From Messari by Mihai Grigore

Key Insights

Primer

IoTeX (IOTX) is a modular infrastructure platform that supports 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 Layer-1 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 is set for mainnet launch in Q1’25, providing verifiability and scalability for DePINs. W3bstream is 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 — that tracks more than 280 DePIN projects.

The newly released IoTeX 2.0 upgrade aims to support the full lifecycle of DePIN projects by providing decentralized infrastructure for DePINs, public goods, and governance tools. As part of the IoTeX 2.0, the ioID protocol aims to manage the decentralized identity lifecycle in DePINs by turning hardware devices (e.g., smart devices, machines, and sensors) into onchain entities with verifiable identity. Simultaneously, the upgraded tokenomic design of IoTeX 2.0 aims to balance inflationary staking rewards with deflationary token burns and to drive the utility of the IOTX token.

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Key Metrics

Performance Analysis

Network Overview

The IoTeX Network connects supply and demand as follows:

Usage

Demand for the IoTeX Layer-1 blockspace from more than 100 dApps in need of data streaming and offchain compute capabilities. The real-world data is sourced from smart devices, machines and sensors, and decentralized applications (dApps).

Daily active wallets on the IoTeX Network grew 13% QoQ in Q3’24 to nearly 4,000. While the metric previously spiked during the inscriptions mania in Q4’23, the recent increase may be attributed to the launch of the ioID infrastructure protocol as part of the IoTeX 2.0 launch in Q3’24.

As part of the IoTeX 2.0 launch, the ioID protocol aims to manage the decentralized identity lifecycle in DePIN. The ioID protocol is IoTeX’s onchain identity solution to issue Decentralized Identities (DID) and Verifiable Credentials (VC) to physical hardware. In simple terms, ioID turns hardware devices (e.g., smart devices, machines, and sensors) into onchain entities with verifiable identity.

As of October 2024, 5,000 ioID identities have been registered and verified onchain by nearly 500 device owners. To bootstrap DePIN networks, miners and community members can reserve ioIDs. As of the end of Q3’24, there are over 7,000 reserved ioID identities.

Following the launch of IoTeX 2.0 and the onboarding of new ioIDs, activity on the IoTeX Network surged 8% QoQ in terms of daily transactions, with an average of 75 transactions per second throughout Q3’24. Previously, transaction activity on the IoTeX Network surged over 1,800% QoQ in Q4’23, driven by the inscription mania one year ago.

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 token holders stake their IOTX tokens, they can vote for delegates to manage consensus on their behalf.

Tokenholders earn IOTX rewards in return for staking. Simultaneously, IoTeX 2.0 introduced inflationary staking rewards to boost the amount of IOTX staked and increase network security. While the inflation rate is decided by the community, the IOTX token is burned based on the amount of network activity.

For example, with the introduction of the ioID protocol, the IOTX token can further be utilized for ioID creation and management. Device owners are able to burn and stake IOTX to obtain ioIDs and register their hardware to the IoTeX Network. Additionally, tokenholders can restake their IOTX to earn additional rewards along with the base staking rewards.

As of Q3’24, the IoTeX Network was secured by 112 active delegates staking $172 million, up 17% QoQ. The average staking participation reached an all-time high of 41.3% in Q3’24, up from 34.2% in Q3’23.

Financial Overview

Fees

Total fees accrued by the protocol capture the demand side of the IoTeX Network:

Total fees accrued on the IoTeX Network grew by 1,261% QoQ to $192,000 in Q3’24. This growth has been fueled by the accrual of ioID device activation fees ($131,000) and by the mimo DEX fees ($53,000). With the expected activity growth on the IoTeX Layer-1 following the launch of IoTeX 2.0, total fees are set to increase further in the coming quarters.

Rewards

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

In Q3’24, rewards to validators decreased 30% QoQ to $2.3 million. In IOTX terms, rewards stayed relatively flat, up 1% QoQ from 60 million IOTX in Q2’24 to 60.6 million IOTX in Q3’24.

Ecosystem Overview

As of the end of Q3’24, the IoTeX ecosystem has over 230 dApps, including over 50 DePIN projects. Messari’s recent DePIN sector report indicates that IoTeX is the third-largest DePIN ecosystem after Ethereum and Solana. DePIN projects building on IoTeX utilize DePIN Infrastructure Modules (DIMs) such as ioID and W3bstream or choose the IoTeX Layer-1 for their token launches. DePIN use cases include connected smart vehicles, geo-mapping, energy data tracking, health platforms, and proof-of-presence and proof-of-humanity apps. Besides DePIN, use cases on the IoTeX ecosystem include DeFi, GameFi, and NFTs.

DePIN

Throughout Q3’24, IoTeX has continued to provide hands-on support to its ecosystem through the DePIN Surf Accelerator and IoTeX Ecosystem Fund, including several DePIN projects:

Other popular projects building on the IoTeX network include uniIOTX (liquid staking), mimo (decentralized exchange), and Drop Wireless (communications infrastructure protocol).

DeFi

The DePIN Liquidity Hub program offers liquidity pool matching of up to $10,000 on mimo, a DePIN-focused decentralized exchange (DEX). By the end of Q3’24, total liquidity in the DePIN Liquidity Hub reached nearly $13 million from a total of over 600 token pairs, out of which 16 were DePIN-specific token pairs. The mimo app allows DePIN tokens from other Layer-1 networks (such as GEODNET, Streamr, WiFi Map) to be bridged to IoTeX with boosted incentives for liquidity providers.

In addition to the activity on mimo, several DeFi protocols started on the IoTeX ecosystem:

Qualitative Analysis

Key Developments

IoTeX 2.0 and Upgraded Tokenomics

The IoTeX team introduced the IoTeX 2.0 upgrade to evolve into 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 introduced 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:

Simultaneously, IoTeX 2.0’s upgraded tokenomics design balances 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 before 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:

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

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

Integrations with IoTeX 2.0

Throughout Q3’24, IoTeX integrated with the following several networks and protocols:

IoTeX Stablecoin

In Aug. 2024, the IoTeX community approved IIP-30, adopting the bridged USDC standard from Circle. This decision will transition the existing ioUSDC stablecoin to USDC.e. The implementation involves deploying USDC.e and its wrapper contract on IoTeX, alongside updates to IoTube validators to support the new bridge. DeFi protocols within the ecosystem will also be encouraged to adopt USDC.e.

Community

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

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 launch of IoTeX 2.0 and its tokenomics design, IoTeX 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.

ioTube Support for BTC (IIP 29)

This successful proposal aims to develop a bridge to facilitate the transfer of Bitcoin assets to the IoTeX network to enhance the network’s value interoperability. The proposed solution utilizes a multi-signature wallet managed by offchain witnesses to secure assets on the Bitcoin network.

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.

Deprecate io1 Address Format (IIP 40)

This proposal aims to deprecate the native io1 address format and utilize only Ethereum’s 0x format across the IoTeX ecosystem and tools.

DePIN Association

The DePIN Association was formed by IoTeX, Powerledger, POKT Network, Acurast, DePINHub, U2U Network, Impossible Cloud Network, SafeJunction, peaq, and Geodnet. The Association aims to foster the development and growth of the DePIN ecosystem by establishing DePIN industry standards and best practices, promoting collaboration, advocating for policies/regulations, and supporting research and development initiatives.

Closing Summary

Launched in Q3’24, the IoTeX 2.0 upgrade provides decentralized infrastructure, public goods, and governance tools to support the full lifecycle of DePIN projects.

Activity on the IoTeX Network surged after the launch of the ioID protocol that turns hardware devices into onchain entities with verifiable identity. In Q3’24, both active wallets and transactions were up 13% and 8% QoQ, respectively. As of Q3’24, the IoTeX Network was secured by 112 delegates actively staking $172 million, up 17% QoQ. The average staking participation reached 41.3% in Q3’24.

The upgraded tokenomic design of IoTeX 2.0 aims to balance inflationary staking rewards with deflationary token burns and to drive the utility of the IOTX token.