resources for node operators and deliver transcoded video content. In return, they earn ETH fees. Delegators stake LPT towards effective node operators to help secure the Livepeer network. Staking is rewarded with a portion of both ETH fees and newly minted LPT rewards. Beyond transcoding, Livepeer aims to build the world’s open video infrastructure and become the go-to decentralized tech stack for developers integrating video streaming into their apps. Website / Twitter / Discord Key Metrics Performance Analysis Demand for Livepeer services comes from apps and developers in need of video transcoding and live-streaming. For example, decentralized social media (DeSoc) apps, traditional Web2 apps (like TikTok or Twitch), or music streaming apps (like Spotify or SoundCloud) require streaming infrastructure to broadcast content. Network Usage Livepeer’s network usage can be gauged by estimating the number of minutes of video transcoded. In September 2023, Livepeer announced a change in the methodology for estimating its usage. This change in methodology aims to address the current challenges in estimating the number of transcoded minutes on the Livepeer network, given that this metric is not directly observable onchain. While the previous methodology relied on transcoding fees earned by node operators as a proxy for usage, the updated methodology accounts for changes in usage patterns, such as the introduction of video on demand (VOD) transcoding and varying price points. As the usage metric is acknowledged as imperfect but still valuable, the previous data is retained until September 2023, when the change was implemented. The usage of the Livepeer transcoding network increased 13% QoQ in Q4 2023, as Livepeer poweered a series of StreamETH’s streaming video events in Q4’23, including Base House and Devconnect Istanbul. Network Revenue Livepeer's network revenue consists of demand-side and supply-side revenue. Demand-side revenue comprises ETH fees accrued from transcoding services. Node operators with larger amounts of stake are more likely to receive more transcoding work, which, in turn, results in them earning more transcoding fees. Supply-side revenue consists of revenue from: LPT staking rewards (accrued by node operators and delegators), which yields inflationary issuance of the token. ETH fees for transcoding services (accrued by node operators and transcoders). The latter doesn’t include ETH fees distributed to delegators, since delegators don’t actively participate in the supply of transcoding services. Demand-Side Revenue from Transcoding Fees from transcoding services are paid to node operators in ETH and are further distributed to transcoders and delegators. Livepeer’s demand-side revenue from transcoding fees decreased 38% in ETH terms, which is equivalent to a 30% QoQ drop in USD terms. This decrease in transcoding fees is a potential consequence of competitive pricing considerations, as node operators are actively discussing how to optimize the price per pixel for video transcoding. The motivation is to support node operators in determining a competitive transcoding pricing to sustainably attracting more transcoding work on the Livepeer network. For context, Livepeer’s Q4’23 demand-side revenue from transcoding fees made up a small fraction of the staking reward revenue (as presented in the next section). Staking Reward Revenue The Livepeer network distributes staking rewards in LPT to node operators and delegators. To provide transcoding services on the Livepeer network, node operators must stake LPT. A node operator’s stake weight comprises their own tokens and those delegated towards them. Revenue from staking rewards grew 33% QoQ in USD terms (up 9% in LPT terms). This increase corresponded with a steady increase in the issuance of LPT rewards, corroborated by the staking participation rate remaining below the 50% equilibrium threshold. The high level of staking rewards indicates that Livepeer network participants are highly reliant on staking rewards for sustaining their day-to-day operations. Notably, Livepeer shared a postmortem on a critical severity bug reported by a whitehat hacker on October 31, 2023. While the vulnerability caused several addresses to inadvertently earn small amounts of extra LPT rewards, no user funds were at risk. The bug was promptly fixed on November 1, 2023. Staking Participation The LPT token follows the Stake-for-Access (SFA) model, also known as a work token model. That is, Livepeer requires its node operators to stake the native token (LPT) to perform work on the network. The year of 2023 saw the Livepeer staking participation rate — the percentage of the circulating LPT supply that is staked — stay below the 50% equilibrium threshold. This drop in staking participation led to a gradual increase in daily LPT issuance from 0.020% in January to above 0.039% in December. The dynamic LPT issuance in absolute terms follows the staking participation rate as below: When the participation rate falls below 50% in a given round, LPT issuance increases by 0.00005%. Conversely, when the participation rate passes 50%, inflationary issuance decreases by 0.00005%. Q4’23 saw staking participation drop to 41%, the lowest level since Livepeer’s migration to Arbitrum in Q1’22. One explanation for this persistent drop is an incentive decoupling between staking and transcoding. A study found that the top five node operators by LPT staked earned ~40-50% of staking rewards, but only ~20% of all transcoding fees. As smaller node operators perform ~80% of the transcoding work, one way to increase staking participation is to make smaller node operators more attractive for delegation. Simultaneously, several forum entries (here and here) discuss the opportunity to move the equilibrium level to account for the changing supply dynamics of the network. Qualitative Analysis Key Developments Interactive Docs Upgrades Livepeer introduced an AI-powered upgrade to Livepeer docs and developer tools, featuring: New development tooling, e.g., an AI-powered chatbot, an Interactive API, multi-language SDKs, and a new command line interface (CLI). New features within Livepeer Studio’s hosted gateway to the Livepeer network, e.g., optimizing streaming latency, new clipping capabilities, livestream thumbnailing, multistreaming, user engagement, in-browser broadcasting, transcoding API, as well as monitoring stream health. The complete changelog is available here. Potential Technical Roadmap Several potential key technical opportunities for Livepeer were identified in a blog post: Accelerating innovation by enabling video developers to build their own workflows. A technical working group called the Livepeer Catalyst Hackers Group was set up in this sense. Livepeer also aims to address challenges of content authenticity and provenance via its blockchain-based Verifiable Video initiative. Bringing AI video compute jobs to Livepeer’s network of GPUs, as detailed by Livepeer co-founder, Doug Petkanics. Adding media processing capabilities to the network, enabling more revenue opportunities for node operators and more products built on top of the network. Strengthening the network’s resilience through decentralization by reducing dependence and single points of failure on any small groups or entities. Go Livepeer Releases Go Livepeer is a Go implementation of the Livepeer protocol which powers the public transcoding network. V0.7.1 and V0.7.0 were released in October 2023 to enhance the quality of the transcoding for node operators and to implement a new selection algorithm for broadcasters. The list of changes can be found in the V0.7.1 and the V0.7.0 release notes. Community Node Operator Survey A node operator survey analyzed the setups and costs of node operators on the Livepeer network. The survey found that: The costs of node operators are largely driven by hardware and operating costs. Approximately ~80% of the GPUs used for transcoding on the Livepeer network are smaller (predominantly 1070 or 1080) and 20% larger (predominantly 2080ti, 1080ti, and 3090). There is an average of four GPUs per node operator. The common GPU setups of node operators are either: only smaller GPUs (often similar type, e.g. only 1070) or one to three small GPUs and one to two medium/large GPUs per node operator. The results of the survey should provide insight into the costs and subsequently the profitability of node operators, who are currently heavily reliant on LPT rewards. Governance Delta Upgrade and Onchain Treasury Livepeer Delta and its community-governed treasury were launched in October 2023. The Livepeer community approved a governance proposal to introduce a community-governed onchain treasury for public goods funding for the ecosystem. The first proposals have been voted on, with one passing and one failing. The Delta upgrade describes a mechanism for populating the Livepeer treasury via a parameterized percentage of the per-round mintable tokens generated by the Livepeer protocol. As of December 31, 2023, over 95,000 LPT were held in the onchain treasury. The treasury is meant to fund Special Purpose Entities (SPEs) running a focused program like the Grants program or Livepeer Innovators DAO. For context, before Delta, the Grants Program was the main vehicle for rewarding and incentivizing builders in the ecosystem. In the first three quarters of 2023 alone, it handed out more than a quarter of a million dollars to 32 pioneering projects. Simultaneously, Livepeer Innovators DAO (LID) aims to reward retroactive grants to ecosystem contributors to video applications and tools that drive demand for Livepeer. The community has proposed a timeline and eligibility conditions for a round of retroactive grant funding. AI-Based Video Compute The Livepeer community discussed the path to bring AI-based video compute onto the Livepeer network beyond video transcoding. A pre-proposal is currently under community deliberation. It aims to provide practical means for node operators to run AI inference jobs on a mainnet sub-network. The discussion comes in the larger context of using decentralized physical infrastructure networks (DePIN) for AI compute. Closing Summary The usage of Livepeer transcoding network grew 13% QoQ in Q4’23, driven by a series of live-streaming video events and applications powered by Livepeer. However, demand-side revenue decreased 30% QoQ in USD terms, down 38% QoQ in ETH terms. Revenue from staking rewards grew by 33% QoQ in USD terms (up 9% QoQ in LPT terms), as LPT issuance reached its highest level since the Arbitrum migration in Q1’22. The Livepeer community approved a governance proposal (Livepeer Delta) to introduce a community-governed onchain treasury for public goods funding. Moreover, Livepeer introduced an AI-powered upgrade to Livepeer docs and developer tools, as well as a revised technical roadmap. Beyond transcoding, Livepeer aims to become the go-to decentralized technology stack for developers integrating video streaming into their apps.
Source: Mihai Grigore — Published: 2024-01-07T14:00:00ZSynthetix Q4 2023 Brief
Key Insights Synthetix Perps had its best quarter by volume traded. Without any incentives, it powered over $13 billion for the second consecutive quarter. SNX stakers earned record fees in Q4’23, taking in nearly $10 million in the quarter. Over 95% of fees come from the Synthetix Optimism deployment. After SIP-2043 passed in the first week of December, SNX no longers offer inflation rewards to stakers, ending SNX inflation. Previous rewards will continue to vest for the next year, but no more SNX will be minted. The Andromeda release on Base begins the first significant test for Synthetix V3, featuring a new architecture, updated Perps design, a new tokenomics experiment, and more. Primer Synthetix (SNX) is a decentralized synthetic asset issuance and liquidity protocol that allows users to trade synthetic cryptocurrencies. Each synthetic asset tracks the price of an external asset through the use of Chainlink, Pyth, or Uniswap V3 TWAP oracles. Users can either trade in spot or in perpetual futures markets for synthetic assets. SNX is the native protocol token, responsible for governance as well as the primary collateral that backs the liquidity of the network. SNX can be staked as collateral for sUSD, the Synthetix stablecoin, which can be traded on Synthetix for any other synth (sAsset). Synthetix V2x is live on Ethereum and Optimism, and V3 launched on Base in Q4 2023. Synthetix Perps is the protocol’s leading product. The DAO uses a novel V3 Governance Module (V3GM), which has councils of appointees voted on by SNX holders. Website / Twitter / Discord Key Metrics Performance Analysis Perps Volume and DAUs The return of the bull market brought demand for perps trading, even without incentives. Synthetix Perps had its best quarter by volume traded, powering over $13 billion for the second consecutive quarter. The number of users also grew to its highest point since Optimism Quest attracted a rush of new addresses and new stakers grew as trading fees increased. October 23 was the highest volume day in the quarter, with nearly $500 million traded. Fees to Stakers SNX stakers earned record fees in Q4’23, raking in over $10 million in the quarter. Over 95% of the fees came from the Synthetix Optimism deployment. Stakers were paid an average 5.5% APY (assuming daily compounding and maintaining a 500% collateral ratio) from trading fees in the quarter. Trading fees are not paid as a dividend but rather by burning sUSD, which reduces debt for stakers. Despite over $10 million in debt burned, the debt pool grew by 50% QoQ as SNX price nearly doubled, enabling stakers to take out more debt. OI and Staker Perp Exposure The first year of Synthetix Perps V2 has been a successful proof of concept for the design. A key feature of the design empowers market makers to collect the spread created by takers buying or selling against LP collateral (staked SNX). This design keeps LP exposure near zero (though certainly not risk free). However, instead of collecting spread, LPs collect fees on increased volumes (the initial trade and the market maker) and have significantly reduced exposure to trader’s directional preference. That said, the design has scaled even as open interest (OI) surpassed $200 million. Final Year of SNX Inflation SNX rewards paid to stakers must be escrowed for at least one year (though they can be staked during that time). After SIP-2043 passed the first week of December, SNX no longer offers inflation rewards to stakers, ending SNX inflation. The rewards paid to stakers in 2023 will at most lead to a 6.13% increase in circulating supply in 2024. With the launch of Andromeda on Base, fees from that deployment will go to burning SNX. In other words, the net inflation will almost certainly be less than 6.13%. Key Developments Andromeda on Base Synthetix V3 Explainer Perps V3 relieves the key constraint of sUSD supply by enabling USDC collateral. This should improve capital efficiency for LPs and should remove the friction of acquiring sUSD to trade on Perps V2. Note: the first deployment will wrap the USDC and convert it to sUSD because the underlying contracts still require sUSD. The team plans to amend those and make them compatible for non-wrapped USDC (i.e., sUSD). Introduces cross margining for traders. MEV-resistant liquidation process. Expanded collateral options. Isolated deployment: Currently the debt pool for SNX stakers is aggregated across Ethereum and Optimism. The Andromeda release on Base will be an isolated debt pool backed by USDC stakers (also called LPs), not SNX stakers. Buyback and burn: 50% of fees will be used to buyback and burn SNX on Base. Andromeda is meant to be an experiment, a “testing ground for new deployments.” The launch will likely be conservative, starting with LP caps, fewer markets, and small OIs. End SNX Inflation In December 2024, the last of SNX inflation will mint. SNX inflation was used to incentivize stakers and increase the staking ratio. With the success of Perps V2, fees should support staking, and limiting the token supply should help clarify the value accrual mechanism of the protocol. Inflation was previously a penalty to passive SNX holders in the form of dilution. Although passive holders still won’t earn fees that pay stakers for their service, the combination of ending inflation and the V3 launch allows them to benefit from the falling supply of SNX. Oracle Integrations and Multi-Chain Trading ERC-7412 (inspired by ERC-3668) could enable cross-chain deployments. The Synthetix V3 protocol can use data from a verifier contract deployed on the chain. Similar to cross-chain pool synthesis on V2, this feature could enable synthesizing liquidity across any chains with a verifier contract. Note: This is still in draft, but V3 is built to be compatible with it. Infinex launches on December 22 The newest Synthetix front-end, Infinex is a highly anticipated launch that is aimed at winning the end user with a best-in-class UX. The project uses Synthetix Perps on the back-end and for liquidity/execution. Closing Summary Synthetix closed out a breakout year for its Perps product with an exciting launch into 2024. Perps had a full quarter of strong volumes with no incentives, while LPs maintained profitability and minimal exposure to user market preference. The end of inflation marks an important change in the narrative for Synthetix, as investors and stakers can shift their focus to usage and trading fees. The Andromeda launch on Base is a key testing ground to determine the future of Synthetix: V3 architecture gets its first test; Perps V3 begins; and a new tokenomic design experiment is launched. Synthetix continues to rank among the top perp DEXs by volume, but the competition is strong and growing. Execution and the outcome of launches like Andromeda and Infinex will likely determine the future success of the protocol.
Source: John_TotalValue_Locke — Published: 2024-01-05T14:30:00ZUnderstanding ZetaChain: A Comprehensive Overview
Key Insights ZetaChain is a Layer-1 blockchain that offers chain-agnostic interoperability by way of its omnichain contracts offering. It allows applications built on ZetaChain to connect to any other application or blockchain. ZetaChain utilizes the Cosmos SDK and Tendermint Consensus mechanism, which enables developers to build customized, scalable, and interoperable blockchains. The network also features an Ethereum Virtual Machine (EVM) compatible execution layer called zEVM. Developers can choose between Omnichain Contracts, which bridge different blockchains, or Cross-Chain Message Passing (CCM), which conveys data and value messages across blockchains. ZetaChain’s omnichain applications introduce far-reaching chain abstraction capabilities. Recent initiatives like Sushi's native Bitcoin support highlight the largely untapped market for BTC within DeFi. ZETA is the native token of ZetaChain and will be used for paying gas fees, calling smart contracts, and securing the network through staking. Once launched, ZETA will allow holders to stake their tokens to earn incentives. Background ZetaChain was introduced on December 15, 2021, by an anonymous project team with experience.) at Coinbase and Basic Attention Token (BAT). Several former Coinbase employees also served as advisors to the project, including the company’s initial Head of People, Nathalie McGrath, and Juan Suarez, who held an internal counsel role at Coinbase for a decade. On March 9, 2022, the team released ZetaChain’s whitepaper and DevNet and closed its initial Seed Round that raised an unspecified amount of capital. Investors in this round consisted of Dan Romero, Sam Rosenblum, John Yi, JD Kanani, and HwiSang Kim. ZetaChain completed its second funding round in August 2023, raising $27 million from participants such as Blockchain.com, Human Capital, Vy Capital, Sky9 Capital, Jane Street Capital, VistaLabs, CMT Digital, Foundation Capital, Lingfeng Capital, GSR, among others. ZetaChain's testnet, launched in August 2022, quickly garnered substantial user engagement, reaching 150,000 users in its inaugural month. By March 2023, this figure had escalated to 1 million users, a milestone that coincided with the introduction of incentives for validators. ZetaChain continues to operate in the testnet phase, with no official release date for its mainnet announced as of December 19, 2023. Overview ZetaChain is a Layer-1 blockchain that enables chain-agnostic interoperability. The network boasts a block time of approximately five seconds and finality without the need for confirmation or the ability to re-organize the transaction. Applications built on ZetaChain will be able to connect to any other application or blockchain, giving new and existing crypto users a singular access point to Web3. This is accomplished by utilizing omnichain smart contracts that read and write to any other blockchain, even blockchains that do not natively use smart contracts. Developers can also send data and value messages to any chain with simple function calls using ZetaChain’s Connector. Technology and Architecture EVM Layer The ZetaChain network utilizes an Ethereum Virtual Machine (EVM) compatible execution layer named zEVM. This layer supports EVM features such as smart contract creation, interaction, and composition. It also enables external chains to call the contracts built on zEVM. zEVM contracts can also create outbound transactions on blockchains connected to ZetaChain.All developers building on ZetaChain create zEVM contracts, which can be standard Solidity contracts. However, in order to maximize the capabilities of the network, zEVM contracts must either follow the specific requirements set forth for omnichain contracts or utilize Cross-Chain Message Passing. Omnichain Contracts Source: ZetaDocs Omnichain Contracts must implement cross-chain call execution and are only required to be deployed once on ZetaChain, after which it can be connected to external chains. The connected chains can also transfer digital assets to the contract’s address on ZetaChain. Assets transferred to ZetaChain take on the ZRC-20 token standard. Omnichain contracts allow for efficient implementation of popular existing protocols on Ethereum, such as Uniswap and Aave. They also enable integration with networks that do not support smart contracts, such as Bitcoin. Gas fees incurred by omnichain contracts are settled in the destination chain’s native gas token. In sum, omnichain contracts on ZetaChain offer a future-proof approach to cross-chain functionality, with a one-time deployment that is subsequently accessible across all integrated networks. This model leverages a synchronous execution environment with immediate compatibility with any new chain supported by ZetaChain, avoiding the hassle of redeploying or recoding to accommodate different blockchains. As such, these contracts serve as a nexus for cross-chain interactions, improving the user experience by minimizing gas fees across chains. The primary advantage of omnichain contracts lies in enabling a unified state and execution. In CCM and other similar systems such as LayerZero and Axelar, apps without said unified state often require complex workarounds. However, omnichain contracts allow for a cohesive, singular state, ensuring a smoother operation for most use cases. By minimizing inbound and destination gas fees and not relying on multiple messages, omnichain contracts stand as a native and accessible complement to CCM. Cross-Chain Message Passing The alternative to omnichain contracts is Cross-Chain Message (CCM) Passing. CCM is used to convey data and value messages across blockchains with ZetaChain as the middleman. Whereas developers deploy omnichain contracts on ZetaChain, CCM-enabled contracts are instead deployed on external chains. The contracts then call the ZetaChain Connector API, and ZetaChain relays the message to the destination chain, where a CCM-enabled contract receives the message. The state is stored on a set of CCM-enabled contracts on different chains. CCM makes sense for applications that only need unidirectional and asynchronous logic/effects and that don't need or benefit from a unified state. CCM is primarily intended to augment existing applications on external chains with cross-chain functionality. Gas fees incurred by CCM-enabled contracts are denominated in ZETA tokens and must be sent to the Connector contract on the origin chain. ZetaChain also uses a burn/mint mechanism to protect digital assets transferred with CCM-enabled contracts. Assets are burned on the origin chain and minted on the destination chain. This mechanism provides more security than either bridging or wrapping due to these methods holding the transferred assets. Consensus Mechanism ZetaChain was built using the Cosmos Software Development Kit (SDK), an open-source framework used to build permissionless public Proof-of-Stake (PoS) blockchains and permissioned Proof-of-Authority (PoA) blockchains. Cosmos SDK assists developers with building new blockchains, as well as launching, testing, and integrating the network once it is created. The Cosmos SDK provides a modular framework that allows for the customization of new blockchains to meet specific user requirements. It also enables the operation of parallel chains to accommodate increasing throughput needs as user demand grows. Because the Cosmos SDK ensures interoperability, it allows digital assets and their values to be translated across different blockchains built using this framework. It also supports a Proof-of-Stake module for consensus and decentralized governance through community proposals and voting. On top of these features, the SDK includes security measures such as firewalls to protect the blockchain application. Thanks to its many features, the Cosmos SDK has been used to build several notable applications and blockchains, including BNB Chain, dYdX, Osmosis, and Celestia. Source: Messari Tendermint’s Consensus mechanism is an asynchronous, Byzantine Fault Tolerant (BFT) state machine operated by validators. Validators rotate through proposing and voting on blocks of transactions. One block is proposed at each height in the chain, and if the proposed block is not approved by the other validators, a new validator proposes a block for that height. In order for a block to be approved, it must complete two stages of voting. The stages are named “pre-vote” and “pre-commit,” and a block is finalized when more than two-thirds of the validators’ voting weight approve the same block in the same round. Voting weight is determined according to the stake weight of the asset denominated by each specific blockchain. With ZetaChain, validator operators must stake ZETA tokens. Since ZetaChain is a Delegated Proof-of-Stake blockchain, ZETA tokenholders that do not operate validators can delegate ZETA tokens to existing validators. The proportion of tokens controlled (delegated and self-staked) by a single validator against the total number of tokens controlled by all validators determines the stake weight, and by extension, the voting weight. Architecture Source: ZetaDocs ZetaChain’s architecture primarily consists of a decentralized network of validators that achieve consensus on external state and events, as well as being responsible for updating the external chain states via distributed key signing. Each validator contains a ZetaCore and ZetaClient, which are bundled together and run by the same operator. ZetaCore produces the blocks in the blockchain and maintains the replicated state machine, while ZetaClient observes events on the external chains and signs transactions being sent to those chains. Validators within ZetaChain serve as either Basic Validators, Observers, or Threshold Signature Scheme (TSS) Signers. Basic Validators Basic Validators are identified by a specific consensus key and are responsible for voting on block proposals with the voting power created by staking ZETA. Basic Validators are required always to be online and available to participate in block production. In addition, running the following two validators, Observers and TSS Signers, also entails running a Basic Validator. By comparison, running a Basic Validator has significantly less overhead as far as software and hardware requirements. Observers Observers are responsible for reaching consensus on events and states for external chains. Observers monitor these external chains for transactions, events, and states at specific addresses operated by the full nodes of the respective external chain. This type of validator is further divided into the Sequencer and Verifier roles. Sequencers observe relevant external actions and report the information to Verifiers, who then verify and vote on ZetaChain to achieve a simple-majority consensus regarding the external actions. For this process to be effective, numerous Verifiers are required; however, only one Sequencer is needed to report to the verifiers. Threshold Signature Signers TSS Signers on ZetaChain hold portions of ECDSA/EdDSA keys. A Threshold Signature Scheme (TSS) is a digital signature verification method used in Multi-Party Computation (MPC) cryptography. In MPC, a private key is created from “key fragments,” each of which is held by a separate party or node. The TSS allows the private key to be used if a set threshold of key fragments contributes instead of the full amount of fragments. For example, if there are nine parties holding key fragments, and the set threshold is five, the private key can be used as long as five of the nine (referred to as “t” of “n”) key fragment holders provide their share. Keys for authenticated interaction with external chains are held throughout ZetaChain and are distributed to multiple signers in accordance with the TSS method described above. ZetaChain uses the tokens staked by validators as collateral against malicious validators to ensure TSS Signers do not sign messages on behalf of ZetaChain on external chains. Architectural Challenges There are inherent risks tied to modular system architectures. These systems could introduce escalations in complexity, security challenges, and composability dilemmas, while also potentially amplifying complications for developers. ZetaChain’s omnichain approach seems to address many of these concerns, but the underlying issues ingrained in the multichain world could limit demand for ZetaChain and its solutions. In a similar vein, ZetaChain could face analogous perils to what bridges have repeatedly faced over the years. A keen analysis of the risks associated with bridges and interoperability will be instrumental in safeguarding the platform as it stakes its offering on an interconnected blockchain future. Though ZetaChain’s PoS mechanism offers a robust security model, it risks creating a network overly reliant on a small contingent of validators. That said, ZetaChain’s round-robin selection system might be a counterbalance, even if its efficacy is yet to be fully assessed. ZetaChain is not alone in this struggle to bootstrap a reliable active validator set, as seen by relatively low Nakamoto coefficients across the board. ZETA Token Zetachain’s native token is ZETA, which will be launched alongside the ZetaChain mainnet. As of writing, no release date has been announced. Once ZETA and mainnet are live, the token will be primarily used for paying gas fees, calling smart contracts, and securing the network through staking. Validators and token holders will be able to stake ZETA and earn incentives. ZETA will also be the main transfer of value on ZetaChain, allowing transfers between connected blockchains using a one-way peg mechanism. Under this mechanism, the number of ZETA tokens being transferred would be burned on the origin chain and minted on the destination chain. The staking parameters have not yet been specified, but the project has listed the hardware requirements to run a validator.No information about the total supply or specific allocations of ZETA has been released. The project team claims that ZETA will be one of the first multichain coins issued across multiple chains and layers. Ecosystem In today’s multichain universe, users have increasingly demanded seamless interactions across various networks. Rather than navigating the requirements of every bridge, chain, wallet, etc., multichain users might find themselves attracted to the omnichain approach championed by ZetaChain. This paradigm shift offers reduced transaction friction and enhanced security, while providing developers with the freedom to deploy applications on the best-suited chains. ZetaChain’s nascent field of omnichain applications exemplifies this potential by introducing chain abstraction capabilities. Initiatives like Sushi's native Bitcoin (BTC) support highlight the largely untapped market for BTC within DeFi, especially considering the recent conversation around BTC ETFs. Moreover, it is feasible to suggest that facilitating smart contracts via ZetaChain's ZRC-20 standard could spur development across Web3, DeFi, and SocialFi applications. As of October, the ZetaChain ecosystem boasts 150 applications. As demonstrated in the infrastructure map below, the ZetaChain ecosystem has expanded its breadth to include a wide variety of unique players in different sectors. Source: ZetaChain As mentioned earlier, ZetaChain's testnet managed to reach 150,000 users in its first month after launching in August 2022. In less than a year, the metric grew to 1 million users, a milestone that coincided with the introduction of incentives for validators. As of writing, the testnet has seen over 37.6 million zEVM transactions and 14 million cross-chain transactions across more than 2.5 million unique zEVM addresses. Competitive Landscape As ZetaChain carves out its niche within the blockchain interoperability sector, it will have to deal with two forms of competition. First, ZetaChain’s relevance could be swayed by the outcome of the battle between monolithic and modular blockchains. Compared to the Interchain ecosystem, Ethereum’s rollup-centric approach has a significant lead in users, developers, and liquidity. But beyond this, ZetaChain faces some well-established competition from a variety of players. Axelar Axelar is crafted from the same foundational Cosmos SDK that underlies ZetaChain's technology. Axelar strives for full-stack interoperability, a holistic approach that encompasses not just asset bridging, but also permissionless cross-chain smart contract execution and dApp support. The Axelar community has taken a three-part strategy to expand its connected networks, currently at 55. This expansion is fueled by economic restructuring, the deployment of the Axelar Virtual Machine for frictionless connections, and the pursuit of more streamlined solutions like light clients. In contrast to Axelar’s comprehensive but potentially intricate system, ZetaChain’s offering of a unified execution environment could allow its users to enjoy a more simplified experience with reduced gas fees and messaging requirements. LayerZero Unlike Axelar, LayerZero stands out from ZetaChain due to its fundamental architecture. It isn't a blockchain, thus handing developers extensive flexibility when it comes to protocol implementation. Despite this, LayerZero relies on centralized oracles and relayers, which necessitate a higher level of trust, particularly owing to its operation on a dual-offchain entity multisig system. As such, LayerZero could experience some complications with its CCM-style interoperability, as seen with Axelar and other similar chains. By comparison, ZetaChain might position itself as a potentially more trust-minimized alternative, thanks to its onchain operations. THORChain THORChain represents another direct competitor to ZetaChain, as it has native integration into the Cosmos ecosystem and employs a similar toolkit for blockchain development. Like ZetaChain, THORChain is geared toward interoperability, enabling asset fluidity across different blockchains; however, its specific focus on liquidity and security via its unique mechanics creates a distinct niche. THORChain is an automated market maker (AMM)-based protocol, similar to Uniswap, but with a twist. All assets in THORChain's system are paired with its native asset RUNE. In doing so, THORChain creates a DEX that prevents liquidity from fragmenting across pools and guarantees that any asset on THORChain can be swapped into any other asset. Comparatively, ZetaChain could potentially leverage its more decentralized validator mechanisms, a broader range of supported chains, or less stringent requirements for node operation. Also, THORChain is application-specific, while ZetaChain is a generalized smart contract platform. This gives ZetaChain users the ability to not only spin up a direct competitor to THORChain but also build applications and use cases beyond a DEX application. Closing Summary Overall, ZetaChain aims to provide seamless connectivity and accessibility for Web3 applications. To accomplish this, it leverages its Layer-1 blockchain infrastructure, Cosmos SDK, and Tendermint Consensus. With its omnichain smart contracts and cross-chain messaging capabilities, ZetaChain enables developers to connect and interact with any blockchain, including those that do not support smart contracts. As a Delegated Proof-of-Stake chain, ZetaChain will enable further decentralization by way of its token ZETA. Aside from securing the network, ZETA will also be used to pay gas fees and as the primary transfer of value. As ZetaChain continues to progress towards its mainnet launch, it holds the potential to facilitate interoperability and enhance the functionality of the broader blockchain ecosystem. Despite its potential, ZetaChain’s path to success is not without its challenges. As of writing, ZetaChain continues to be a relatively new Layer-1 that has not yet launched its mainnet. As with nearly all blockchains, reaching mainstream adoption is a difficult task, especially when there are significant incumbents at play. According to the upcoming roadmap, the ZetaChain team plans to focus on increasing adoption at both a user and developer level. The roadmap emphasizes setting up more chain integrations, bringing more interoperability across dapps and diverse asset types (specifically the capability to support Bitcoin NFTs), and providing an SDK for omnichain dapp developers. At the same time, the team will be looking into ways to improve ZetaChain’s security and efficiency by upgrading some of the network’s features. Ultimately, ZetaChain's positioning in a competitive landscape should accentuate its unique selling points — such as its architecture, validator mechanisms, or transaction efficiencies — as compared to the focus areas of Axelar, LayerZero, and THORChain. By doing so, ZetaChain can effectively delineate its place in the market, capitalizing on areas where it can deliver enhanced value to its users.
Source: Ryan Schulenburg — Published: 2024-01-04T14:10:00ZUnderstanding Aptos: A Comprehensive Overview
Key Insights Aptos is a Layer-1 blockchain designed around the core tenets of scalability, safety, reliability, and upgradeability. It was born out of Meta’s Diem and Novi projects, launching in October 2022. Aptos’ technological stack features many novel aspects, including the AptosBFTv4 consensus mechanism, the Quorum Store mempool protocol, the Block-STM parallel execution engine, and the programming language Aptos Move. Since July 2023, Aptos has averaged over 475,000 daily transactions and over 72,000 daily active addresses. Network activity has been driven by social media platform Chingari, oracle Pyth, and a one-day communal art creation event on Graffio. Aptos Labs and the Aptos Foundation have formed partnerships with many notable companies and conglomerates, including Microsoft, Alibaba Cloud, NPIXEL, Lotte Group, Coinbase Pay, and more. Many of its growth initiatives are focused on the APAC region. The modular versus integrated debate has been discussed ad nauseam. The TLDR is that both sides are converging on a similar endgame: modular chains are initially optimizing for verifiability and decentralization, and integrated chains are optimizing for low latency and high throughput. Aptos is one of the biggest players in the integrated camp, with development team Aptos Labs having raised around $400 million in total funding. Since its launch in October 2022, the network has upgraded rapidly with over 40 AIPs and 8 major releases. Aptos’ ecosystem is relatively young, but it already features projects like onchain order books, perp DEXs, and social media platforms. In a recent mainnet-like testing environment, Aptos verifiably achieved a peak of 30,000 TPS and over 2 billion transactions in a day, with a north star of over 1 million TPS. If it can continue implementing technical upgrades and attract developers and users, Aptos will be poised for success. Background Aptos was born out of Meta’s Diem and Novi projects. In 2019, Meta (at the time known as Facebook) formally announced its upcoming blockchain-based payments network. The project consisted of the permissioned Diem blockchain (originally called Libra) and the Novi wallet (originally called Calibra). Development was led by the independent consortium Diem Association and Facebook subsidiary Novi Financial. Due to regulatory pushback, Diem and Novi never launched. Diem wound down and sold its assets to Silvergate Capital in January 2022. In September 2022, Meta announced the end of Novi. Aptos Labs was founded in December 2021 and formally introduced itself in February 2022. Aptos Labs was co-founded by Novi’s Head of Strategic Partnerships Mo Shaikh, who previously led strategy at Consensys and founded blockchain-based fractional real estate platform Meridio, and Novi’s Principal Software Engineer Avery Ching, whose background is in supercomputing. The remaining founding team consisted of PhDs, researchers, engineers, designers, and strategists, many of whom also worked on Diem or Novi. In March 2022, Aptos Labs announced its $200 million raise along with the launch of its public devnet and open-source codebase. The raise consisted of equity and token options and was led by a16z with participation from Multicoin Capital, ParaFi Capital, Coinbase Ventures, and many other investors. In July 2022, Aptos Labs announced a subsequent $150 million raise at a reported $2 billion valuation, led by FTX Ventures and Jump Crypto. FTX Ventures also participated in the first fundraising round; its investments are now controlled by FTX bankruptcy proceedings. Further strategic investments by Binance Labs and Dragonfly Capital brought the total funding to around $400 million. After Aptos Labs published the Aptos whitepaper in August 2022, the mainnet network launched in October 2022. Some voiced concerns about the launch when centralized exchanges added support for Aptos’s native token APT before complete tokenomics info was publicly released. Mo Sheikh acknowledged these concerns in a tweet thread the following day. Since mainnet, the Aptos network has completed several upgrades and is now on V1.8.0. The non-profit Aptos Foundation leads the growth efforts for the Aptos ecosystem. Technology The Aptos technological stack was designed around the core tenets of scalability, safety, reliability, and upgradeability. It brings novel mechanisms to many aspects of the stack. Consensus Aptos is a Delegated-Proof-of-Stake (DPoS) Layer-1 that uses the AptosBFTv4 consensus protocol. AptosBFT AptosBFT (originally called DiemBFT) evolved through four iterations while at Diem and was then adopted for the permissionless Aptos blockchain. The first AptosBFT was based on HotStuff, which is itself based on traditional practical BFT (pBFT) protocols. Aptos’s current implementation, AptosBFTv4, is now based on Jolteon, which improves upon HotStuff latency by 50% via a pBFT-style quadratic view change. In addition, to mitigate latency caused by faulty leaders, AptosBFT selects leaders not just based on staking but also performance (together, “reputation”). A validator’s performance measures their success rate as a leader (how often their proposals are committed) and as a non-leader (how often they vote on proposals). Aptos throughput was further improved with the implementation of Quorum Store in the Aptos V1.5 upgrade, completed on July 18, 2023. Quorum Store is an implementation of Narwhal, a mempool protocol. Quorum Store brings improvements to consensus by separating data dissemination from consensus. The decoupling of data dissemination from consensus was the key discovery of the Narwhal and Tusk paper co-authored by Aptos Labs and Mysten Labs researchers. Before Quorum Store, transaction processing included a mempool and consensus phase: Mempool phase: All transactions are broadcasted to all validators. Consensus phase: The leader broadcasts all transactions in its created block to all validators. Non-leaders vote on blocks by sending signed block metadata. This led to two bottlenecks: Duplicated transaction dissemination: All transactions are disseminated to all validators twice, in both the mempool and consensus phases. Unequal distribution of work: In the consensus phase, the leader does far more work than non-leaders since it has to send raw transactions versus signed block metadata (which are relatively small messages). Thus, total bandwidth was upper-bounded by the leader’s bandwidth, with non-leaders’ being bandwidths underutilized. Quorum Store adds an intermediary phase between the mempool and consensus protocols. The complete process is now: Mempool phase: Transactions are no longer broadcasted to validators but instead sent to Quorum Store. Quorum Store phase: The Quorum Store protocol receives transactions from the mempool and orders them based on gas fees into batches. Quorum Store broadcasts these batches to validators. Upon receiving a batch, validators sign and send the batch to other validators. Once a batch receives signatures from greater than ⅔ of validators, Quorum Store creates a Proof-of-Availability, guaranteeing the uniqueness and availability of the batch. Consensus phase: The consensus protocol is the same, except now the leader creates a block using certified batches from Quorum Store rather than raw transactions from the mempool. This solves the above two bottlenecks as follows: Duplicated transaction dissemination: Raw transactions are only disseminated once (from the mempool to Quorum Store), and after that, only batches are disseminated, reducing the amount of data in messages. Unequal distribution of work: In the consensus phase, the leader only has to send the batch metadata (along with the corresponding PoAv). This is much less work than before and more equal to the work of non-leaders. Furthermore, all validators are working equally in the Quorum Store phase. In testing, Quorum Store increased TPS limits by 12x in a consensus-only test and 3x in an end-to-end test. However, the full benefits of Quorum Store are not realized with a leader-based protocol like AptosBFT. Thus, Aptos Labs is exploring an upgrade to a DAG-based consensus protocol, with more details in the Roadmap Section. DPoS Validators are compensated through inflationary staking rewards. At the moment, all transaction fees are burned. Staking rewards are weighted by a validator’s reputation (stake and performance). Rewards are distributed and automatically compounded every epoch, which lasts two hours. Staked tokens are locked in global 30-day cycles. Each validator sets a commission rate, with the remaining percentage of tokens passed down to their delegators. In-protocol delegated staking was implemented on mainnet on April 20, 2023. Delegators need a minimum stake of 11 APT to participate. This brings much more community participation to staking, as the minimum stake to participate as a validator is 1 million APT ($10.5 million as of December 26, 2023). There is also a maximum stake of 50 million APT for validators. At ~5% of the total supply, this is not a very restrictive cap. However, if a validator operator gains enough stake, it would be incentivized to spin up multiple validator nodes. Notably, locked tokens are able to be staked and earn liquid rewards (after the global 30-day unlock period). There is currently no slashing mechanism for offline or malicious validators, but such mechanisms could be added via governance in the future. Execution Once validators agree on a block order, they need to execute the transactions in the block and persist the results to storage. Many blockchains have a sequential transaction engine, where transactions are ordered and executed one by one. To speed up execution, Aptos uses a parallel execution engine. Furthermore, Aptos differentiates from other networks with parallel processing of transactions like Solana and Sui by not requiring upfront, user-declared knowledge of dependencies. To do this, Aptos uses Block-STM, which builds on the principles of software transactional memory (STM) and optimistic concurrency control (OCC). STM libraries with OCC follow the general framework where transactions are executed optimistically (i.e., assuming no dependencies), validated post-execution, aborted if dependencies are surfaced, and eventually re-executed. However, this approach is rarely used in practice due to limited performance caused by managing dependencies and cascading aborts. To be suitable for deployment and overcome these limitations of OCC STM systems, Block-STM leverages a preset order of transactions for estimating the dependencies, reducing the number of aborts. The observation that a preset order of transactions can be a blessing, not a curse, was one of the key findings of the Bohm (2014) research paper. Block-STM utilizes the preset order even more so than Bohm, refining dependency estimates with each abort in the system (and, as such, reducing the chances of further aborts). Block-STM additionally improves upon general STMs by leveraging aspects of a blockchain, including: VM safety: The Move VM (more on Move below) ensures that uncommitted states may not negatively impact other ongoing transactions by catching errors and charging gas. Block granularity: Garbage collection is straightforward as it can happen between blocks. While Block-STM initially just tracked block commitments to reduce synchronization costs, Aptos Labs has since improved the algorithm. It now supports a rolling commit within the block without sacrificing performance. Before walking through each step of Block-STM, it’ll be helpful first to define a term already mentioned: dependencies. A blockchain transaction consists of smart contract code that reads and writes to shared memory. Upon execution, each transaction has a list of these read and write locations, called the read-set and write-set. If Mo’s transaction reads from a location in the shared memory which is first written by Avery’s transaction, then Mo’s transaction is dependent on Avery’s. Transactions with dependencies must be executed sequentially, in this case, Avery’s first before Mo’s. With that, we can dive into the step-by-step process of Block-STM, broken up into five major phases: Preset ordering of transactions From the previous consensus phase, there are blocks containing a sequenced order of transactions. As noted above, this preset order is a key advantage of Block-STM. The parallel execution outcome has to result in the same read and write sets as the sequential execution outcome. Optimistic execution Block-STM executes transactions optimistically in parallel. In other words, it executes transactions assuming there are no dependencies. Validation Executed transactions are then validated, i.e., checked for dependencies. This is done by re-reading a transaction’s read-set and comparing it to the read-set from its latest execution. If the two read-sets aren’t equal, the transaction aborts. A key part of Block-STM is the continuous scheduling of execution and validation tasks in an efficient manner, in particular: Prioritizing tasks earlier in the preset order. Dispatching waves of validations to detect missed dependencies as early as possible to avoid cascading aborts. Note that validation is much cheaper than execution, so continuous validation (re-reading read-sets) is not a major bottleneck. Aborts and re-execution When a transaction is aborted, an ESTIMATE tag is applied to the location where the transaction writes. Then, if a later transaction reads to this location, they will see an ESTIMATE tag. Upon reading an ESTIMATE tag, a transaction will suspend the execution until a value overwrites the ESTIMATE tag. This will happen once the original, aborted transaction is successfully re-executed. Anytime a transaction is re-executed, the scheduling guarantees that any transactions that are higher in the preset order and depend on it will be re-validated. This on-the-fly dependency management is a key concept of Block-STM. Without an ESTIMATE tag, the second transaction would have been executed and then likely have later aborted since it read from a location that an aborted transaction wrote to. Block-STM thus avoids a lot of wasted work of executing transactions that are likely to abort. Furthermore, doing on-the-fly dependency management has several improvements to upfront dependency systems. First, users don’t have to declare dependencies, supporting atomicity with arbitrarily complex transactions (complex transactions don’t need to be broken up). Secondly, it only manages dependencies when needed rather than storing dependencies of all transactions. Lastly, most dependencies are based on a state fresher than the one at the beginning of the block. Commits Once Block-STM detects that the output of an optimistic execution of a transaction is correct, it is committed by the rolling commit mechanism. Rolling commit relies on lightweight synchronization to verify and commit each wave of transactions before processing the next. In testing, Block-STM achieved up to 170,000 TPS in Aptos benchmarks with 32 threads. This was a 17x improvement over sequential execution. Storage When a block is committed, its data is persisted in the storage layer. While commits are done by block, each individual transaction is stored separately after execution in a Merkle tree. Everything that happens on the blockchain – including transactions, state changes, and events – can be cryptographically proven against a summary known as the “root hash,” which is authenticated by the current validator signatures. This method differs from other blockchains, where one needs to trace the chain of blocks to verify past transactions, allowing for more granular provable data access. To handle the large amount of data, Aptos uses two types of Merkle trees: a Jellyfish Merkle Tree for storing data on disk and an in-memory Sparse Merkle Tree for quick updates. These trees are optimized to efficiently store data and allow for concurrent updates. Several further paths to scaling storage are being explored by Aptos Labs, notably storage sharding which is detailed in the Roadmap Section. Move Move is a bytecode language inspired by Rust that was created by the Diem and Novi teams. Move offers enhanced flexibility and safety over Solidity and other Web3 programming languages. Move consists of two types of programs: transaction scripts and modules. Transactions scripts are atomic and can only ever be used once, whereas modules are published in the global state and remain there indefinitely. Modules are similar to smart contracts in other programming languages. They define resources and their associated procedures. A resource is like an object, and a procedure is the action that can be performed on it, such as creation, modification, or deletion. Resources are specifically designed to represent scarce assets like tokens. They feature built-in protections to help these assets avoid being mistakenly copied or discarded. Modules enforce data abstraction, where a type is transparent within its declaring module and opaque outside of it. In other words, only the originating module can create, destroy, or update values. External access to a module’s data is confined to public procedures exposed by the module. These guarantees are enforced at execution time by Move’s bytecode verifier, which all modules and transaction scripts must pass through in order to be executed with the Move VM. This data abstraction is done more explicitly in Move than Solidity/EVM, which has encapsulation but with less strict enforcement. Move aims to remove the attack vectors present in Solidity and the EVM, particularly those stemming from the lack of first-class assets beyond ETH and re-entrancy attacks. First-class assets: On the EVM, ERC-20s and other assets do not have the same built-in scarcity and access control properties as Ether. Solidity developers need to manually implement these protections to avoid introducing bugs that allow the duplication, reuse, or loss of assets. Comparatively, all resources on Move, not just the native asset, are treated as first-class assets with these protections. Re-entrancy attacks: Unlike the EVM, Move does not have unsafe dynamic dispatch. With unsafe dynamic dispatch, a VM does not know what operations are being performed by external contract functions until the contract is running. Dynamic dispatch leads to re-entrancy attacks, one of the most prevalent roots of blockchain hacks, including the recent Curve/Vyper exploit. In a re-entrancy attack, a contract calls to an external contract that calls back to the original contract before the original contract completes execution and updates the balance, which can lead to repeatedly draining funds. Move aims to make it harder for developers to make mistakes. Beyond the bytecode verifier, developers can also leverage the Move Prover, a formal verification tool. Of course, Move does not remove the possibility of smart contract vulnerabilities. Programmers still need to establish proper safety invariants within their modules. Furthermore, the bytecode verifier and Move Prover do not replace the need for an audit. Auditing firm CertiK observed several instances of developers either not using Move’s built-in protection mechanisms or adopting programming patterns, likely ported from legacy code designs that ran counter to Move’s design philosophy. Other Key Features User Safeguards Aptos includes several features to improve user experience and safety, including flexible key management, transaction outcome transparency, and light-client support. Aptos accounts decouple private keys from public keys, allowing flexible key management. Users can rotate the private key of their account to pre-empt or respond to a compromise without having to transfer all their assets to a new account. Users can also set up their account as a multi-sig with different permissions for each public key. For example, a user could create an account with two hot public keys that can sign transactions along with a cold public key that can sign transactions but also rotate private keys. This user could then stipulate that 2/3 of the account’s keys are required to sign a transaction. To help prevent phishing attacks and generally improve transparency, wallets can use transaction pre-execution to explain the outcome of a transaction in a readable format before a user signs it. Aptos also adds transaction safeguards by adding an expiration time and sequence number to transactions. Sequence numbers function similarly to nonces on the EVM and help prevent replay attacks. Light clients allow people to easily verify the blockchain state by only downloading block headers. This minimizes trust assumptions when accessing blockchain data. Doing so is especially important for high-performance blockchains like Aptos that come with higher node hardware requirements. Upgradeability Source: Messari Intel Aptos is defined to support frequent protocol upgrades. This is largely enabled due to validator management occurring onchain, allowing validators to easily sync to a new upgrade. Parts of Aptos itself are also written in Move, which can improve time-to-market, as noted above. Around 46 improvement proposals have already been implemented since launch. Tokenomics Overview Aptos’s native token APT is used for security and Sybil-resistance (validator and delegator staking), resource consumption (transaction fees), and onchain governance. At genesis, 1 billion APT was allocated to several buckets with various lockups. APT has no fixed supply and currently inflates at a 6.895% annual rate. All transaction fees are currently burned. Initial Distribution As stated, 1 billion tokens were distributed at genesis. In addition, 13% were unlocked at genesis, with the remaining subject to vesting schedules. Allocations are as follows: Ecosystem (51.02% of the initial total supply): The largest portion of APT’s initial distribution is toward ecosystem development. Around a quarter of these tokens were unlocked at genesis, with the remaining portion subject to a linear monthly unlock over the following 10 years. Before distribution, around 80% of these tokens are held by Aptos Foundation, with the rest being held by Aptos Labs. The APT airdrop at genesis distributed just over 20 million tokens from the Ecosystem bucket to over 110,000 participants. Team (19% of the initial total supply): These tokens are distributed to Aptos Labs and subject to the following four-year vesting schedule: one-year lock-up, 6.25% unlocked monthly for the next 6 months, then 2.083% unlocked monthly for the next 30 months. Note that if an Aptos Labs employee joins after genesis, they would still be subject to the same four-year schedule. Foundation (16.5% of the initial total supply): These tokens are distributed to Aptos Foundation, with 3% of this portion (5 million tokens) available at genesis and the rest subject to the same four-year vesting schedule as the Team tokens. The Foundation plans to use these tokens to host events, fund legal support, and sponsor research. In addition to other plans, the Foundation will cover operational costs in its effort to aid validator operators and further validator geographical distribution. Private Investors (13.48% of the initial token supply): These tokens are distributed to investors in the Aptos Labs company private financing rounds who elected to acquire tokens and are subject to the same four-year vesting schedule as the Team and Foundation tokens. As noted above, APT is inflationary with ongoing rewards to stakers. The annual inflation rate is set to 7% in the first year following genesis, which then decreases by 1.5% each year (i.e., in the second year it is 6.895%), until it settles at 3.25%. Note that this rate is based on the initial total supply of 1 billion APT and is subject to governance. The unlock schedule of APT’s initial distribution was designed to avoid major unlock events, instead unlocking tokens monthly. The steepest increase in APT liquid supply will occur during the six monthly unlocks from mid-November 2023 to mid-April 2024. This period begins unlocks for the Team and Private Investors portion. During this period, the supply of liquid tokens from the initial distribution (i.e., excluding staking rewards) will increase roughly 60% from 209 million to 334 million. Locked tokens can be staked and accrue liquid rewards. Because in-protocol delegation did not launch until mid-April, airdrop recipients and other smaller token-holders were diluted for the first six months of mainnet unless they self-coordinated to pool together over 1 million tokens. Network Activity Usage Following the excitement from the network launch, network usage – measured by transactions and active addresses – subsided before picking back up in July 2023. Since then, Aptos has averaged over 475,000 daily transactions and over 72,000 daily active addresses. Several factors contributed to the uptick in usage, including the integration of social media platform Chingari and oracle Pyth. Chingari is a video-sharing mobile app, similar to TikTok, that has over 100 million downloads on the Google Play store. It originally launched in 2018 as a Web2 platform before adding onchain features, such as virtual gifts. Pyth integrated with Aptos on July 13, bringing access to its low-latency price feeds. Since July 13, Pyth has accounted for around 17.7% of Aptos’s total transaction count. Note that this share is not uncommon for the networks that Pyth is on. On October 19, daily active addresses reached over 600,000, driven by the Graffio communal art creation event. To celebrate the network’s one-year anniversary, Aptos contributors invited community members to draw on a communal digital canvas during a 24-hour period. Each individual drawing was registered as an onchain transaction. Participants then received an NFT version of the final canvas. The event brought 605,000 unique addresses and 1.3 million transactions. The increased activity brought by Graffio caused a network outage, when block production halted on October 18. The incident was resolved within around 5 hours. The Aptos Foundation shared a postmortem on October 20. The root cause was identified as non-deterministic code, stemming from a performance-focused code change made to the Aptos-core codebase on August 22, 2023. More recently, transaction activity has been driven by inscriptions, a trend prevalent on many blockchains. NFT marketplace BlueMove launched the APT20 standard in mid-December. On December 23 and 24, there were a combined 6.8 million transactions, largely due to APT20 mints. Security and Decentralization As of December 26, 2023, the Aptos network features 123 active validators from 27 countries and 54 cities. The number of validators has gradually increased since the network launch, when it supported around 100 validators. The validator network currently has a Nakamoto coefficient of 18, which is above the median of other networks. With the Aptos Foundation holding a majority of the total supply between its own allocation and the tokens held on behalf of the Ecosystem allocation, it can help distribute stake rather equally among validators. There are 907 million APT staked ($9.8 billion as of December 26, 2023), representing 84.6% of the total APT supply. As noted above, locked tokens can be staked and earn liquid rewards. Relative to its circulating supply, 296% of tokens are staked. On October 5, Coinbase Cloud enabled APT delegation to its validator and added APT staking on Coinbase Prime. Ecosystem DeFi Just over a year into launch, Aptos DeFi protocols have amassed almost $127 million in TVL from over 32 protocols, ranking Aptos 26th among all networks in TVL. Aptos’s DeFi TVL mostly comes from five protocols: Thala Labs, Liquidswap, Aries Markets, PancakeSwap, and SushiSwap. Thala leads Aptos protocols in TVL at $43 million, giving it a 45% market share. Thala features a suite of DeFi products, including a CDP, an AMM, a liquid staking protocol, and a token launchpad. Thala is also currently developing governance tool Parliament. It raised $6 million in a seed round in Q4’22, launched its governance token THL at the end of March, and shortly after, launched on mainnet. Its CDP mints Move Dollar (MOD), which has 8.3 million tokens in circulation as of December 26, 2023. Both MOD and THL are omnichain fungible tokens (OFTs). OFT is a multichain token standard created by LayerZero Labs that is interoperable with fungible token standards across chains. Most of MOD’s overcollateralized backing is based in LayerZero and Wormhole-based USDC. Right at the end of Q3, Thala announced Thala Foundry, a DeFi incubator, in partnership with the Aptos Foundation. The Foundry has $1 million in initial funding and will distribute $50,000-$250,000 in funding to Aptos DeFi projects, along with other developer and business development support. LiquidSwap was one of the first AMMs live on Aptos. It was developed by Pontem Network, who also built the Pontem Wallet for Aptos. It has $20 million TVL, a 21% market share. Aries Market is a borrow/lend and margin trading protocol. It launched soon after Aptos’ mainnet launch, but it more recently saw a notable increase in TVL, jumping from less than $2 million to over $11 million during October 2023. December growth brought Aries’ TVL to almost $20 million for a 20% market share. At the end of November, Aries launched its trading product which is powered by Econia. Econia is an onchain order book engine that launched at the end of November after originally forming during the 2021 Inaugural Aptos Hackathon. It raised $6.5 million in seed funding earlier this year in a deal led by Dragonfly. Beyond Aries, Econia’s infrastructure is currently powering trading on Kana Trade, Gator Trade (developed by Pontem), SwapGPT, and Hippo Labs. PancakeSwap, BNB Chain’s top DeFi protocol, launched its AMM on Aptos. From late 2022 to mid-July 2023, PancakeSwap was Aptos’ top protocol by TVL. However, it now ranks fourth and has a 6% market share. In late November, SushiSwap launched its V2 AMM on Aptos, making Aptos the first non-EVM that SushiSwap supports. So far, SushiSwap has gained almost $5 million in TVL for a 5% market share. With the cost of not staking at around ~7% dilution, liquid staking protocols will be crucial to continue growing Aptos’ DeFi ecosystem. In late-October, liquid staking protocol Amnis Finance launched. It is now Aptos’ leading liquid staking protocol by TVL, with almost $33 million TVL, ahead of Thala’s liquid staking protocol at $23 million. To incentivize growth, Amnis launched a points program that will be used for the airdrop of its upcoming token. Other projects and integrations include: Merkle Trade: Merkle Trade is a perp DEX that launched at the end of October. There has been over $277 million in total trading volume on Merkle Trade since its launch. Oasis Pro: Oasis Pro’s FINRA-registered marketplace integrated with Aptos in mid-November. Consumer Social As noted above, Chingari is one of the most popular applications on Aptos by transactions and active addresses. Other live or upcoming social applications include TowneSquare and Overmind. TowneSquare opened its waitlist in August 2023. It is building a mobile application that integrates with onchain activity and an identity system to power use cases such as an onchain social feed, ticketing, whitelists, affiliate marketing, and more. Overmind is a platform that first featured Quests where developers can compete in coding challenges and bounties to earn rewards and onchain credentials. In partnership with the Aptos Foundation, Overmind has awarded developers around $50,000 through its quests. In mid-October, it opened early access to its open-source, decentralized social network and soon after launched “Race to Keys,” incentivizing developers to build out a friend.tech-esque Keys feature. Gaming Gaming has been another core consumer-related focus for Aptos Labs and Foundation. At the end of February, Aptos Labs released a gaming SDK for development on Unity, one of the most popular game engines. It’s also developing a module for verifiable onchain randomness, a crucial aspect of gaming and other applications. AIP-41 proposes creating a new Move module which will enable developers to easily add onchain randomness into their smart contracts. Once it’s implemented, there are plans to host a hackathon devoted entirely to building with onchain randomness. Near the end of October, arcade-style shooter Aptos Arena launched with over $10,000 in prizes for the first week. It attracted over 12,000 addresses in the first weekend and is working on updates to address feedback from initial playing. Aptos Labs and the Aptos Foundation have formed partnerships with several notable gaming companies and conglomerates, including: NPIXEL: NPIXEL is a South Korean Triple-A gaming studio. It partnered with Aptos Labs in Q4’22 to bring its METAPIXEL gaming universe to the network. In Q3’23, it concluded its second playtest for the upcoming game Gran Saga Unlimited. NEOWIZ: NEOWIZ is a South Korean game developer and publisher. The Aptos Foundation partnered with NEOWIZ and its Web3 subsidiary Intella X in mid-August. MARBLEX: MARBLEX is the Web3 subsidiary of Netmarble, South Korea’s largest mobile gaming company. It partnered with the Aptos Foundation near the end of August to develop the MARBLEX WARP Bridge and integrate its multichain gaming universe with Aptos. The Bridge will connect Aptos to MARBLEX’s existing ecosystem, including its MBX token and in-game NFTs. Lotte Group: Lotte Group is one of South Korea’s largest retail conglomerates. It partnered with the Aptos Foundation at the end of August to bring subsidiary Daehong Communication’s Bellyland universe to Aptos. Readygg: Readygg is an infrastructure company aiming to bring Web2 gamers into Web3. It works with Web2 game publishers to help them integrate their games with Web3. Through its efforts, four publishers – Minijuegos, ToroFun, CimuGames, and Aeria Canada – plan to integrate with Aptos by the end of the year. BlockGames: BlockGames is building a cross-chain, cross-game network of games and players. It recently announced plans to integrate Aptos. GuardianLink: Aptos Labs partnered with GuardianLink to integrate its Jump.trade NFT marketplace, bringing access to the Meta Cricket League NFT game. Although many games are still in development, there are some that are live. Near the end of October, arcade-style shooter Aptos Arena launched with over $10,000 in prizes for the first week. It attracted over 12,000 addresses in the first weekend and is working on updates to address feedback from initial playing. NFTs Since launch, there’s been around $19.4 million in NFT trading volume, with most activity occurring soon after launch. Over 74% of that volume occurred through marketplace Topaz. Since its launch on August 1, Wapal has commanded 15% of volume share to Topaz’s 50%. Wapal is an NFT marketplace for “pro traders,” similar to Blur and Tensor, using a points system to incentivize activity, which will be used for an airdrop. Wapal recently launched a no-code NFT launchpad. Inscriptions have brought an uptick in NFT volume. Since the launch of the APT20 standard on December 10, BlueMove has accounted for a 41% market share of NFT trading volume with $674,000 total volume. NFTs on Aptos have also been used for several real-life use cases. KYD Labs is a Web3 ticketing company. It has powered ticketing for several live events, including music festival WonderBus and Korea Blockchain Week closing event SEOULBOUND. Aptos Labs partnered with NBCUniversal twice by launching digital fan experiences for the movies Renfield and The Exorcist: Believer. In early November, Aptos Foundation partnered with South Korean amusement park and media group Seoul Land. Seoul Land’s digital-focused subsidiary RXMeta will launch Bloom, a new festival experience powered by NFT ticketing and memberships on Aptos. Near the end of August, Aptos Labs introduced the Aptos Digital Asset Standard (DA). The DA focuses specifically on NFTs, with features including dynamic NFTs, soulbound tokens, reduced gas costs, the ability for NFTs to own other NFTs, simplified airdrop support, and more. Roadmap Technical Improvements As noted above, Aptos is designed to support frequent upgrades. To test and highlight several upgrades in the works, Aptos Labs recently published the findings from Previewnet, a testing environment designed to mirror Aptos mainnet. From November 6 to 21, the environment sustained over 9 billion transactions, 2 billion of which came during a 24 hour period. Peer-to-peer transactions per second peaked at 30,000, and over 1 million limited collection NFTs were minted in 90 seconds. One of the primary upgrades that unlocked this higher performance was storage sharding, where the state storage is split into multiple RocksDB instances. Storage sharding is planned to go live on mainnet in 2024. There were also improvements to the execution engine, state synchronization algorithm, and network stack, which will be detailed by Aptos Labs later. The improved NFT mint performance came from a new solution called Aggregators. Limited supply NFT mints traditionally require sequential execution due to their sequential naming (e.g., “Cryptopunk #4317”). Aggregators are a novel, conflict-free counter mechanism that enables essentially parallel execution of limited supply NFT mints. Aptos Labs recently published a blog post detailing Aggregators. Aptos Labs is next targeting 100,000 TPS on its journey to exceed 1 million TPS. Beyond improvements tested in Previewnet, another major upgrade in development is a new consensus mechanism, Shoal. Shoal combines DAG and BFT qualities, reducing latency and increasing throughput. Lastly, Aptos Labs is developing a new Aptos Move Compiler, bringing a set of new language features that aim to streamline coding processes and expand functionality. These include Receiver Style Function Calls, First Class Higher Order Functions, and User-Defined Abilities. Aptos Labs expects to implement most of the new features in the first half of 2024. Growth Strategy To grow the Aptos ecosystem, the Aptos Foundation has hosted hackathons and started grant programs. Aptos Labs and the Aptos Foundation have also formed many partnerships. Beyond those two entities, there are also other groups spearheading growth campaigns, such as Indian-based developer community Move Developers DAO (MDD). In general, many growth efforts are focused on the APAC regions. In addition to the partnerships mentioned throughout the Ecosystem section, major partnerships have been formed with: Microsoft: In early August, Aptos Labs announced a partnership with Microsoft. The partnership will bring Microsoft Azure AI features to Aptos, beginning with Aptos Assistant, a chatbot aimed at helping users and developers onboard to Aptos. Aptos Move will also be supported within GitHub’s Copilot feature. Google Cloud: Aptos Labs has partnered with Google Cloud on several initiatives and integrations, including Google Cloud running an Aptos validator and indexing Aptos data for BigQuery, an accelerator program offering APT and Google Cloud credits, and a co-hosted hackathon, among other events. Alibaba Cloud: In late November, Aptos Foundation partnered with Alibaba Cloud to grow the Web3 developer community in the APAC region. The partnership includes Aptos Foundation being the leading blockchain sponsor for Alibaba Cloud’s Singapore Innovation Accelerator program, collaborating to launch a Move developer community in Asia, and co-hosting a series of hackathons and other events. SK Telecom: In early November, Aptos Labs partnered with SK Telecom and its technology partner Atomrigs Labs, with plans to develop a Web3 wallet service called T wallet. Aptos is SK Telecom’s first non-EVM partner. Flowcarbon: In mid-September, the Aptos Foundation partnered with Flowcarbon to make Aptos a carbon-negative blockchain. The Aptos Foundation will purchase and retire carbon credits tokenized by Flowcarbon. Coinbase Pay: In mid-September, Aptos Labs partnered with Coinbase Pay to integrate Coinbase’s fiat onramp into Petra, the wallet developed by Aptos Labs. A mobile Petra wallet launched on the Google Play and Apple App Stores in June. At the end of October, it integrated with hardware wallet Ledger. Hackathon and grant initiatives include: Aptos World Tour Hackathon: In 2023, the Aptos Foundation hosted hackathons in Seoul, Holland, and Singapore, with plans for one more before year end. Prize pools from those three hackathons totaled over $760,000. Aptos Grant Program: The Aptos Foundation announced the Aptos Grant Program before mainnet launch in 2022. At the beginning of May 2023, the Foundation announced that it awarded over $3.5 million in funding to 50 teams and opened applications for the second wave. Artist Grant Program: In April 2022, the Aptos Foundation launched a $20 million grant program for artists and creators. The Registry Grant Program: In mid-July, the Aptos Foundation released The Registry grant program. The Registry features a list of project ideas, initially featuring seven projects, mostly related to gaming and Move infrastructure. Applications are closed for all seven, with the projects already in development. The Foundation plans on adding new projects periodically. Outlier Ventures Accelerator: In early August, Outlier Ventures announced its Move Accelerator in partnership with the Aptos Foundation. The 12-week program featuring eight teams ended in early October, with a demo day later in the month. Move Developers DAO (MDD): MDD has helped host several hackathons and other events, recently including Indore Blockchain Days, Pune Blockchain Days, and REVA HACK. ABCDE Highlight: Asian Web3 venture and accelerator studio ABCDE Highlight partnered with the Aptos Foundation to launch an Asian-focused grant program and grow community engagement. Aptos Winter School: The Aptos Foundation is hosting a two-week accelerator for student developers in India in the second half of December. Galxe Quests: In early December, the Aptos Foundation announced a four-week onchain quest campaign powered by Galxe. Closing Summary Aptos is a Layer-1 blockchain designed around the core tenets of scalability, safety, reliability, and upgradeability. It was born from Meta’s Diem and Novi projects, eventually launching in October 2022. Aptos’ technological stack features many novel aspects, including the AptosBFTv4 consensus mechanism, the Quorum Store mempool protocol, the Block-STM parallel execution engine, and the programming language Aptos Move. Since July 2023, Aptos has averaged over 475,000 daily transactions and over 72,000 daily active addresses. Network activity has been driven by social media platform Chingari, oracle Pyth, a one-day communal art creation event on Graffio, and inscriptions. Initiatives to grow the ecosystem have included partnerships, hackathons, grant programs, and more, many of which target the APAC region.
Source: Peter Horton — Published: 2023-12-27T15:00:00ZUnderstanding Metronome: A Comprehensive Overview
Key Insights Metronome offers a suite of innovative solutions enabling users to issue synthetic assets backed by productive collateral, thereby enhancing token utility and capitalizing on DeFi opportunities. Smart Farming is a key feature of Metronome, automating leverage yield farming with synthetic assets, and offering a fixed borrowing rate with dynamic mintage parameters, enhancing yield farming strategies. The evolution of Metronome into version 2.0 includes the formation of the Metronome DAO and the migration to a new MET token. esMET offers benefits like Smart Farming boosts, trading fee discounts, and access to gated pools. Offering enhanced functionality of MET tokens through an improved vote-escrow model and providing various incentives based on the duration of token lockup. Introduction The decentralized finance (DeFi) ecosystem is a dynamic web of interconnected platforms, each offering tailored solutions. Platforms like Compound for lending, Lido for staking, and decentralized exchanges such as Curve have revolutionized the way we perceive and interact with financial instruments. Together, they've ushered in a transformative era of finance, setting the stage for new innovative solutions. Among these solutions is Metronome, a multi-collateral and multi-synthetic protocol that introduces unique leverage mechanics. Through its complementary product suite, Metronome can issue synthetic assets (synths) backed by productive collateral. By doing so, it provides users on Ethereum and Optimism with a toolkit designed to enhance token utility and better capitalize on opportunities throughout the DeFi landscape. At the heart of Metronome's suite of services is Smart Farming. This automation tool refines the traditional leverage yield farming paradigm by utilizing synthetic assets in the open market. Leverage yield farming is a strategy that allows DeFi users to multiply their onchain yields by borrowing to increase their exposure to specific assets or pools. While many lending protocols operate on a person-to-person liquidity model, where interest rates fluctuate based on deposit utilization, Metronome offers a solution in the form of overcollateralized synthetic assets issued at a fixed rate with dynamic mintage parameters. The current fixed rate for all Metronome synths stands at 1% annually, accrued on a per-second basis. While leverage yield farming opportunities have traditionally been limited to USD, Metronome’s Smart Farming tool accommodates a wide range of assets. These include productive ETH positions and their yield-bearing wrappers, such as vastETH. Metronome's synthetic assets are central to the Smart Farming approach. These synths not only offer an enhanced yield farming experience but also allow users to trade and take directional positions on them. These trades are facilitated by zero-slippage trading on Metronome's dedicated marketplace. Website / X (Twitter) / Discord / Telegram / Github MET Tokenomics Source: MET 2.0 Initial Distribution In 2018, Metronome (MET 1.0) emerged as one of the first autonomous currencies. As the DeFi landscape evolved over the subsequent four years, the limitations of MET 1.0's contract framework became evident — particularly its inability to seamlessly integrate within the DeFi space. Recognizing this, the Metronome team rolled out Metronome 2.0 in August 2022 with a commitment to DeFi innovation. Metronome 2.0 notably included the formation of the Metronome DAO (MET DAO) and the concurrent migration to an enhanced version of the MET token to guide the DAO's operations. With this migration, the total circulating supply of MET 1.0 at the time, which stood at 14.3 million MET, became the capped total supply for the new MET token. Additionally, the MET DAO Treasury received an allocation of 8.2 million MET and 8,346 ETH from the now-deprecated Metronome 1.0 Autonomous Converter Contract. These funds, along with incoming operational revenues, support the continued development of the Metronome ecosystem, collaborations with other DeFi projects, and liquidity incentives. They also back the deployment of protocol-owned liquidity on leading DEXs. To date, LP contributions include 2 million MET, 1,000 ETH, and 250,000 USDC provided on Uniswap V3. Through a token-weighted voting process on Snapshot, MET holders actively shape the protocol's future. They make decisions on operational matters such as the integration of new collateral assets, directing MET token emissions, and managing treasury allocations. These decisions are then carried out by one of the three core Metronome teams: Engineering, Growth, or Operations. A testament to this collaborative approach was the approval of Metronome Improvement Proposal 15 (MIP-015) on September 18, 2023. This decision set aside 3.5 million MET tokens (24% of the total supply) from the MET DAO treasury for liquidity incentives and strategic partnerships. It also introduced esMET (escrowed MET), enhancing the token's functionality beyond governance and liquidity incentives. esMET esMET is built upon the vote-escrow (ve) model, popularized by Curve, where token lockups lead to a range of benefits via veCRV. However, esMET introduces pivotal changes to address the traditional model’s challenges related to lockup commitments, the gradual erosion of voting power, and transfer limitations. When users opt to lock MET, the protocol issues esMET in exchange. The amount of esMET received is correlated with the duration of the lockup: the longer the lockup, the greater the amount of esMET exchanged. Users can lock their MET for durations ranging from one week to two years, with the two-year lockup offering the highest exchange rate of 5 esMET for every MET. While the enhanced functionality of MET has yet to go live, esMET holders stand to gain exclusive benefits in the Metronome ecosystem: Smart Farming Boosts: Ample liquidity is key for the smooth operation of Metronome synths and is a prerequisite for the Smart Farming feature. To incentivize this, the protocol rewards users who supply liquidity to eligible synth pairs. By also locking some MET for esMET, users can “boost” the capital efficiency of Smart Farming positions. Per MIP-015, the "boost" each user receives will be influenced by their contributed synth LP and their esMET holdings, among other global factors. Trading Fee Discounts: esMET unlocks tiered discounts on the standard 0.25% swap fee in the Synth Marketplace based on the level of a user’s holdings. The discount tiers are: 20% for 500 esMET 40% for 5,000 esMET 60% for 50,000 esMET 80% for 500,000 esMET For perspective, a two-year lockup of 100,000 MET (equivalent to 500,000 esMET) would reduce the swap fee to just 0.05%. Access to Gated Pools: esMET is also set to provide entry to various gated pools where access is determined by a user's esMET holdings. For instance, gated pools with higher collateral ratios would likely require a more substantial esMET holding compared to other pools. In practice, esMET holders could utilize such pools to achieve higher returns in the open market without the need for additional emissions from the MET DAO treasury. One standout feature of esMET is its encapsulation of locked positions as ERC-721 tokens. This design choice offers flexibility by allowing users to simultaneously hold distinct positions and transfer them freely. Furthermore, esMET positions intentionally lack a time-based decay to ensure consistent benefits without the need for periodic re-locking. For users contemplating an early exit, esMET offers a solution in the form of a diminishing unlock fee. The fee starts at 50% and tapers to 0% over the lock-up period. Synth Issuance The minting process for Metronome synths is straightforward. Each supported collateral asset is subject to a deposit cap, ensuring a balanced backing for Metronome synths. These caps are integral to calculating synth mintage limits. If a desired collateral asset's deposit cap isn't maxed out, users can deposit their tokens. Upon doing so, Metronome issues deposit tokens on a 1:1 basis. These tokens serve a dual purpose: 1) they act as a receipt, representing the user's claim on the assets in the pool, and 2) they enable users to mint synthetic assets. Similar to many lending platforms, Metronome’s deposit tokens come with an attached Collateral Factor (CF). This CF limits the synth value that can be borrowed against the deposit. To balance risk and offer competitive CFs, Metronome employs a risk assessment framework. This considers factors like market cap, liquidity, Lindy score, peg volatility, and rehypothecation. After securing their collateral, users can head to the synthetics dashboard. There, they can create a synthetic asset, provided there's mintage capacity. Each synth's mintage cap is shaped by the deposit caps and CFs of collateral options of a similar "type". For clarity, the current mintage cap for msUSD, Metronome's synthetic USD, is determined as: Max msUSD = (USDC deposit cap CF) + (FRAX deposit cap CF) + (DAI deposit cap CF) + (vaUSDC deposit cap CF) + (vaFRAX deposit cap * CF). Utilizing Synths Source: Metronome, Curve, Velodrome Metronome's synths function as dynamic debt instruments within the DeFi ecosystem. Outside of their role in Smart Farming, synths can be utilized for zero-slippage trading in the Synth Marketplace. They can also be tapped for arbitrage opportunities or paired with real-world counterparts through various liquidity provision strategies. A prevalent LP strategy among users is to leverage the low fixed-interest rate of synths to earn risk-adjusted returns on blue-chip assets from swap fees and token incentives on DEXs such as Velodrome and Curve. This approach gradually reduces the cost basis while also enabling users to tap into governance and incentive opportunities across various platforms. However, there is a key distinction. Within the Metronome platform, synths adhere to a hardcoded 1:1 value with targeted assets such as ETH or USD. Yet, in the open market, they operate on a soft peg. As such, their exchange value is influenced by market dynamics and can differ across individual liquidity pools. The inherent soft-peg nature of synths in the open market presents arbitrage opportunities. When the peg is strong, users are incentivized to exit positions and capitalize on favorable exchange rates. Conversely, when the peg weakens, purchasing synths becomes the more attractive option. This dynamic, combined with mintage caps and enticing liquidity incentives, aids in stabilizing the synth pegs. On the other hand, blindly employing this strategy might erode gains or even lead to losses. It is essential to be aware and timely when navigating these market nuances. Moreover, these synthetic assets are intentionally overcollateralized to ensure a consistent relationship between the issued amount and the underlying collateral. Even so, the system remains susceptible to market fluctuations. If the value of a synth position exceeds the collateralization threshold set by each market’s CF, the collateral becomes vulnerable to liquidation. Such an event can be triggered by a drop in the collateral's value or by a position failing to generate adequate returns over time, given the effects of compounding interest. Smart Farming Metronome’s Smart Farming tool leverages its internal synth issuance mechanism to offer superior capital efficiency in the leverage yield farming domain. Initiating a Smart Farming position is a streamlined process, facilitated by a “Flash Mint” mechanism. Here's a breakdown: Initial Deposit and Configuration: Users start by depositing their collateral, which can include assets like ETH, USDC, FRAX, or yield-bearing positions tied to these assets. During this phase, users specify a "Loop" or collateral multiple and set the maximum price impact permissible for the subsequent swap. Flash Minting of Synths: Once the collateral is secured, the protocol initiates a flash mint, creating a synthetic asset that's based on the loop of the deposited collateral. This flash minting bypasses the need for an initial check on the user's collateral value for over-collateralization. As a result, it is central to the cost-efficiency of Smart Farming. Asset Swapping: The original collateral and the newly minted synthetic asset are swiftly routed to a DEX, such as Curve. There, they're swapped for their real-world equivalents as necessary. Yield Optimization: The real asset is then wrapped into a productive position using platforms like Vesper, a DeFi middleware yield aggregator Final Deposit: The yield-enhanced asset is then channeled back to the Metronome protocol. Users receive both a deposit and a debt position, covering the full collateral and the synthetics. Because this Smart Farming approach is executed through a single user interaction, it results in up to 90% savings on transaction costs. In addition, it relieves users from the intricacies of managing multiple steps or preliminary assets. Source: Vesper Smart Farming requires users to make an initial choice of collateral. While the system can accommodate various yield-bearing collaterals, it initially supports only Vesper's vaTokens. Vesper offers a diverse range of interest-yielding pools. When users opt for single-asset pools, they are awarded vaTokens, representing their stake in the pooled assets. These deposits are then strategically channeled across renowned DeFi platforms, including MakerDAO, Aave, Compound, and Yearn. Then, the yield generated from these platforms is credited to vaTokens, leading to a progressive increase in the exchange rate between vaTokens and the base assets. Throughout this system, Smart Farming users gain consolidated exposure to multiple yield sources. Navigating Smart Farming The capacity to provide Smart Farming leverage is intrinsically tied to the market liquidity available for swapping an issued synth with its real-world counterparts. With sufficient liquidity, users can engage in Smart Farming and harness the peg dynamics. By entering a Smart Farming position during a strong peg and exiting during a weak one, users can benefit from the increased volume of assets both wrapped into and retrieved from yield-bearing positions. This strategy noticeably boosts capital efficiency, achieved independently of the benefits from leverage. However, reversing this approach or misunderstanding the dynamics can amplify potential losses. Beyond the inherent risks associated with smart contracts, the primary concern in Smart Farming is the potential for collateral assets to lose their peg. A depeg could occur if the Vesper wrapper encounters issues, or if the base asset, such as a stablecoin or liquid staking token, deviates from its peg. While vaTokens are designed to consistently appreciate relative to their base assets, unexpected shifts can jeopardize Smart Farming positions, making vaTokens prone to liquidation. Due to the leveraged nature of Smart Farming, liquidations can result in substantial losses. In such scenarios, users not only risk losing their collateral but also miss out on the opportunity to counterbalance losses by selling the borrowed assets. Importantly, the strategy of Smart Farming offers a layer of protection against such risks, as it borrows native assets against their yield-bearing versions. For real-time insights and position management, users can directly access the Metronome dashboard. Closing Summary Metronome's evolution into its 2.0 version epitomizes its spirit of innovation and adaptability. With a multi-collateral and multi-synthetic foundation tailored for both newcomers and seasoned DeFi veterans, Metronome’s toolkit enables users to amplify their onchain yields by minting synthetic assets backed by productive collateral — all while enhancing their exposure to specific assets or pools. Apart from offering synthetic leverage, Metronome’s suite of services includes the Synth Marketplace and a Smart Farming tool, which refines and automates leverage yield farming strategies. Synths have a fixed rate annual borrowing cost of 1%, and their peg's value is maintained through dynamic mintage parameters, arbitrage opportunities, and liquidity incentives. While the MET token primarily steers protocol governance and incentivizes synth liquidity, the recently approved multi-faceted esMET functionality offers MET lockers exclusive benefits within the Metronome ecosystem. Through this holistic approach, Metronome provides users with a streamlined and intuitive entry into the DeFi universe, positioning itself as a leader in the evolution of modern DeFi tooling.
Source: Kentrell Key — Published: 2023-12-18T14:30:00ZUnderstanding Axelar: A Comprehensive Overview
Key Insights Axelar is more than a bridge: it offers the ability to program cross-chain logic and pass arbitrary data. The upcoming Axelar VM will allow the permissionless connection of new chains. Axelar’s Interchain Token Service is in testnet, which supports cross-chain transfers of native tokens rather than wrapped ones. Updated tokenomics have been proposed for AXL. They would allow the network to sustainably support more chains by decreasing the rate of token inflation per added chain. As of this writing, 10 of the top 15 Axelar chains by activity are EVM-based. Axelar is focused on onboarding even more EVM and Ethereum-based chains. This report focuses primarily on Axelar’s more recent technology. For a more in-depth look at the network without a recency bias, please see our original protocol overview. Background Blockchains are expanding in number and diversity, with the growth of modular blockchains, Layer-2 (L2) rollups, and application-specific chains. However, the market lacks solutions for developers to cost-effectively span across multiple multichain ecosystems. The Axelar project offers developers a secure cross-chain development platform accessible via APIs and an SDK. These developer resources are primarily easy-to-use, plug-and-play integration solutions. As such, Axelar can be a great option for dApps that want to build out quick cross-chain capabilities. Axelar began as a project in 2020, built with various Cosmos technologies to provide interoperability with Ethereum and other networks. From the beginning, Axelar was more than just a Cosmos interoperability hub. The fragmentation of liquidity, services, and users creates friction across ecosystems and sovereign networks. Axelar’s technology aims to allow cross-chain functions that are more complex than simply transferring wrapped assets to different blockchains. Axelar addresses this by focusing on full-stack interoperability — with full-stack meaning that Axelar not only supports bridging any information/asset but also permissionless overlay programmability, executing smart contracts, and dApps across networks. The Axelar community is working to scale the number of connected networks (55 at the time of publication) through a three-pronged approach: adjusting the network’s economic structure, releasing the Axelar Virtual Machine to support permissionless connections, and exploring more efficient solutions like light clients. These initiatives aim to connect Axelar to hundreds of chains. Technology Axelar has three components: A decentralized network. This is built primarily on open-source Cosmos technologies. A set of gateway smart contracts that provide the connectivity between the Axelar network and its interconnected external chains. A software development kit (SDK) of developer tools and APIs, including Axelarscan, a block explorer used to track cross-chain transactions. Network Architecture The Axelar network is built using the Cosmos SDK, CometBFT, and CosmWasm VM. The Cosmos SDK is an open-source software development kit (SDK) for building sovereign, multi-asset, public, PoS blockchains. It’s used to build a custom application layer, or state machine, while CometBFT is used to securely replicate that state machine on all nodes in the network. CometBFT, an application-agnostic engine, handles the networking and consensus layers through two main components: A consensus algorithm, i.e., Tendermint. A socket protocol, i.e., the Application Blockchain Interface (ABCI). Tendermint is used to validate requests on the source chain and confirm changes on the destination chain. Tendermint consensus provides instant finality and Byzantine fault tolerance. While this specific consensus approach only verifies cross-chain communication, Axelar can connect diverse forms of consensus. For example, Axelar is one of a few cross-chain protocols able to connect EVM and Cosmos chains. Consensus & Security Approaches Axelar’s network uses a Delegated Proof-of-Stake (DPoS) consensus mechanism. Validators produce new blocks, participate in multiparty signing, and vote on external chain states. Tokenholders stake AXL by delegating tokens to a validator’s staking pool. Only the top 75 validators are in the active set, a parameter that can be adjusted through onchain governance. Both delegating to validators and running a validator are permissionless. Every PoS consensus mechanism runs the risk of concentrating voting power among a few dominant stakers. Axelar mitigates this risk with quadratic voting for its consensus mechanism. With quadratic voting, voting power does not increase linearly with stake. For Axelar validators to increase their voting power, they must increase their delegated stake exponentially. In addition, Axelar applies network functions that enable the suspension of traffic from malicious interconnected chains and contract limits that cap how much can be transferred over a time period. The efficacy of these functions is improved by Axelar's hub-and-spoke network topology. During the Multichain collapse, cross-chain swap services built using Axelar were able to stay safe and liquid by isolating compromised connections. Axelar Virtual Machine The introduction of the Axelar Virtual Machine (AVM) expands Axelar’s offering from bridging and message passing to a fully programmable cross-chain layer. It enables developers to deploy smart contracts on Axelar and build cross-chain developer tooling. Smart contracts can help reduce developer overhead and simply UX by abstracting away cross-chain tasks, such as token conversions. Developers can deploy contracts on the AVM written in any language that compiles to WebAssembly (Wasm). In addition, AVM is expected to play a key role in the tokenomics of the Axelar native token, AXL. Axelar’s token is designed to scale the network across an anticipated proliferation of Ethereum-based L2 blockchains (see more in the AXL Token section below). Because the AVM is permissionless, any developer can leverage it. Axelar Foundation supports development teams working to scale the ecosystem, improve security, and design interchain orchestration templates on the AVM. The first product under development is Interchain Token Service (ITS), now available on testnet. Other services enabled by the AVM include Interchain Amplifier and Interchain Maestro. Interchain Token Service ITS is a service designed to preserve the fungibility and custom functionality of native tokens across multiple blockchains. These preserved tokens are known as Interchain Tokens. This would be a familiar feature to anyone aware of LayerZero's Omnichain Fungible Tokens and IBC-connected networks that use Interchain Accounts (ICA) and Interchain Queries (ICQ). Unlike these alternatives, Axelar ITS supports canonical wrappers and standardized tokens; these features enable one-click deployments across multiple chains. ITS also offers native support for arbitrary data and fast-finality gadgets. With ITS, developers can deploy Interchain Tokens on multiple chains at once and automate tasks, such as managing supply. Interchain Tokens are backed by the security protocols of the Axelar network and can operate on any EVM-compatible chain connected to Axelar's network. Interchain Amplifier Once launched, Interchain Amplifier will enable developers to permissionlessly connect new blockchains to the Axelar network. This benefits new ecosystems, such as modular blockchains building on Ethereum, as well as dApps that wish to customize cross-chain flows. Interchain Maestro Interchain Maestro is a set of orchestration contracts and templates to assist in designing, deploying, and managing dApps across multiple chains. It is similar to Kubernetes. ITS is a single component of the broader Interchain Maestro. Axelar is an Overlay Network The internet, like the crypto space, is composed of diverse networks. Protocols, BGP and HTTP, make it possible for these diverse networks to communicate on a best-efforts basis: without guarantees, improvements, or added functionality. Overlay networks are networks that are built on top of existing networks to provide a richer and more seamless level of service. Examples of overlay networks include Akamai and Cloudflare. Axelar can be thought of as an overlay network for blockchains. It employs various cross-chain communication protocols and smart contract logic to facilitate its connectivity and interoperability. General Message Passing Since launching to mainnet in May 2022, General Message Passing (GMP) has allowed Axelar-connected applications to move any payload cross-chain, including function calls and other logic. GMP uses Axelar’s validator set for security and a decentralized protocol for routing and translation. Unlike basic cross-chain bridges, it supports the secure transfer of arbitrary data, including function calls enabling composable liquidity and computing across blockchains. For example, an application can bridge tokens along with instructions to deposit them in a contract or swap them on a DEX, delivering one-click UX, regardless of blockchain boundaries. Cross-Chain Gateway Protocol The Cross-Chain Gateway Protocol (CGP) operates like the internet’s Border Gateway Protocol (BGP). BGP is essentially a relay center designed to securely pass data among internet networks, the way a post office sorts and delivers mail. In the same way, Axelar’s CGP has two critical functions: state synchronization and asset transfers. Cross-Chain Transfer Protocol The Cross-Chain Transfer Protocol (CTP) is similar to the Hypertext Transfer Protocol (HTTP) on the Internet. It’s an application-level, file-transferring mechanism that sits atop the CGP. CTP allows dApps to interact with various blockchains, enabling the transfer of assets and arbitrary messages across chains. The AXL Token The AXL utility token serves the following functions for the Axelar network: Paying transaction fees on Axelar. This includes fees for services built atop Axelar's programmable interoperability layer, like developer automation, cross-chain gas conversions, and fast-finality gadgets. Paying transaction fees on connected networks. AXL tokens can be automatically converted into the necessary gas tokens for connected chains. Staking or delegating to participate in consensus and rewarding consensus participants. Voting on governance proposals. The token was launched in 2022 to make Axelar’s network permissionless. AXL had an initial supply of 1 billion, which will finish vesting in 2026. Release schedules for the team, company, backers, and community programs began three months after the token launch; community sale token release began earlier, on an accelerated schedule. Due to the issuance of staking rewards, AXL is inflationary. However, this may change as new tokenomics models have been proposed. New Tokenomics The proposed new AXL tokenomics introduces a series of changes to improve AXL utility and value capture as the Axelar network scales. In the long run, these changes could make AXL overall deflationary with increased activity from new chains. The changes include adding a step to the process flow, where gas is burned between the Gas Receiver and the network. Flow: Gas Receiver converts native tokens to AXL Reducing Inflation Rate Until recently, Axelar validators were incentivized to support more chain connections by increasing rewards linearly by 0.75% with each externally supported chain (e.g., EVM chains). This implied a total inflation rate of 11.5% (1% base inflation + 14 externally supported chains at 0.75% each). In October, new AXL tokenomics were proposed to gradually reduce the per-chain reward from 0.75% to 0.3%. The proposal was approved via onchain vote and effected incrementally, with the final leg locked in on Dec. 8, 2023. This would bring annual inflation down from 11.5% to 5.2%, based on an equivalent number of chains. Since the proposal post was published, two new chains (Scroll, followed by Centrifuge) have been added, bringing Axelar's current inflation rate to 5.8%. Gas-Burning Mechanism Currently, gas fees paid in AXL are distributed to validators and stakers. Axelar Foundation’s proposal would instead burn these fees, applying deflationary pressure to the total supply. This variable supply pressure could turn the network deflationary with enough activity. Increased Demand from New-Chain Connections Currently, connecting new chains to the Axelar network is a complex process. It requires both support from Axelar developers and a vote of Axelar validators. Axelar is developing a more permissionless path that is non-inflationary and may generate buy pressure for the AXL token. Once fully developed, Interchain Amplifier will allow developers to instantiate a series of smart contract templates to plug a new chain into the Axelar network. This largely automated process will include a way to bootstrap validator incentives by setting up AXL-funded reward pools for early-stage validator rewards. These AXL-funded reward pools will be necessary for new chains, except those that already have large transaction volumes with fees that can be routed to validators in lieu of rewards. With Ethereum-based infrastructure like dAppchain ecosystems and tools like Rollups-as-a-Service, it will become easier to launch new L2 blockchains on Ethereum. Axelar is positioning itself for expected growth in this category as the permissionless connectivity component. If the L2 category expands and the strategy is successful, it could become a significant driver of AXL demand. State of the Axelar Ecosystem Connected Ecosystems Axelar is known for its connectivity within and between the Cosmos and Ethereum ecosystems. However, it also has the capability to connect with unique VMs and consensus mechanisms. Axelar has 55 connected chains at the time of writing, including Arbitrum, Avalanche, Base, BNB Chain, Ethereum, Optimism, Polkadot, Polygon, Scroll, Sui, and a variety of Cosmos-based chains. Additionally, connections to one chain in a multichain ecosystem grant users access to the whole ecosystem, albeit not directly. For example, a connection to Avalanche provides a secure path to subnets, while a connection to Polkadot provides a secure path to parachains, and so on. At the time of this report’s publication, Polygon, Avalanche, and Osmosis are the top 30-day source and destination chains; and AXL, ETH, and USDC are the top assets, according to Axelarscan. EVM users are particularly active on Axelar, with 10 of the top 15 chains by activity being EVM-based. Ethereum Ecosystem Ethereum’s rollup-centric roadmap is still in the early stages, with new rollups and rollup development kits being announced and released regularly. Ethereum modularity will potentially see hundreds of L2 and L3 networks. Without full-stack interoperability between L2s, UX and developer capabilities will suffer from the fragmentation of liquidity and users. Full-stack interoperability consists of both bridging any information/asset and permissionless overlay message passing. The Axelar network satisfies both of those criteria with its existing communication protocols and its new AVM. Cosmos Ecosystem Axelar is the source of the majority of cross-chain activity on Osmosis, the largest Cosmos DEX by volume. Community members have even explored forms of shared security between the two networks due to their symbiotic relationship. One of these ideas is Mesh Security, a bi-directional security leveraging both networks’ validator sets. While it may only be a concept, there are other ecosystem collaborations already taking place. A portion of AXL tokens was airdropped to Osmosis users in early 2023. Applications Using Axelar Axelar is already integrated and being leveraged by a diverse set of applications and services: DeFi: dYdX, Frax Finance, Lido, PancakeSwap, Uniswap Enterprise: Mastercard, Microsoft, Onyx by J.P. Morgan RWAs: Centrifuge, Circle, Ondo Finance, Provenance Wallets: Blockchain.com, Ledger, MetaMask, TrustWallet Cross-Chain Use Cases Axelar’s Gateway smart contracts allow for cross-chain token transfer – i.e., bridging using wrapped tokens. Until recently, this was the top use case for Axelar by far. In September 2023, for the first time, GMP usage surpassed basic bridging in both transaction count and notional volume. GMP has remained ahead of basic bridge uses since. As of this writing, Axelar has executed over 1 million transactions with a cumulative volume nearing $7 billion. Intents: Squid & MetaMask Squid is an Axelar-based liquidity router that uses GMP to enable cross-chain swaps and bridging. Recently, it implemented a feature called GMP Boost, enabling fast finality. Normal cross-chain transactions often take several minutes, as bridges wait for transaction finality on one chain before taking an action (such as minting a wrapped token) on another. Essentially, GMP Boost allows dApps like Squid to deliver the desired asset in seconds, taking on the risk of a chain reorg in exchange for a small fee. Using an offchain path to achieve an onchain outcome is an innovative application of intents. Unlike standard transactions, which are imperative and explicitly outline all steps, intents are declarative and instead focus on the achieved outcome. Cross-Chain Governance: Filecoin & Uniswap Uniswap was first built on Ethereum and has since expanded to multiple chains. This makes it difficult to deploy updates beyond Ethereum. After selecting Axelar as one of two interoperability platforms qualified to support upgrades cross-chain, Uniswap used Axelar to deploy on Filecoin's smart contract blockchain, Filecoin Virtual Machine (FVM). Real-World Assets (RWAs): J.P. Morgan & Provenance Onyx by J.P. Morgan recently announced a proof-of-concept in which Axelar was used to connect Apollo funds tokenized on the Provenance blockchain with the Onyx Digital Assets blockchain, where Onyx applied logic used to automate portfolio rebalancing. DeFi Onramps: dYdX & Squid At the time of this writing, dYdX is rolling out its V4, built on a dedicated appchain. The largest perp-swap DEX by volume, dYdX, is using Axelar and Squid to facilitate streamlined deposits from any connected chain. Connecting Traditional Tech Axelar and Microsoft announced in 2023 a collaboration to integrate Axelar as an interoperability provider in Microsoft's Azure Marketplace. Doing so enabled companies using Azure to connect seamlessly with crypto applications, protocols, and blockchains. Roadmap A proposal has been presented to scale Axelar from dozens to hundreds or even thousands of chains. L2 and modular Ethereum networks are a large focus of this strategy. The proposal features a short, medium, and long-term strategy for scaling. The short-term strategy was explored in the AXL Token section above. It aims to both reduce the rate of inflation as new external chains are added and increase deflationary pressure by burning transaction fees. The medium-term strategy is based on the Axelar VM. The AVM will allow permissionless connection of new chains. AVM-enabled features, such as the Interchain Amplifier, can automate much of the technical overhead that new-chain connections require. Unlike the current system of increasing inflation to incentivize validators to support new chains, third-party sources can pool AXL to directly fund supporting validators. The long-term strategy is all about light clients. Given that they are also connected to the Interchain Amplifier, light clients would eliminate the need for external validators. Only relayers would need to be incentivized, as packets would still need to be relayed. Competitive Landscape Many protocols and teams are focused on interoperability, but most of them are looking at it with a more limited scope. Axelar’s full-stack interoperability bridges any information/asset, arbitrary data (GMP), and permissionless overlay message passing (programmability). Most interoperability solutions are essentially bridges, capable of transmitting only wrapped assets. There are other interoperability solutions that can transmit arbitrary data. But very few, besides Axelar, have a function like overlay networks, which provides the ability to program cross-chain logic into the cross-chain environment. LayerZero and Chainlink are two prominent competing cross-chain networks. LayerZero’s Omnichain Fungible Tokens (OFT) and Chainlink’s Cross-Chain Interoperability Protocol (CCIP) are analogous to Axelar’s various cross-chain protocols and ITS in many ways. That said, one of the main differences between Axelar and both of these solutions is Axelar’s permissionless validator set. It uses this set to facilitate interchain messaging instead of a multisig. Among other interoperability solutions that use decentralized validator sets, Axelar validators may choose which chains they support. This allows for a more diverse validator set supporting Axelar's security model, as distinct ideological niches can form to support certain networks. Enforcing validation from the entire validator set is not inherently better or worse, but it can decrease participation from opinionated operators who have their own agendas, potentially limiting scalability. Axelar has more validators (75 at this writing) than any other cross-chain network. LayerZero LayerZero allows for flexible and customized configurations with oracles and relayers, but ultimately operates on a 2-of-2 multisig of those two offchain entities (oracles and relayers). Axelar, on the other hand, has an entire validator set already built out to sit between chains and secure interchain messages. LayerZero’s default configuration relies on an oracle managed by Google and a relayer operated by LayerZero Labs. Protocols can specify a custom validation library, oracle, and relayer, which makes the decentralization dependent on the specific implementation. More trust is placed in these standard configurations of oracles and relayers than in individual Axelar validators, as two-thirds of the voting majority is required to verify Axelar messages. Chainlink Chainlink is an established provider of DeFi price oracles, but Chainlink CCIP is a separate and new product that is not yet live. Like LayerZero, CCIP relies on a multisig to verify, order, and pass interchain messages. CCIP relies on Chainlink oracles, which are permissionless to run but permissioned to have data included in Chainlink's price reference feeds. By contrast, Axelar’s permissionless validator set has validators serve all roles rather than separating node roles (i.e., oracle nodes, execution nodes, and risk-management nodes). Closing Summary Axelar continues to distance itself from classical bridges as it adds new features for cross-chain programmability. The upcoming Axelar VM will be at the heart of many of these new features, such as Interchain Token Service. Other features and connections will be permissionlessly built by chains wishing to leverage the cross-chain capabilities. The development of the Axelar VM and Interchain services will complement Axelar’s existing general messaging and transfer protocols, but another upcoming change deals with the economics of the ecosystem. The AXL token has several proposed changes to economically position the network to accommodate tens, hundreds, or even thousands of new networks. Modular roadmaps, such as Ethereum’s, are presenting the need for such a scale of connectivity.
Source: Red Sheehan — Published: 2023-12-14T14:30:00Z