State of EOS Q1 2024

Key Insights

• Revenue increased by 387% QoQ to $296,000, driven by an increase in EOS EVM gas fees and a higher volume of RAM trading transactions.
• The EOS Network Foundation (ENF) unveiled exSat Network, a Bitcoin indexing layer on EOS. Bitcoin state will be stored using RAM, enabling state data indexing for BRC-20s, BRC-721s, and other Bitcoin ecosystem assets.
• The ENF shared a proposal to cap EOS’s total supply at 2.1 billion tokens. The 950 million more minted tokens will be distributed to the RAM market, staking rewards, the ENF, block producers, EOS Labs, and infrastructure development.
• The Savanna consensus protocol upgrade was implemented on testnet and planned for mainnet on July 31. The upgrade will bring several improvements including a potentially increased block producer count and 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.

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Key Metrics

Financial Analysis

The crypto market continued its upward trend in Q1’24, and EOS was no exception. Its circulating market cap increased by 27% QoQ to $1.2 billion. However, EOS’s market cap growth was outpaced by other tokens, as its market cap rank fell from 74 to 90 QoQ.

EOS revenue is defined as the fees collected by EOS’s Resource Exchange (REX). EOS’s unique resource model bills for compute (CPU), bandwidth (NET), and memory (RAM) separately.  Other networks typically bundle these costs into one transaction fee. Through REX, users can pay a fee to boost their available CPU and NET for 24 hours and trade RAM. For a more in-depth explanation on this feature, refer to the EOS Initiation of Coverage report. REX then distributes these fees to EOS stakers.

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 390 gigabytes. RAM was previously non-transferrable, but an update in mid-March made it transferable, giving users more control over the resource.

With RAM becoming more scarce, more users have been buying RAM, leading to more protocol-owned liquidity and fees for REX stakers. Then in early January, a proposal was passed to increase the gas_price parameter on the EOS EVM. As a result, EOS revenue increased by 342% QoQ to 346,000. Denominated in USD, revenue grew by even more, up 387% QoQ to $296,000.

The EOS protocol mints the $EOS token at around a 3% annual inflation rate, which it distributes to validators (1%), EOS Network Foundation (1.5%), and EOS Labs (0.5%)

After the quarter ended, the EOS Network Foundation (ENF) shared a proposal to significantly alter EOS’s tokenomics. Key changes include capping total supply at 2.1 billion tokens. EOS’s supply at the time of the proposal was around 1.15 billion tokens, so under the proposal, there will only be another 950 million tokens minted. These 950 million tokens will be distributed to the RAM market (37%), staking rewards (26%), the ENF (16%), block producers (11%), EOS Labs (9%), and infrastructure development (2%).

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.

Network Analysis

Usage

EOS Native

After elevated transaction activity in mid-December driven by inscriptions, average daily transactions decreased by 28% QoQ to 1.2 million. However, daily transactions remained at higher levels than in Q2 and Q3 2023. On the other hand, average daily active addresses grew by 7% QoQ to 29,000.

There were 260,000 total unique active addresses in Q1’24, a 27% QoQ increase. Engagement levels, measured by the number of days each address was active, were slightly reduced compared to Q4. In Q1’24, 28% of active addresses were active for only one day, compared to 26% in Q4’23. Also, 75% of active addresses were active for eight days or less in Q1’24, compared to ten days in Q4’23.

Average daily new addresses increased by 108% QoQ to 1,300. However, the average one-month retention rate for the January and February cohorts of new addresses was 13%, compared to 19% for the monthly cohorts in Q4.

EOS EVM

After spikes in activity driven by inscriptions in mid-December, EOS EVM’s activity decreased in Q1. Its average daily transactions fell by 90% QoQ to 32,000. Its average daily new addresses fell by less, down 10% QoQ to 2,900.

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).

Volume in the EOS Trustless Bridge increased by 36% QoQ to $11.5 million, with 58% of that being outbound volume (EOS EVM -> EOS Native). Note that this metric only includes $EOS and USDT transfers, although other EOS Native tokens have been added. Around 35% of this volume was in USDT, with the majority of bridge transfers still occurring in $EOS. Assets integrated into the Trustless Bride in Q1 include bRAM, BANANA, ZEOS, CHEX, MLNK, SFN, and SFNS. In early March, EOS Labs announced an update to the bridge’s fees, adding a 0.1 $EOS fee for $EOS transfers to EOS EVM and a 0.1 USDT fee for USDT transfers to EOS EVM.

As noted above, other third-party bridges have integrated EOS EVM, including Meson and NerveNetwork. In mid-January, EOS Labs announced a partnership with Polyhedra to integrate its zkBridge with EOS EVM.

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. There are 58 validators earning validator rewards.

At the end of the quarter, there were almost 142 million $EOS ($152 million) staked and voting for validators, a 4% QoQ decrease. This represented around 13% of the circulating supply. An additional 107 million $EOS was staked but not used for voting for validators. Around two-thirds of this amount comes from tokens not yet vested 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 planned for a July 31 hard fork. This upgrade will implement the Savanna consensus protocol, 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. The consensus upgrade has been implemented on a testnet, achieving 1.5 second transaction finality. The update will also bring enhanced cryptographic capabilities, as BLS signature aggregation plays a role in the consensus mechanism and can be used for other privacy or zk-related developments.

In mid-January, EOS EVM V0.7.0 went live on mainnet. The upgrade introduced WebSocket support, a crucial communication channel allowing applications to surface real-time blockchain data.

Future planned upgrades for the EOS EVM were highlighted in the EOS EVM roadmap released in September 2023. They include EIP compatibility starting with EIP-1559 and EIP-4337, trustless bridge front-end refresh, RPC scalability enhancements, and more.

In mid-February, the ENF released a product roadmap for 2024. One of the major new items is the development of an EOS BTC L2. Near the end of March, the ENF unveiled exSat Network, which will be a Bitcoin indexing layer on EOS. Bitcoin state will be stored using RAM, enabling state data indexing for BRC-20s, BRC-721s, and other Bitcoin ecosystem assets.

Ecosystem Analysis

Popular Contracts

Virtual property game Upland is the most popular EOS contract group by daily active addresses. In Q1’24, Upland averaged almost 22,000 daily active addresses, a 2% QoQ increase.

The EOS System contract, which handles functions such as delegation and resource management, was the second most popular contract group. It averaged 2,900 daily active addresses in the quarter, a 41% QoQ decrease.

Wombat’s genialwombat contract saw spiked activity starting at the end of January, leading to a 79,000% QoQ increase in average daily active addresses, ending the quarter with 952.

Rounding out the top six contract groups by daily active addresses were NFT marketplace AtomicHub, MMO strategy game Prospectors, and RPG game Crypto Dynasty.

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.

EOS System’s decrease in market share of newly created addresses indicates that a higher percentage of new addresses interacted with ecosystem applications immediately upon joining the network.

The top application by average daily newly created addresses was RAM-based inscription project RAMS, which featured 1,900 newly created addresses on January 20 and almost 3,800 on January 21.

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 86% share of power addresses among contract groups. Of its 22,000 average daily active addresses, over 15,000 were power addresses (70%). 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 241 daily new addresses, an 84% 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.

As noted above, RAMS and Wombat saw increased activity, averaging 138 and 131 daily new addresses, respectively. Decentralized exchange SOVDEX increased its average daily new addresses by 1,200% QoQ to 46.

DeFi

EOS Native’s DeFi TVL fell by 12% QoQ to $40 million. After growing by almost 3,000% in Q4’23, EOS EVM’s DeFi TVL increased by 10% to $2.5 million in Q1.

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. In May 2023, an address exploited PayCash before transferring almost 2 million $EOS to the EOS EVM. In February, the ENF announced that stolen tokens were recovered by the ENF’s Recover+ program.

AMM Noah Swap accounted for nearly 100% of DeFi TVL on EOS EVM. The teams developing Defibox and Noah Swap have formed a partnership under the name NoahArk Tech Group. In early January, the collective announced that it received a $2.4 million strategic investment from the EOS Network Ventures.

Other DeFi-related events include Neutroswap’s V2 launch.

Average daily DEX volume on EOS Native fell by 19% QoQ to $741,000. Defibox accounted for 69% of that volume, with PayCash the other 31%.

EOS Native’s stablecoin market cap remained at $75.5 million throughout Q1. This figure is entirely composed of USDT. As noted above, EOS is one of fifteen 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 $408,000, a 53% QoQ decrease.

The EOS Stable Coin Chain (ESCC) launched at the end of March. 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 launch follows a partnership with the ENF and EOS Labs announced in Q4’23.

NFTs, Gaming, and Other

The most popular dapps by address activity on EOS are gaming-related, including Upland, Prospectors, Crypto Dynasty, and Dungeon Master.

In Q1, many popular applications were also inscriptions related, such as RAMS. There were several other notable inscriptions-related events in Q1 including EZ Swap’s fundraising announcement and Echo’s launch.

After launching at the end of Q4’23, multichain NFT and inscription marketplace EZ Swap announced that it raised $1 million in funding, led by EOS Network Ventures.

In early January, Echo Markets released the whitepaper for its EOS-20 standard, enabling inscriptions on EOS EVM. Echo Markets is backed by EOS Labs, the ENF, and EZ Swap. The first EOS-20 token was Echo’s native token ECHO, deployed on January 8. ECHO currently has almost 6,700 holders. There were 29 total tokens launched via Echo, most of which were deployed on January 23. Trading of EOS-20 tokens is possible on EZ Swap.

Development

Ecosystem development, measured via the number of unique contracts called and new contracts, fell slightly in Q1 The number of unique contracts called throughout the quarter decreased by 2% QoQ to 840. The number of new contracts called in the quarter decreased by 20% QoQ to 41.

Near the end of February, Greymass completed initial work on developer toolkit Wharf to streamline development on Antelope-based blockchains. The Wharf SDK includes the Session Kit, 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.

Growth

EOS ecosystem growth is furthered by the ENF, ENV, and EOS Labs. The three entities continued to form partnerships, give out grants, and make investments in Q1 as detailed throughout the report. There are several ongoing grants and incentive programs. ENF’s EOS EVM Incentive Program offers up to $50,000 per qualifying EOS EVM project as well as marketing and development support on top of the grant. Also, ENV has a commitment to invest $20 million into EVM projects and GameFi projects (across both EOS Native and EVM).

The seventh and final season of Pomelo, an open-source public good crowdfunding platform, concluded in December 2023. Later in Q1, Pomelo launched Pomelo Bounties. Pomelo Bounties is a freelance marketplace connecting projects and developers. As open-source software, Pomelo Grants could still continue in the future, but there are currently no plans for EOS Labs or the ENF to continue providing matching bonuses.

Closing Summary

Significant developments continue to occur in the core EOS protocol and tokenomics. An increase in EOS EVM gas fees and a higher volume of RAM trading transactions drove revenue up by 387% QoQ to $296,000. In December 2023, RAM inflation was halted, and then in March 2024, an update made it transferable, giving users more control over the resource. The next major EOS upgrade is the Savanna consensus protocol update planned for mainnet on July 31. The upgrade will bring several improvements, including a potentially increased block producer count and near-instant finality.

The EOS Network Foundation (ENF) also unveiled exSat Network, a Bitcoin indexing layer on EOS. Bitcoin state will be stored using RAM, enabling state data indexing for BRC-20s, BRC-721s, and other Bitcoin ecosystem assets. Lastly, the ENF shared a proposal to cap EOS’s total supply at 2.1 billion tokens. The 950 million more minted tokens will be distributed to the RAM market, staking rewards, the ENF, block producers, EOS Labs, and infrastructure development.

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