State of IoTeX Q2 2024

Key Insights

• As of Q2’24, the IoTeX Network was secured by 109 delegates actively staking $50 million, up 12% QoQ. The average staking participation reached an all-time high of 41.2% in Q2’24, up from 40.6% in Q4’23.
• In Q2’24, rewards to validators grew 3% QoQ to $3.3 million; in IOTX terms, rewards stayed relatively flat, up 1% QoQ from 59.5 million IOTX in Q1 to 60 million IOTX in Q2.
• IoTeX's network transaction activity grew by 107% QoQ, driven by heightened volumes of bridged assets activity.
• The IoTeX 2.0 upgrade aims to support the full lifecycle of DePIN projects by providing infrastructure, public goods, and governance tools for decentralized infrastructure.
• Simultaneously, the upgraded tokenomic design of IoTeX 2.0 is designed to balance inflationary staking rewards with deflationary burning mechanisms. The goal is to maintain a stable token supply while driving the utility of the IOTX token.

Primer

IoTeX (IOTX) is a modular infrastructure platform focused on supporting developers of decentralized physical infrastructure networks (DePIN). The IoTeX Network combines its EVM-compatible Layer-1 blockchain, offchain compute mid-layer, and open hardware to connect smart devices and real-world data to blockchains. The real-world data is sourced from smart devices, machines and sensors, and decentralized applications (dApps) across the physical and digital world.

The IoTeX base layer utilizes a Randomized Delegated Proof-of-Stake (Roll-DPoS) consensus mechanism. Anyone can stake the network’s native token (IOTX) and cast a vote for one or more community-voted delegates, who manage consensus on behalf of the IoTeX Network.

IoTeX's middleware solution W3bstream computes and verifies real-world data, bringing it onchain. To prove real-world activity, IoTeX collects raw data from tamper-proof devices (e.g., WiFi hotspots in wireless networks or home batteries in energy networks) via an offchain compute middleware called W3bstream.

The W3bstream middleware serves as an open infrastructure for verifiable data streaming and processing using zero-knowledge proofs and a general-purpose zkVM. W3bstream also powers the DePINscan platform — a DePIN sector-wide, map-based explorer-as-a-service.

The newly released IoTeX 2.0 upgrade aims to support the full lifecycle of DePIN projects by providing infrastructure, public goods, and governance tools for decentralized infrastructure. Simultaneously, the upgraded tokenomic design of IoTeX 2.0 is designed to balance inflationary staking rewards with deflationary burning mechanisms. The goal is to maintain a stable token supply while driving the utility of the IOTX token.

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Key Metrics

Performance Analysis

Network Overview

• Supply: IoTeX provides DePIN-focused blockspace and a vibrant ecosystem and community to DePIN projects and other decentralized applications (dApps).
• Demand: Consumers of blockspace are primarily DePIN projects, but also projects in the DeFi and GameFi sectors.

Usage

Demand for IoTeX comes from apps and developers in need of data streaming and offchain compute capabilities. As of the end of Q2’24, the IoTeX ecosystem has over 215 dApps. Use cases include connected smart vehicles, geo-mapping, energy data tracking, and health platforms, as well as proof-of-presence and proof-of-humanity apps. Popular projects building on the IoTeX network include uniIOTX (liquid staking), Mimo (decentralized exchange), Drop Wireless (communications infrastructure protocol), and Network3 (Layer-2 protocol focused on AI developer needs).

In line with other Layer-1 protocols, the IoTeX transaction activity resumed to usual levels in H1’24, after experiencing a significant spike during the inscription craze in Q4’23. Notably, IoTeX saw several spikes in transaction activity in April, driven by increased activity involving bridged assets on Mimo.

For context, transaction activity on IoTeX Network grew over 1,800% QoQ in Q4’23. During Q1 and Q2 of this year, transaction activity resumed to levels seen in Q3’23, prior to the heightened activity driven by inscriptions.

Staking Overview

Staking represents a core component of decentralized governance on the IoTeX Network.

Holders of the native IoTeX token — IOTX — deposit the token to support network operations, consensus, and governance. If IOTX holders stake their IOTX tokens, they can vote for delegates to manage consensus on their behalf. Simultaneously, tokenholders earn IOTX rewards in return for staking.

As of Q2’24, the IoTeX Network was secured by 109 active delegates staking nearly $50 million, up 12% QoQ. The average staking participation reached an all-time high of 41.2% in Q2’24, up from 40.6% in Q1’24.

Simultaneously, IoTeX 2.0 will introduce inflationary staking rewards to boost the amount of IOTX staked and increase network security. The inflation rate will be decided by the community. To balance out the inflationary staking rewards, IOTX will be burned based on the amount of network activity.

Financial Overview

At the end of Q2’24, in line with the overall market cool-off, IOTX market capitalization reached nearly $360 million, down 49% QoQ from nearly $700 million in Q1’24.

Revenue

The gas fees from transactions on the IoTeX Network represent the demand-side revenue.

As the inscription activity cooled off in H1’24, IoTeX's network transaction fees saw a 9% decrease QoQ, despite the 107% QoQ increase in transactions.

Similar to other Layer-1, IoTeX saw a big spike in network transactions due to the heightened inscription activity in Q4’23. Inscription activity began to emerge on IoTeX in the second half of December. From December 18 to 31, IoTeX netted nearly $200,000 in revenue from gas fees — i.e., roughly 94% of the overall quarterly revenue, mostly attributed to inscriptions. While the inscription activity cooled off in H1’24, this year’s gas fee levels still surpassed those seen in Q3’23.

Rewards

To deploy and maintain a community-contributed infrastructure network, IoTeX leverages token incentives. That is, rewards are paid to validators on the IoTeX Network from inflationary token issuance.

In Q2’24, rewards to validators increased 3% QoQ to $3.33 million. In IOTX terms, rewards stayed relatively flat, up 1% QoQ from 59.5 million IOTX in Q1’24 to 60 million IOTX in Q2’24. With the introduction of IoTeX 2.0, users will be able to restake their IOTX to earn additional rewards along with the base staking rewards.

Qualitative Analysis

Key Developments

IoTeX 2.0 & Upgraded Tokenomics

The IoTeX team introduced IoTeX 2.0, an upgrade aimed at evolving to an open decentralized physical infrastructure network (DePIN). The upgrade is designed to enable a broad range of ecosystem participants, from established decentralized applications and traditional companies to small innovative teams.

IoTeX 2.0 also introduces a modular DePIN infrastructure that allows projects to build their tech stacks from a variety of modular offerings. These modules include offchain scaling, zero-knowledge proofs, and artificial intelligence. The five key architectural components are:

• DePIN dApps: building on top of the IoTeX platform,
• DePIN Infrastructure Modules (DIMs): pre-built, interoperable components of the DePIN tech stack that can be built by third-party teams,
• Modular Security Pool (MSP): a trusted layer secured by the IOTX token and other assets, ensuring the security and trust of the network,
• IoTeX Layer-1, and
• Users.

Simultaneously, IoTeX 2.0’s upgraded tokenomic design is designed to balance inflationary staking rewards with deflationary burning mechanisms. The goal is to maintain a stable token supply while driving the utility of the IOTX token. This new tokenomic model also introduces the Marshall DAO, a decentralized autonomous organization that allocates incentives to grow the IoTeX ecosystem through funding DePIN projects and initiatives.

The IoTeX 2.0 upgrade aims to support the full lifecycle of DePIN projects by providing infrastructure, public goods funding, and governance tools for decentralized infrastructure.

V2.0 and V1.14 Series

The IoTeX blockchain underwent the V2.0.0 hard fork in July. All node operators are advised to upgrade to the latest release prior to the arrival of the activation block and are only required to restart their nodes with the new image. This hard fork includes the following features:

• Introduces a new NFT staking contract.
• Allows users with native staking buckets to migrate to NFT-based staking.
• Wraps transactions sent in the web3js API/format in a general container format, improving execution and compatibility across various tools.
• Bug fixes and performance improvements, including automatically purging failed transactions from the action pool and handling errors within the EVM module.

Previously, the V1.14 hard fork arrived in April and added the following features:

• IIP-24: Raise the block gas limit to 50 million IOTX to enhance transaction processing capabilities.
• IIP-25: Delegate endorsement, introducing a new governance model allowing stakeholder endorsements for delegates, aiming to improve network participation and ecosystem diversity.

The complete list of changes can be found in the release notes.

Integrations with IoTeX 2.0

Throughout Q2’24, IoTeX integrated with the following several networks and protocols:

• Espresso Systems integration with IoTeX 2.0 using Espresso Systems as the sequencer module.
• Phala Network integration with IoTeX 2.0 using Phala as the verifiable compute module.
• NEAR integration with IoTeX 2.0 as the data availability (DA) module.
• Injective integration: allowing for the transfer of IoTeX assets into the Injective ecosystem.
• Coin98 integration: allowing for the transfer of tokens using Coin98 Super Wallet and Coin98 Extension.

Governance

IoTeX Improvement Proposals (IIPs) are the mechanism for proposing community-driven changes to the IoTeX protocol, processes, or ecosystem.

Bridge Solana to IoTeX via ioTube (IIP 31)

This successful proposal aims to integrate Solana with the ioTube bridge. The integration will require onchain contracts for sending/receiving assets, the ioTube Message Protocol, and offchain witness consensus.

Delegate Endorsement (IIP 25)

This successful proposal aims to introduce Delegate Endorsement, enabling individual stakeholders within the IoTeX Network to become delegates without owning a substantial amount of tokens (the current minimum self-stake requirement of 1.2 million IOTX). Instead, the team proposes that individuals can accept endorsements from other stakeholders to help meet the minimum self-stake requirement because the team believes delegate endorsement promotes inclusivity and decentralization.

Transfer Delegate Ownership (IIP 28)

This successful proposal aims to introduce a "Transfer Delegate Ownership" feature. This feature will allow delegate owners to change their profile addresses and offer "increased flexibility and security to delegate owners."

Marshall DAO

In conjunction with the IoTeX 2.0 launch and its tokenomic design, IoTeX has announced the Marshall DAO. The DAO will manage a pool of IOTX tokens that will be used to fund DePIN projects and initiatives. The community will be able to propose projects and those who have IOTX staked (veIOTX) will be able to vote on projects to fund.

Closing Summary

By the end of Q2’24, the IoTeX Network was secured by 109 delegates actively staking $50 million, up 12% QoQ. The average staking participation reached an all-time high of 41.2% in Q2’24, up from 40.6% in Q1’24.

In Q2’24, rewards to validators grew 3% QoQ to $3.3 million; in IOTX terms, rewards stayed relatively flat, up 1% QoQ from 59.5 million IOTX in Q1 to 60 million IOTX in Q2. IoTeX's network transaction activity grew by 107% QoQ, driven by heightened volumes of bridged assets activity.

The IoTeX 2.0 upgrade aims to support the full lifecycle of DePIN projects by providing infrastructure, public goods, and governance tools for decentralized infrastructure. Simultaneously, the upgraded tokenomic design of IoTeX 2.0 is designed to balance inflationary staking rewards with deflationary burning mechanisms. The goal is to maintain a stable token supply while driving the utility of the IOTX token.