State 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.

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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.

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