State of Core Chain Q1 2024

Key Insights

• CORE’s market cap increased 147% QoQ to $1.21 billion.
• Core Chain’s DeFi TVL increased 74% QoQ to $6.75 million. SushiSwap has been the dominant DEX, but native DEXs such as Glyph are growing quickly to challenge dominance.
• coreBTC, an enshrined BTC bridge, launched in March. coreBTC will enable BTC DeFi by giving users access to a bridged BTC that leverages Core Chain’s security and is secured by permissionless entities.

Primer

Core Chain (CORE) is a scaling and programmability solution for Bitcoin that is differentiated by its Satoshi Plus consensus, EVM execution environment, Core DAO governance, and coreBTC bridge. This Bitcoin sidechain was launched in early 2023. The Core Chain community is building an ecosystem of Bitcoin-focused applications, leveraging Bitcoin security wherever possible along the way, such as consensus resources.

Satoshi Plus consensus involves staking and hashrate delegation from Bitcoin miners. Staking includes both the native CORE token and BTC. This combination of security resources results in a hybrid model that leverages bitcoin mining, rewards bitcoin miners, and still separates block production to mitigate censorship and MEV risks. Core DAO is the governing body of the network, powered by the CORE token. The EVM is used on the network, granting access to Ethereum’s infrastructure and mindshare. coreBTC is the enshrined Core-native bridged BTC, which allows users to access BTC liquidity in Core Chain’s fully expressive execution environment.

For a full primer on Core Chain, refer to our Initiation of Coverage report.

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Key Metrics

Financial Analysis

CORE’s price increased 144% QoQ, and its market cap increased similarly by 147% QoQ, with the discrepancy due to CORE’s 1% increase in circulating supply. This increase moved CORE’s market cap rank up from 119 to 58.

A price spike in late March accounted for nearly all of Q1’s price appreciation. This price increase led Core Chain’s revenue (USD) – i.e., all transaction fees – to increase 28% QoQ to $94,000 over the quarter. However, revenue (CORE) was more or less flat, with an 8% QoQ increase to 153,000 CORE. The increase can be attributed to several 1-2 day fee spikes in January, where users experimented with inscriptions. Inscriptions are arbitrary data posted on a chain, such as an image, and cause fee spikes due to not only a higher cost per transaction but also user behavior where large amounts are inscribed at a time.

CORE is the native token of Core Chain. It’s used for transaction fees, staking (and mining) rewards, and governance. Its total supply is 2.1 billion, distributed through block rewards over 81 years. CORE also has a minor deflationary mechanism, as it can burn excess rewards for relayers and verifiers.

In Q1, 12 million CORE was either vested for airdrop participants or emitted to validators and relayers for rewards. Rewards for validators and relayers will continue at the same rate (2.56 million and 0.01 million per month, respectively) until 2030. Airdrops participants will be fully vested by January 2025, and at the same time, contributors’ tokens will begin vesting at a rate of 6 million per month for four years.

Network Analysis

Average daily active addresses and transactions increased 22% to 43,000 and 8% to 863,000 in Q1, respectively. Active addresses in Q1 were lower than in the first three quarters of 2023, while transactions were higher. This generally suggests more “power users,” i.e., users who transact often. This was the case, but not in the typical way, as increased transactions in Q4 2023 and Q1 2024 came from a very small group of users in the form of inscriptions.

Ignoring the massive spikes to over 20 million transactions per day, the median number of daily transactions in Q4 2023 and Q1 2024 was ~200,000, which was more in line with previous quarters.

Staking

Core Chain uses the novel Satoshi Plus consensus mechanism. Satoshi Plus is a hybrid model of Delegated Proof-of-Work (DPoW) and Delegated Proof-of-Stake (DPoS). Unlike merge-mined sidechains, Core Chain’s block production is performed by Core Chain validators rather than participating Bitcoin miners.

The top 21 validators are ranked by the weighted score of hash and stake. Core uses its Validator Election mechanism to rank the top 21 validators based on hybrid scores, creating the validator set for a consensus period of 200 slots, known as an epoch. Due to this mechanism, there has been a daily average of 21 unique block producers since inception.

Liquid staking was enabled through stCORE in Q1. This allows users to utilize CORE liquidity in DeFi or other use cases while still earning staking rewards.

Mining

Core Chain has multiple Bitcoin mining pools (M Labs, InfStones, OKXEarn, and others.) participating in Satoshi Plus consensus. In Q1, Spiderpool began to participate, pushing Core Chain’s delegated hashrate above 50% of the total Bitcoin hashrate, i.e., over 50% participation by Bitcoin miners.

Ecosystem Analysis

Contract calls and unique contract callers increased 4% and 11% QoQ to 821,000 and 34,000, respectively. Unique contracts called increased by a greater amount, 144% QoQ to 2,400. The drastic increase in ‘contracts called’ suggests either an increase in ecosystem diversity (i.e., users are interacting with more existing protocols) or an increase in new protocols (i.e., most services involve calls to multiple contracts that are now activated and seeing regular activity).

Core Chain’s ecosystem is defined by two technologies:

• coreBTC
• The Ethereum Virtual Machine (EVM)

coreBTC is the enshrined Core-native bridged BTC, which allows users to access BTC liquidity in Core Chain’s fully expressive execution environment. While most ecosystems are built around the native token (or stablecoins), Core Chain’s ecosystem is deeply focused on BTC. It’s essential to have a viable bridged BTC. coreBTC launched in late March, and WBTC (from BitGo) launched soon after.

Core Chain uses the EVM, which means much of Ethereum’s infrastructure is used. Wallets like MetaMask, developer tooling such as Hardhat, and DEXs such as SushiSwap are found on Core Chain. This familiarity greatly reduces the development overhead and has other benefits, such as reducing the risk of exploits. Core Chain ecosystem developers can leverage the learnings of EVM development on Ethereum, Arbitrum, Avalanche, and other EVM chains.

Core Chain’s DeFi TVL increased 74% QoQ to $6.75 million. This increase primarily came in March, simultaneously with CORE’s price action. This can be seen in TVL denominated in CORE, as it was relatively unchanged during the same time period in March.

SushiSwap, a popular cross-chain EVM DEX, was the most dominant DeFi platform on Core Chain in Q1, with $2.1 million in TVL. However, some of the other large DeFi players are native to Core Chain. Glyph, LFGSwap, and Archer all only exist on Core Chain. Glyph was the fastest grower in Q1, launching in March and crossing $1 million in TVL in only a few weeks.

The Core Chain ecosystem is not only focused on BTC, but also BTC-derivative assets. NFT marketplaces such as Wizard Gallery not only act as launchpads and platforms for trading NFTs, but also support the trading of bridged Bitcoin Ordinals.

Core Chain is connected to other networks through LayerZero, among other bridges. LayerZero activity to and from Core Chain is primarily with BNB or Polygon. Although, activity with Ethereum L2s Arbitrum and Optimism has picked up through Q1.

Growth and Development

Several key developments and initiatives took place in Q1:

• stCORE, liquid-staked CORE, was launched.
• Glyph, a native DEX, was launched.
• Core Ignition, a six-month incentive program intended to catalyze more growth around Bitcoin DeFi, was launched.
• Core Chain Ventures, a community of 50 VCs and other investors offering resources to ecosystem builders, was launched.
• Core Foundation launched a $5 million innovation fund.
• The ambassador program continued to host hackathons and community calls.
• Non-Custodial BTC Staking development was being completed for an April launch
• Development continued on an HTLC-based bridge and order book between BTC and Core Chain.

Closing Summary

Core Chain was an early mover in the Bitcoin programmability ecosystem and has benefited from this in Q1. This can be seen in the 144% increase in CORE’s price and 74% increase in DeFi TVL (USD). The ecosystem is still young, with both dapps and core features developing.

As Core Chain builds trust over time, it’s likely to gain more BTC locked in its TVL, fueling DeFi. DEXs and standard tokens (CORE, stablecoins) reigned supreme in Q1, but alternative assets, particularly BTC, could steal market share once made available through bridges for Ordinals, Runes, and other BTC-derivative assets.

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This report was commissioned by Core DAO. All content was produced independently by the author(s) and does not necessarily reflect the opinions of Messari, Inc. or the organization that requested the report. The commissioning organization does not influence editorial decision or content. Author(s) may hold cryptocurrencies named in this report. This report is meant for informational purposes only. It is not meant to serve as investment advice. You should conduct your own research, and consult an independent financial, tax, or legal advisor before making any investment decisions. Past performance of any asset is not indicative of future results. Please see our Terms of Service for more information.

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