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Introduction

Helium is undeniably the leader in DePIN (Decentralized Physical Infrastructure Networks). If you’re familiar with this space, you’ve likely heard of it. Rather than focusing on the basics, this report dives into advanced topics—key statistics, real-world case studies, upcoming developments, and a broader look at the DePIN ecosystem and decentralized wireless (DeWi) technology, which is where Helium is doubling down right now.

Here’s what this report covers:

• SubDAOs: what are SubDAOs, why do they matter, and how do they operate?

• Network of networks: helium’s vision for supporting multiple decentralized networks.

• Use cases: real-world applications, from paragliding safety to green energy.

• Challenges: issues like demand generation and evolving incentive structures.

• Future growth: opportunities in new markets and industries.

Before diving in, let’s take a quick look at what Helium is and how its network has evolved over the years.

So, helium is a unique wireless network built & operated by the “community“, not traditional web2 telecom companies. It’s a bold attempt to decentralize the wireless infrastructure industry by letting individuals deploy hotspots to build connectivity. In return, these contributors earn rewards, creating a unique alignment between network growth and real-world demand. This approach eliminates dependence on telecom giants, offering a more scalable and cost-effective alternative to traditional networks.

Helium’s journey so far

Helium started in 2013 with a mission to create a decentralized IoT network. It launched its first LoRaWAN-based network in 2019, targeting low-power devices like sensors in agriculture, logistics, and smart cities. By 2021, it had grown into one of the largest decentralized networks globally, with over 450,000 hotspots deployed in 34,000 cities across 161 countries, but it didn’t get to the desired demand as expected (more on it later in the report).

In 2022, Helium entered the mobile space with its 5G network, expanding into new use cases. This marked its evolution from an IoT network to a broader infrastructure provider or how they call it today a “network-of-networks“. Today, Helium supports various wireless technologies like WiFi and VPN and develops sector-specific ecosystems through subDAOs.

If you’re excited to learn about the history of Helium, you could more about it here.

Why Helium matters?

Traditional telecom providers monopolize the wireless industry, controlling infrastructure, spectrum, and pricing. This centralized approach inflates costs, slows innovation, and focuses primarily only on urban markets while leaving rural areas disconnected. Deploying and maintaining networks under this model involves significant CapEx and OpEx, with these inefficiencies passed on to users.

For eg: in USA, three corporations dominate 99% of the wireless market, making alternatives nearly nonexistent.

Deploying and maintaining networks under this model involves significant CapEx and OpEx, with these inefficiencies passed on to users.

Building and maintaining networks under this system is slow and expensive, with costs ultimately passed on to consumers, while underserved areas remain disconnected.

Helium wants to try to change this - by decentralizing network ownership, it enables individuals to deploy hotspots and earn rewards for providing coverage. This crowdsourced model reduces costs, speeds up deployment, and ensures coverage grows where it’s needed most, without relying on lengthy approvals or major investments.

Helium’s incentive system is a big reason why it works. Instead of charging contributors, it rewards them with tokens for helping the network. This builds trust, keeps the system transparent, and makes the network sustainable.

So what does Helium offer?

• Reduces costs with small, affordable hotspots

• Introduces competition in a monopoly-dominated industry

• Expands coverage to ignored rural areas

• Enables quick deployment without lengthy approvals

• Supports low-power devices for affordable IoT use

• Avoids failures with decentralized network design

• Resists censorship with decentralized infrastructure

• Ensures transparency through blockchain-based systems

Here’s a quick understanding about what it takes to set up a network in traditional web2 scenario vs helium

So, that’s a good understanding about why does Helium even matter. Let’s now first dive deeper into understanding, what’s depin all about and why does it even matter.

What’s DePIN?

Decentralized Physical Infrastructure Networks (DePIN) offer a decentralized alternative of building infrastructure using blockchain and token incentives. It shifts control from centralized entities to individuals who contribute resources like capital and labor. This makes infrastructure efficient, scalable, and resilient while lowering costs.

How it works?
Contributors deploy assets (e.g., hotspots or sensors) and earn token rewards. Networks grow organically as more people join, creating a cycle of better services, wider coverage, lower costs, and increased participation.

This creates a positive feedback loop, often referred to as the DePIN Flywheel:

1. Improved user experience (faster, better services)

2. Broader coverage through increased participation

3. Higher utilization as networks attract more use cases

4. Lower unit costs driven by economies of scale

5. Increased token liquidity and value, drawing in additional contributors

State of DePIN

Applications across industries

• Telecom: decentralized wireless (eg. Helium)

• AI: networks for collaborative AI training (e.g. Bittensor)

• Storage: scalable data storage (e.g. Filecoin)

• Energy: peer-to-peer renewable energy trading (eg. Glow)

• Mapping: real-time maps from user contributions (e.g. Hivemapper)

• Logistics: transparent delivery and mobility systems

Ofc Depins also have their challenges circling around scaling, bootstrapping issues, lack of user incentives over a period of time and so on. But most of the these apps are extremely heavy revenue making first projects as compared to the other broader web3 applications which struggle to make any revenues.

The spectrum of offerings is also spread across depending on whether one of targeting growth over

What we can also see/ expect to unfold over the next couple of years (especially since Trump’s gov is going to start from 2025), a more deeper focus and opportunity for depin to succeed. Some trends we could be on the look out for:

• Capital-efficient scaling over full decentralization for faster adoption

• Time-based or demand-driven token strategies to stabilize value

• Rapid growth in Asia due to favorable regulations and adoption

• Gamification, like mapping missions, to attract and engage users

• Increased focus on real-world sectors like energy and logistics

• Collaborations with traditional companies to boost adoption

DePIN provides a sustainable, utility-focused model to replace inefficient centralized systems and over speculation (what most of the other web3 verticals offer), but its success depends on overcoming regulatory and scalability challenges.

This is a great graph to understand how the network wins if they are able to sustain over a longer period of time and have sustainable growth.

Decentralised wireless networks

Traditional wireless networks dominate the landscape, here’s a quick understanding of realising the massive market opportunity that’s present in operating and running wireless networks.

DeWi networks combine blockchain incentives with physical infrastructure, allowing individuals to manage nodes, earn tokens, and support scalable, cost-efficient connectivity.

Categories:

• Radio networks: Helium (5G), Nodle (Bluetooth)

• Sensor networks: WeatherXM (IoT data), Hivemapper (mapping)

• Server networks: Filecoin, Arweave (decentralized storage)

• Energy networks: PowerLedger (peer-to-peer energy trading)

Timely emergence:

• Advances like eSIMs and unlicensed spectrum simplify entry

• DeWi reduces risks like SIM-swapping and offers urban scalability

Economic opportunities:

• Cuts network operation and customer acquisition costs

• Unlocks underused spectrum as a $10B+ market

• Early adopters earn tokens through venture mining

• Targets inefficiencies in the $270B U.S. telecom market

Innovative models:

• MHNOs: Combine telco and DeWi infrastructure for lower costs

• MVNO Platforms: Oxio simplifies network creation

• Tokenized Spectrum: Enables dynamic spectrum allocation

• ISP Enablers: Airwaive optimizes wireless ISP operations

Again, this report by ev3 is one of the best reports i’ve read on understanding the DeWi landscape deeply.

Here’s a good comparison of the live tokens in the market and how helium compares against them on the secondaries (on a high level).

How does helium work?

It connects hotspot operators, device users, and governance participants, creating an alternative to traditional telecom.

• Hotspot deployment
  Individuals or businesses purchase hotspots from approved manufacturers and deploy them to provide wireless coverage. LoRaWAN hotspots support low-power IoT devices like agricultural sensors, while 5G hotspots enable high-speed mobile connectivity. Each hotspot becomes a network node, contributing to coverage expansion

• Proof of Coverage (PoC)
  Helium uses PoC to verify the location and coverage quality of hotspots. Hotspots issue challenges to nearby nodes within a grid structure (H3). Successful participation in these challenges validates their activity and earns operators token rewards, encouraging reliable network contribution

• Data credits (DCs)
  Devices connected to the Helium network consume DCs to access services like IoT data transfer or mobile connectivity. DCs are purchased by burning $HNT tokens at a fixed rate. This creates a deflationary effect, reducing $HNT supply as network usage grows

• Token rewards and governance
  Hotspot operators earn tokens - $HNT, $IOT, or $MOBILE - based on their contributions to the network, including PoC participation and data transmission. SubDAOs, such as IoT and Mobile, oversee specific sectors in the network. Token holders stake governance tokens (eg. veIOT, veMOBILE) to vote on subdaos decisions, ensuring decentralized governance.

The flywheel effect
As more devices use the network, the demand for DCs increase. This leads to more $HNT being burned, raising its scarcity and value. The higher token value incentivizes more hotspot deployments, which improves coverage and attracts even more users. This positive feedback loop can help drive scalable network growth.

Helium combines infrastructure, PoC validation, data tokenomics, and governance into a scalable decentralized system. Here’s a good flowchart understanding of how the helium network is interlinked on a high level.

What is proof of coverage?

Proof of Coverage (PoC) is Helium’s mechanism to verify that hotspots provide valid wireless coverage and are accurately located. It ensures trust, fairness, and reliable rewards in the decentralized network.

How PoC works?

PoC uses a continuous challenge system with three participants:

• Validators: Trusted blockchain nodes send random challenges to hotspots. Validators stake 10,000 $HNT to participate

• Beacons: Challenged hotspots broadcast responses as data packets to nearby hotspots

• Witnesses: Neighboring hotspots detect these responses and submit proof to the Validator, confirming the Beacon’s activity and location

PoC plays a crucial role in ensuring the integrity of Helium’s network by verifying hotspot locations and coverage, preventing fraudulent activity. It ensures fair rewards by aligning token distribution with hotspots’ actual contributions through PoC participation. This mechanism also promotes strategic hotspot placement, encouraging efficient and wide-area coverage rather than overcrowding in specific locations.

While attempts to game the system, such as faking locations, have posed challenges, Helium has implemented stricter verification methods and penalties to counter such behavior. Continuous upgrades further enhance PoC’s robustness, maintaining its reliability as the network grows.

PoC in SubDAOs:

• IoT SubDAO: Validates LoRaWAN coverage for IoT devices

• Mobile SubDAO: Verifies 5G coverage for decentralized mobile networks

It’s probably one of the most crucial elements of Helium!

Understanding data credits (DCs)

Data credits are a non-transferable currency used to access Helium’s network services like data transfer, device onboarding, and hotspot location assertions. Pegged to $0.00001 per DC, they offer stable pricing regardless of $HNT’s market volatility. DCs are acquired by burning $HNT, permanently reducing its supply and linking network usage to token scarcity.

How DCs work?

• Acquisition: DCs are created by burning $HNT, lowering its overall supply.

• Usage: Examples include $0.10 (10,000 DCs) for a 10kB IoT data transfer or $0.50 per GB (50,000 DCs) for mobile data usage.

• Non-transferability: DCs are tied to the purchaser’s account and can only be used for network services.

• Stable pricing allows businesses to manage predictable costs, unaffected by $HNT volatility.

• Burning $HNT permanently reduces supply, increasing scarcity and potential value.

• DCs unify IoT and Mobile SubDAOs, aligning incentives across the network.

Helium faces some significant challenges in driving the DC demand which in turn resonates to the actual network growth. Slow growth in IoT adoption limits DC burns within the IoT SubDAO, reducing its overall contribution to the ecosystem. Additionally, currently Helium Mobile accounts for 90% of all DC burns, creating a heavy reliance on this segment and underscoring the need for more diverse use cases. Market volatility further complicates the system, as fluctuations in $HNT’s price affect the purchasing power of DCs and the rate at which they are burned, impacting the network’s deflationary dynamics.

Expanding Helium Mobile, forging partnerships, and increasing IoT applications will be key to boosting DC demand. Higher DC burns will enhance $HNT’s deflationary effects and strengthen Helium’s ecosystem, driving long-term growth.

HNT: Utility and Tokenomics

The Helium Network Token ($HNT) powers the ecosystem by incentivizing participants and supporting decentralized wireless connectivity. It plays a central role in rewarding hotspot operators, facilitating data transfers, and enabling network governance.

Key Utilities of $HNT

• Network rewards: Hotspot operators earn $HNT for Proof of Coverage (PoC) challenges and data transfer activities.

• Data Credits (DCs): $HNT is burned to generate DCs, linking its value to network usage.

• Governance: $HNT holders stake tokens to gain voting rights in Helium DAO decisions through veHNT.

• SubDAO tokens: $HNT can be redeemed for subDAO tokens like $IOT or $MOBILE, used in specific subnetworks.

Tokenomics

• Deflationary supply: $HNT supply decreases over time through halvings every two years. The max supply is capped at 223M, with minting reducing to 1 HNT per month by 2064.

• Burn-and-Mint Equilibrium: DC purchases burn $HNT while minting aligns with network demand.

• Net Emissions (HIP 20): Supply adjusts dynamically to maintain steady rewards amid changing burn rates

The Helium Flywheel

• Devices use DCs, increasing $HNT burns

• Reduced supply boosts $HNT value

• Higher value motivates hotspot deployment, expanding the network

• Expanded coverage attracts more users, driving further DC burns

By integrating rewards, network activity, and governance, $HNT tries to sustains Helium’s ecosystem. Its deflationary model and link to network usage ensure long-term growth while incentivizing participation.

Here’s a detailed balance sheet of how $HNT has performed over the last few years & quarters. If you’ like to play around more, check out this dashboard.

→ Y-o-y changes

→ Q-o-Q changes

Helium's SubDAO’s

Helium’s "network of networks" relies on SubDAOs, like IoT and Mobile, to manage specific subnetworks with independent governance and tailored rewards. SubDAO tokens ($IOT, $MOBILE) incentivize operators for activities like PoC and data transfers while linking their performance to $HNT through redeemability and utility-based rewards.

This modular structure drives growth by rewarding high-performing subnetworks, ensuring scalability and resilience. Decentralized governance within SubDAOs, alongside the Helium DAO, balances emissions and fosters collaboration, making SubDAOs integral to Helium’s decentralized ecosystem.

Who are the major stakeholders in the Helium network and how do they contribute?

The network thrives on the contributions of four main stakeholder groups:

• the founding team

• early investors

• miners

• network participants

Each group plays a critical role in the ecosystem’s growth, scalability, and sustainability.

• Founding team
  The founding team drives Helium’s long-term success and scalability. They hold $HNT through HST allocations, often staking their tokens to reduce circulating supply and support price stability. Their focus on sustainable growth aligns their compensation with the network’s performance.

• Early investors
  Early investors provided the funding needed to launch Helium. They hold $HNT via HST allocations and often stake their tokens, contributing to supply reduction and economic stability. Their success is tied to the network’s growth and token value.

• Miners (hotspot operators)
  Miners form the network’s backbone by deploying hotspots for IoT and 5G coverage. They earn $HNT through PoC participation and data transfers. By expanding coverage and staking rewards, they improve network reliability, adoption, and governance.

• Network participants
  IoT users and service providers burn $HNT to create DCs for network usage. This continuous burning reduces $HNT supply, creating deflationary pressure that ties network utility to token value.

Incentive alignment

By combining staking and burning mechanisms, all stakeholders strengthen Helium’s economic sustainability,

Here’s the funding history of helium

Helium’s evolution: From IoT to a network of networks

Helium began as a decentralized IoT network, enabling low-power devices to connect via LongFi, a mix of LoRaWAN and blockchain. Hotspot operators provided wireless coverage and earned $HNT through the PoC mechanism. By 2022, Helium had deployed over 900,000 hotspots worldwide, making it the largest decentralized IoT network. However, low IoT data demand and overreliance on a single market exposed limitations, particularly during $HNT’s price volatility in the 2020 crypto bull market.

To address these challenges, Helium transitioned to a "network of networks" model in 2022, introducing SubDAOs like IoT and Mobile SubDAOs to manage specific wireless technologies. These SubDAOs operate independently with tailored governance and tokens ($IOT for IoT, $MOBILE for 5G) while maintaining $HNT as the ecosystem’s backbone. This modular structure supports multiple networks while ensuring economic alignment through $HNT and DCs, which are required for all data transfers.

Helium’s 5G network under the Mobile SubDAO emerged as a key growth driver. The Helium Mobile hybrid carrier, combining decentralized 5G hotspots with T-Mobile infrastructure, quickly reached 90,000 subscribers. Partnerships with companies like Telefonica further expanded its reach, targeting large markets like Mexico with over 300 million potential users. These efforts diversified Helium’s revenue streams and reduced its dependence on IoT.

Managing multiple SubDAOs and maintaining sufficient operator rewards remain challenges, as does competition from traditional telecom providers and other decentralized networks. Helium’s transition to a "network of networks" addresses these hurdles by integrating diverse wireless technologies, expanding market reach, and unifying its ecosystem around $HNT. This shift positions Helium to meet a broad range of connectivity needs while scaling its decentralized wireless infrastructure.

Here’s a good way for you to understand on a high level how does the user <> helium <> subdao economy operate and look like:

The IoT SubDAO

The IoT SubDAO manages Helium’s original LoRaWAN-based network, launched in 2019, to provide low-power, long-range connectivity for IoT devices. This network supports applications like environmental monitoring and asset tracking through community-owned hotspots. Operators earn IOT tokens, which they can stake for governance rights (veIOT), burn for DCs to use the network, or exchange for $HNT, ensuring alignment with Helium’s ecosystem.

Here’s a very good understanding about how does the IOT network work:

PoC validates hotspot locations and coverage reliability, using a challenge-response system where neighboring nodes verify transmitted data packets. This decentralized approach eliminates reliance on centralized servers, reducing costs and improving security. Operators earn IOT tokens for participation, incentivizing network growth.

The IoT SubDAO faces challenges such as limited growth in IoT applications, leading to low data transfer demand and reduced revenues for hotspot operators, despite nearly a million hotspots deployed.

Future growth for the IoT SubDAO depends on the broader adoption of IoT applications that require low-power, decentralized connectivity. Developing high-value use cases and improving network efficiency will be crucial for driving demand and increasing data transfer revenues.

One of the core challenges of IOT subdao are the long term revenue potentials, because of lack of demand.

The mobile subDAO

The Mobile SubDAO, launched in December 2023 through HIP 53, manages Helium’s decentralized 5G network. It operates a hybrid model that combines T-Mobile’s infrastructure with community-owned CBRS and WiFi hotspots. This approach reduces costs and expands affordable 5G coverage, especially in underserved areas. $mobile incentivizes hotspot operators, rewarding them based on location, uptime, and demand. The SubDAO independently governs PoC

Here’s a good understanding about how it works:

The hybrid 5G model allows traffic to route through Helium hotspots when available, lowering costs compared to traditional carriers. MOBILE tokens reward hotspot operators based on factors like location, uptime, and demand. Service providers like Helium Mobile must burn $HNT to acquire DCs for subscriber connectivity, ensuring the broader Helium ecosystem benefits from the Mobile SubDAO’s growth.

Helium Mobile as a carrier

The average cost of mobile data worldwide is approximately $7.29 per GB. With the typical user consuming around 20GB of data per month, this translates to a significant expense of nearly $150 monthly for data alone. These high costs highlight the burden on users and underscore the need for more affordable alternatives like Helium Mobile.

Helium Mobile, a $20/month plan launched by Nova Labs (parent company behind helium), has reached almost 120k subscribers in its first year by leveraging cost savings from hotspot offloading.

Its pricing has been able to challenge traditional carriers, showcasing the hybrid model’s viability and encouraging future adoption by other providers.

Here’s a breakdown of the offering by Helium:

How does it compare to the web2 players?

Offload partnerships and expansion:
Helium is partnering with major MNOs like Telefonica in Mexico and U.S. telecom operators to offload data traffic. These partnerships target markets with over 300 million potential users, driving DC demand and $HNT burns, which support network scalability and revenue growth.

Revenue impact

• The Mobile SubDAO generates 90% of Helium’s network revenue, primarily through hotspot offloading and Helium Mobile subscriptions.

• This decentralized model democratizes telecom access, reduces costs for users and operators, and incentivizes deployment in underserved areas.

• This breakdown further showcase which organisations have got the highest contribution to the network.

• Amount of data transfer via the network over the last few weeks

• The retention numbers though are not the best, with an avg retention rate of around 78% for the telecom industry in USA, helium is far away from reaching that. But ofc, these are early days and as the network grows, hopefully these can become better

  

So, it would make sense to focus on the following for driving more growth:

• Expanding offload partnerships to drive more DC demand and $HNT burning

• Growing Helium Mobile’s subscriber base to attract additional service providers

• Exploring tokenized spectrum to lower costs and improve spectrum management efficienc

The revenue potential for Helium is immense. By examining the performance of web2 players (shown above in the report), we can better understand the scale of the opportunity and the vast market Helium is positioned to disrupt.

Understanding dynamic coverage & pricing

Dynamic coverage is a core feature of Helium’s Mobile network, seamlessly combining decentralized hotspots with T-Mobile’s infrastructure. Subscribers automatically connect to Helium’s community-owned hotspots when coverage is available, offloading data to reduce costs. When hotspots are unavailable, devices switch to T-Mobile’s network without interruption, ensuring reliable service.

This hybrid model benefits all stakeholders. Helium Mobile lowers operational costs by routing data through hotspots, enabling affordable plans like unlimited data for $20/month. Subscribers enjoy reliable and cost-effective connectivity, while hotspot operators earn MOBILE tokens for data offloading, driving demand for more hotspot deployments. This feedback loop improves coverage and increases offloading opportunities, reinforcing the network’s growth.

By reducing congestion on T-Mobile’s infrastructure, dynamic coverage enhances efficiency for both Helium and T-Mobile users.

Dynamic pricing for data offloading in Helium Mobile

Helium Mobile employs dynamic pricing to adjust costs for data offloading based on factors like demand, location, and network congestion. This market-driven approach incentivizes efficient hotspot deployment by raising prices in high-demand areas to attract more deployments and lowering prices in low-demand regions to prevent oversaturation.

By combining T-Mobile’s infrastructure with community hotspots, Helium Mobile reduces costs for telecom partners while optimizing hotspot usage. B

Core challenges Helium faces

Helium has grown significantly as a decentralized wireless network but faces key challenges in reward allocation, network participation, and tokenomics that affect its sustainability and growth.

→ Overallocation of rewards during the IoT phase

Helium’s early IoT network allocated fixed $HNT rewards to a small hotspot pool, creating high earnings that spurred rapid deployments. However, as hotspots multiplied and IoT demand remained low, rewards diluted, exposing an imbalance between incentives and network utility. The reliance on PoC rewards during this phase highlighted the need for a more sustainable incentive structure.

As we can see in the graph above helium ranks last in terms the tokens available to keep driving demand, it’s that’s why becoming important for them to now focus even more on the secondary partnerships and introducing more subdaos.

→ Low participation due to limited demand

Despite nearly a million hotspots deployed, Helium’s IoT network experienced minimal utilization, with data transfer revenue at one point averaging just $200 per month across the network. This lack of real-world demand led to operator disengagement as PoC rewards dropped. Aligning rewards with actual network usage rather than expansion is essential to re-engage operators and maintain consistent coverage.

→ Exploitation of reward mechanisms

Helium’s PoC system has been exploited by fraudulent hotspots gaming the system for rewards without providing legitimate coverage. This undermines network integrity and reduces rewards for honest operators. Stricter validation mechanisms, penalties for fraud, and a focus on data transfer rewards over PoC could be helpful for having a better ratio of revenue vs token incentives provided.

As we can see above, the revenue has consistently remained below 10% of the token incentives distributed, which is expected given the early stage of the network's evolution. Monitoring this metric will be critical to assess the network's growth potential, particularly in terms of revenue generation (i.e., demand driven by subDAOs). If demand fails to rise, it could jeopardize the network’s sustainability. A lack of sufficient rewards for operators could eventually push the network into a downward spiral.

This should also resonate into the price becoming a function of paying users on the network helping drive the revenue.

→ Token buyback considerations

A potential $HNT buyback plan for mobile operations could boost token demand and value. However, such mechanisms must be carefully designed to avoid centralization risks or market distortions. A well-structured buyback could stabilize demand.

→ Fixed supply constraints

Helium’s fixed $HNT supply of 223M, coupled with biennial halvings, creates scarcity but may limit reward pools for SubDAOs like IoT and Mobile. As supply tightens, incentivizing participation could become difficult without adjustments to the halving schedule or alternative reward structures to balance scarcity with growth needs.

Addressing these challenges requires refining Helium’s tokenomics and incentive structures. By prioritizing real-world utility, combating fraud, and aligning rewards with network demand, Helium can sustain its growth and remain competitive in the DePIN space.

Real world use-cases

Helium’s impact on paragliding safety and tracking

Helium has addressed critical tracking challenges in paragliding, offering a reliable, low-cost alternative to traditional GPS and cell phone coverage, which often fail in remote mountainous regions. For instance, in 2020, a paraglider named Kiwi tragically went missing in Nevada due to GPS failure and lack of cell coverage, underscoring the need for better tracking solutions.

Using LoRaWAN trackers like Oyster devices, Helium provides long-range, low-power location tracking that functions even in remote areas. These trackers send location data up to 40 km, leveraging Helium’s hotspots for connectivity without requiring personal infrastructure. In areas with no hotspot coverage, portable Helium gateways powered by batteries or solar panels can be temporarily deployed for flights or events, bridging connectivity gaps. Tests at

• locations like The E launch site in California demonstrated seamless tracking for a 5-mile flight

• another test Palomar Mountain demonstrated reliable tracking for flights, even with hotspots 40 km away

This system enhances safety by offering a backup when GPS and cell coverage fail, enabling faster emergency response times. It is also significantly cheaper than satellite-based alternatives, making it accessible to more pilots. Helium’s decentralized network ensures continuous improvement as more hotspots are deployed, benefiting both paragliders and hotspot operators.

Ofcourse, challenges like signal interference in mountainous terrains and the need for internet-connected gateways persist, Helium has helped transform paragliding safety to some extent.

Next up, let’s also look at some of the companies that Helium has worked with over the years and understand the metric that it’s helped move

→ Building and real estate: Automating water metering and billing

• Key example: Heliotics in Slovakia

• Problem: Manual water meter readings were labor-intensive, prone to errors, and failed to meet EU directives requiring remote readability by 2027

• Solution: Helium-powered LoRaWAN water meters enabled 24/7 remote data collection, automated billing, and real-time anomaly detection

• Impact:

  • 5X lower costs compared to WM-Bus solutions

  • 10-year battery life, reducing maintenance

  • 100% compliance with EU directives

→ Agriculture and climate tech: Optimizing irrigation for golf courses

• Key example: Greenmetrics in Portugal

• Problem: Inefficient irrigation led to excessive water usage, rising costs, and regulatory challenges requiring a 20% reduction in water usage in Algarve

• Solution: IoT sensors provided real-time soil data, optimizing irrigation schedules

• Impact:

  • 20-30% reduction in water usage (60-90M liters annually)

  • EUR 30,000 saved per course annually, with a 1.5-year ROI

  • Compliance with water regulations and enhanced sustainability

Smart cities: Early flood detection and prevention

• Key example: Greenmetrics in Lisbon

• Problem: Frequent flooding due to heavy rainfall lacked real-time monitoring, leading to property damage and delayed responses

• Solution: Helium-enabled LiDAR sensors and humidity monitors tracked water levels and sent real-time alerts to authorities

• Impact:

  • Alerts issued 15 minutes before flooding began, reducing damage

  • Improved infrastructure planning using historical sensor data

  • Faster response times, enhancing public safety

Environmental monitoring: Carbon sequestration and climate research

• Key example: OPEN in Liberia

• Problem: Liberia lacked accurate data on carbon capture, hindering reforestation efforts and access to carbon credits.

• Solution: IoT sensors monitored CO2 levels, temperature, and humidity to guide reforestation projects and support carbon credit applications.

• Impact:

  • Identified optimal tree species for carbon sequestration.

  • Secured carbon credits, incentivizing sustainable practices

  • Informed forestry education programs with real-time data

Tracking and logistics: Livestock guardian dog monitoring

• Key example: Texas A&M and LoneStar Tracking

• Problem: Monitoring dogs across vast ranches was costly and inefficient, risking injury or loss of the animals

• Solution: LoRaWAN GPS trackers provided real-time location and health monitoring, with alerts for abnormal behavior

• Impact:

  • Prevented $3,500 loss per dog by detecting issues early

  • Eliminated helicopter search costs

  • Improved livestock safety and pasture planning

Residential roofing: Preventing mold damage in homes

• Key example: Roof Tec in Washington, USA

• Problem: High humidity in remote homes caused mold growth and structural damage, with repair costs exceeding $40,000 per home

• Solution: Helium-connected sensors provided real-time temperature and humidity monitoring, alerting homeowners to abnormal conditions

• Impact:

  • Prevented costly repairs by detecting issues early

  • Enabled proactive maintenance, extending roof lifespan

  • Reliable monitoring even in areas with limited connectivity

Quick summary of some of Helium’s impact:

Helium’s expansion strategies

• Telefonica partnership: Piloted in Mexico City and Oaxaca, with plans to expand across South America, leveraging Helium hotspots for traffic offloading.

• DISH Network: First major telecom to adopt Helium’s decentralized hotspots as part of its 5G rollout.

• Discovery Mapping: Rewards users with MOBILE tokens for identifying coverage gaps, optimizing hotspot placement.

• New protocols: Expanding into WiFi, VPNs, and CDNs to create a "network of networks."

• Proposed ENERGY SubDAO: Aims to address renewable energy and decentralized power grids.

• MNTD and RAK Wireless: MNTD’s Light Hotspots reduce costs, while RAK Wireless supports onboarding with 50 million MOBILE tokens staked.

• Underserved markets: Focus on regions where traditional providers avoid infrastructure investments, offering affordable connectivity solutions.

What’s next for helium?

Helium is entering a transformative phase, focusing on streamlining its ecosystem, scaling networks, and expanding into new use cases. Key Helium Improvement Proposals (HIPs) help address governance, tokenomics, and technical scalability, shaping the network.

Below is a detailed breakdown of the major HIPs in progress/ recently concluded.

Let’s learn about a few of the recent HIPs as well.

HIP-138: Consolidating the helium ecosystem

• Redirects all rewards to HNT, eliminating IOT and MOBILE tokens to simplify tokenomics

• MOBILE tokens can be converted to HNT at a guaranteed rate (7,060 MOBILE = 1 HNT)

• Allocates unissued HNT to a MOBILE Growth Fund (1.3M HNT) and the MOBILE treasury (2.9M HNT)

• Burns 18.2B MOBILE tokens to reduce inflation and increase HNT value.

• Impact: Increases participant rewards by 40%, simplifies the ecosystem, reduces inflation, and funds MOBILE network development

• This is one of the most controversial proposal in my opinion, because this can lead to some major gaming since HNT <> Mobile swapping are guaranteed for a min amount, might introduce a few bad players to take advantage of this
  

HIP-128: Energy subDAO

• Introduces the ENERGY subnetwork by creating a VPP to incentivize renewable energy contributions like solar power generation and energy storage using distributed energy resources (DERs)

• Issues 250B ENERGY tokens, with allocations to investors (60B) and participants (190B)

• Enables IOT Hotspots to support energy services through software upgrades

• Impact: Expands Helium into renewable energy markets and supports sustainable practices
  

HIP-132: Scaling mobile mappers

• Opens MOBILE mapping participation to non-Helium Mobile customers, enabling mapping through third-party apps and in international markets

• Impact: Increases mapper participation, accelerates MOBILE network expansion, and improves coverage

HIP-134: Reward mobile carrier offload hotspots

• Rewards Hotspots that contribute to carrier offloading by transferring significant data volumes

• Impact: Drives Hotspot deployments, increases data offloading, and boosts HNT burns, scaling network utility

Here’s the current impact and growth career offloading has shown

HIP-110: Proxy voting

• Allows wallets to delegate voting power to other wallets to improve governance participation

• Proxies reset annually to keep governance active

• Impact: Enhances decision-making efficiency and governance engagement
  

These HIPs focus on simplifying Helium’s operations, enhancing participant incentives, and driving adoption in new areas like renewable energy and global connectivity

Closing thoughts

Helium has evolved into a leading decentralized wireless network, expanding from its IoT-focused origins to include 5G and upcoming protocols like energy and WiFi. By leveraging LoRaWAN technology, strategic partnerships with major telecom players like Telefonica and DISH, and innovative tokenomics, Helium is addressing connectivity challenges in underserved and remote areas. Proposals like HIP-138, which consolidate rewards into HNT, simplify the ecosystem and create a more focused growth strategy—though not without significant risks.

Helium’s impact is evident: it reduces the costs of deploying and operating networks, making solutions like IoT tracking, paragliding safety, and flood prevention more affordable and accessible. Features like dynamic pricing, boosted location rewards, and decentralized governance ensure Helium remains competitive in the fast-growing DeWi space.

Challenges persist, including managing operator rewards, maintaining hotspot engagement, navigating regulations, and competing with traditional providers. However, Helium’s first-mover advantage and ability to scale across diverse DePIN use cases position it as a formidable player in the space.

With a dedicated team that has been building the network for nearly a decade, it will be exciting to see how Helium continues to grow, especially as the market gains momentum. The next year holds significant promise for Helium’s network expansion and innovation.

Hope you had a great time reading as I did about Helium, thanks for making it till here - if you did please enjoy, want to drop any corrections/ suggestions or just chat more about Helium & the broader DePIN space, please do drop me a message on Twitter.

References

• The Generalist's take on Helium as the Network of Networks

• Helium Foundation Protocol Report

• Helium's Revolutionary Value - MoneroMR

• Helium's Evolution and the Value of Good Actors - MoneroMR

• Helium HNT - A Generational Opportunity - MoneroMR

• Telecom's Crucible Moment and DEWI Adoption - MoneroMR

• Minting M Helium Research Report (Sept 2021)

• IoT Devices Using the Helium Network - Smart Sight

• Tweet by CartmanGroyp

• Tweet by Greatgateholder

• Tweet by srcful

• Tweet by Austin Barack

• A Deep Dive into Helium Network - Medium

• State of Solana DePIN 2024 - Medium

• Introduction to Helium Operation - Wublock

• Helium HNT - CryptoNjal's Substack

• Switching to Helium Mobile - Tyson's Tech Substack

• TIP OpenLAN Case Study on Helium Network - Telecom Infra Project

• HeliumGeek: All Things Helium

• New Models for Utility Tokens - Multicoin Capital

• Overview of Decentralized Wireless - Insights4VC

• Comparative Insights on DeWi Giants (Helium, Wayru, etc.) - CryptoDaily

• What Helium Hotspots Earn Tokens - Helium Blog

• Helium: The People's Network - Medium

• Can Helium Beat ISPs and Starlink? - Cryptonary

• Tweet by Helium on Network Updates

• HNT Thesis - Sam C. Lewis Substack

• Helium Overview - Revelo Intel

• Helium 101 - Outpost Swisscom

• Tweet by FMGroupXYZ

• Tweet by HNT_Investor

• Tweet by Amir Haleem on Helium

• The Wireless Network That Will Connect - Joe Morrison Substack

• Tweet by Syndica_IO

• Tweet by Nick D Garcia

• Tweet by Helium on Technology

• Tweet by Superteam

• Tweet by Amir Haleem on Helium

• Understanding Helium - Messari Report

• How Helium Hotspots Earn - Medium

• Decentralized Evaluation of Helium Network - Swissborg

• Data Credits on Helium - Dune Analytics

• Helium's Potential Value - Pinnacle Substack

• https://dune.com/helium-foundation

• https://planner.hellohelium.com/stats?tag=Carrier+Offload&carrierTag=Total

• https://x.com/hopenothype_io/status/1859467174328590419

Disclaimer

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Some Blockcrunch VIP posts are written by contractors to Blockcrunch and posts reflect the contractors’ independent views, not Blockcrunch’s official stance. Blockcrunch requires contractors to disclose their financial exposure to projects they write about but is not able to fully guarantee no such conflicts of interest exist. Blockcrunch itself will not buy or sell assets it covers 72 hours prior to and subsequent to the publication of a piece; however, its directors, employees, contractors and affiliates may buy or sell assets prior to or subsequent to publication of any content and will make disclosures on a best effort basis.

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This post was brought to you by the Aptos Foundation, an organization dedicated to supporting the growth and development of the Aptos protocol and developer ecosystem. Aptos is the secure, scalable, and feature-rich L1 blockchain of choice for both developers and users—delivering the best performance, the highest throughput, and lowest latency.

Uniswap stands as DeFi's flagship protocol, being both the largest decentralized exchange (DEX) and one of the first platforms for users to buy tokens on-chain. Since its launch in 2018, the protocol has processed over $2.36 trillion in trading volume, has over 25 million unique addresses, with almost half a billion trades.

Today it commands approximately 37% of the total DEX market share, with daily active users consistently around 70 thousand, and is deployed on 12 networks including Ethereum, Arbitrum, Optimism, and Base. 

Founded by Hayden Adams, Uniswap received substantial backing from leading venture capital firms including Paradigm, Andreessen Horowitz, Polychain Capital, and more: 

• Seed Round (2019): $1.8M led by Paradigm

• Series A (2020): $11M led by Andreessen Horowitz

• Series B (2021): $165M led by Polychain Capital, valuing the company at $1.66B

The team has consistently demonstrated its ability to execute, with each version of the protocol introducing features that become industry standards. 

When V1 launched in 2018, it featured the groundbreaking concept of AMM using the constant product formula (x * y = k), enabling permissionless token swaps without traditional order books. In 2020, V2 added any-to-any token liquidity pools and swaps, flash swaps, and price oracles. In 2021, V3 launched concentrated liquidity, allowing liquidity providers to focus their capital within specific price ranges for greater capital efficiency.

V3 has generated over $2.4 billion in fees for liquidity providers since launch. Notably, the protocol itself has not taken any cut of these fees - all revenue has gone to liquidity providers. The protocol has the ability to enable up to a 10% protocol fee on all trading volume through the "fee switch," which, based on current volumes, could generate substantial protocol revenue if activated by governance. 

In October 2023, Uniswap Labs (the core development team driving protocol innovation) introduced a frontend fee where users interacting via its website UI will incur a fee of 0.25% (was increased to 0.25% from the initial 0.15%), generating over $83 million in fees. 

Now, with V4, Uniswap is pushing the boundaries further by introducing a hooks system that enables customizable pool logic, enabling more possibilities to create sophisticated DeFi applications by builders. We will deep dive into V4 and especially hooks later in this article. 

On 10 October 2024, Uniswap also launched Unichain on testnet, a Superchain L2 which aims to address key challenges in DeFi, promising significantly reduced gas fees and block times, unifying cross-chain liquidity, and more. 

In this report, we will explore Uniswap's latest developments and their implications for the future of DeFi, covering the following key topics:

1. What is Uniswap v4: Singleton design, hooks and use cases, and more

2. What is special about Unichain?

3. Competitive Landscape

4. Investment considerations

5. Thesis

Uniswap V4: Revolutionizing DeFi Infrastructure

Uniswap V4 represents a fundamental reimagining of decentralized exchange architecture. Think of it as upgrading from a basic calculator to a programmable scientific calculator – same core function, but with vastly more capabilities.

This major upgrade focuses on four key innovations: Hooks, Singleton Design, Dynamic Fees, and Flash Accounting, collectively positioning Uniswap as a more versatile and efficient DeFi primitive. Let’s explore these key innovations. 

1. Hooks: Customizable Pool Logic

Hooks are V4's most transformative feature, enabling custom logic to interact with a pool during its lifecycle. 

Let’s first understand the lifecycle of a uniswap pool: 

1. Uniswap pool is created with a fee tier

2. Liquidity is added, removed, or readjusted

3. Tokens are swapped in the pool

Hooks allow an action, such as calling any solidity code, to take place at anypoint of the pool's lifecycle, such as before or after a swap, or before or after adding or removing liquidity. For example, a hook can adjust fees before a swap happens, or reward liquidity providers directly with incentives upon adding liquidity. Here is a full list of the available functions so you get a better idea: 

• Before and after pool initialization (only invoked once during intialization)

• Before and after adding liquidity to a pool

• Before and after removing liquidity to a pool

• Before and after executing a swap

• Before and after donating to a pool

Let’s understand some of the key characteristics of hooks: 

1. External smart contracts: Hooks are external smart contracts attached to a Uniswap V4 liquidity pool, and they can be attached during creation or after

2. Pool-specific: Each liquidity pool in Uniswap v4 can specify which hook contract to attach during pool creation, but it can only be attached to one hook

3. Reuseable: While one pool can only have one hook, a hook can be attached to an unlimited number of Uniswap v4 pools, making it scalable 

4. Modular: Hooks extend the functionality of a liquidity pool without changing Uniswap v4’s core logic, saving on audit costs

Hooks open up all kinds of use cases and opportunities. Here are some examples:

• Custom Trading Logic:

  • On-chain limit orders that fill at specific prices

  • Time-Weighted Average Market Making (TWAMM) for large order execution

  • Volatility-based dynamic fee strategies

  • Whitelisted address exclusivity for compliance

  • Custom oracle implementations replacing default TWAP

• Advanced Liquidity Management:

  • Automated position adjustments

  • Yield optimization strategies without separate staking contracts

  • MEV protection mechanisms benefiting liquidity providers

  • Dynamic fee adjustment based on market conditions

• Integration Capabilities:

  • Direct connection with other DeFi protocols

  • Automatic deployment of out-of-range liquidity to lending protocols

  • Cross-protocol yield optimization

  • Custom oracle feeds for external protocols

Note: While hooks offer powerful customization options, users should exercise caution and verify the hooks used in pools they interact with, as malicious hooks could potentially be deployed.

Now that we have a better understanding of hooks, let’s go through a sample scenario of how a dynamic fee hook would work:

Hook Creation:

• Developer creates hook that tracks hourly volume

• Implements fee tier table (e.g. <$1M = 0.1%, $1M-$5M = 0.2%, >$5M = 0.3%)

• Includes logic to calculate rolling volume

Hook Attachment:

• Attaches to his own pool during creation

• Sets initial parameters and fee bounds

Hook Execution:

• Hook triggers before a swap takes place to check current volume

• Calculates appropriate fee tier

• Applies new fee to current swap

Hooks are the future of DeFi and there are already hackathons (or hookathons) focused on helping developers to launch hooks, supported by Uniswap Foundation’s grant. 

In other words, hooks are like an app store. Imagine Uniswap V3 as a smartphone with only pre-installed apps, in V4, developers can create Hooks to customize how you interact with Uniswap, similar to downloading apps to customize your phone's functionality. 

We will explore some example use cases of Uniswap hooks in a later section. 

2. Singleton Design: Unified Pool Management

Uniswap V4 introduces a singleton design, where all pool state and operations are solely managed by the PoolManager.sol contract. This helps to facilitates:

• Centralized Pool Operations: All liquidity pools are managed by a single contract

• Reduced Deployment Costs: New pools are contract states rather than entirely new contracts, which makes pool creation cheaper as it is not a contract deployment

• Improved Gas Efficiency: Optimizes multi-hop swaps and pool interactions

• Simplified Protocol Management: Streamlines upgrades and maintenance

This design choice reflects a mature understanding of blockchain's constraints and opportunities, optimizing for both performance and scalability.

3. Dynamic Fees: Market-Responsive Pricing

V4's dynamic fee system introduces market-responsive fee pricing mechanisms managed through hooks:

• Adaptive Fee Structure: Unlike the static fee tiers in Uniswap V3, V4 allow fees to be any number and be adjusted real-time based on market conditions and volatility 

• Frequent Updates: Fee updates can occur on swaps, blocks, or a scheduled interval 

• Optimized Efficiency: Better yield for LPs during different market conditions can attract more LPs which allows traders to have less slippage as well

• Enhanced Capital Efficiency: More precise fee capture during high-volatility periods

This feature represents a significant improvement over V3's fixed fee tiers, allowing pools to optimize for both liquidity depth and trading volume, opening many use cases, such as:

1. Volume-based fees: Higher fees during low-volume periods to compensate LPs

2. Time-based fees: Different fees during off-peak hours based on historical data

3. Arbitrage Penalty: Increase fees when arbitrage potential detected to discourage it

4. Momentum: Analyze price momentum and adjust fees based on trade direction

Note that Uniswap V4 pools determine their dynamic fee capability at pool creation and is immutable. For more info, read Uniswap V4’s dynamic fees here.

4. Flash Accounting: Gas Optimization

In Uniswap V3, token swaps required tokens to be transferred between pool contracts for intermediate steps via external calls, which was gas intensive (expensive). This was because each pool was its own contract and token transfers were needed for accounting. 

In Uniswap V4, it uses the singleton design where all pools are managed by a single contract, allowing it to leverage EIP-1153’s Transient Storage feature, aka Flash Accounting. This allows swaps and liquidity changes to update a single internal balance, resulting in only one set of token transfers once the final balance changes, optimizing transaction efficiency. 

This results in the following benefits:

• Balance Netting: Consolidates multiple token transfers into single, net settlements

• Optimized Multi-Hop Swaps: More efficient execution of complex trading routes

• Reduced Gas Costs: Significantly lower fees for complex operations

Example of a swap between V3 and V4: 

Uniswap v3​: Swapping ETH to DAI

1. ETH is transferred to ETH/USDC pool contract

2. USDC is withdrawn from ETH/USDC contract and transferred to USDC/DAI contract

3. DAI is withdrawn from USDC/DAI contract and transferred to the user

Now on v4​: Swapping ETH to DAI

1. Call swap() on ETH/USDC

2. Call swap() on USDC/DAI, with the credit of USDC from above as the input amount

3. User pays ETH and receives DAI, without calling the transfer function, saving gas

More use cases of Uniswap v4 Hooks

To emphasize how big of a gamechanger hooks can be, let’s explore some use cases to further illuminate the potential massive impact of hooks.

Yield Optimization for LPs: 

Current problem: Uniswap v3 concentrated positions regularly go out of range, not earning yield until the user withdraws the liquidity and creates a new concentrated liquidity position, turning the impermanent loss permanent, or until the price returns back to the range. 

Solution: Hooks could automatically deposit out-of-range concentrated liquidity positions into other protocols to earn yield, such as AAVE, Yearn vault, or even dynamically fetch the highest-yielding protocols that is whitelisted and deposit it there. 

It would also automatically withdraw back to uniswap once it detects that a swap has moved the price within the range again. 

This optimizes the yield that a user could earn while providing concentrated liquidity. 

Fixed-Rate Orderbook Lending: 

Current problem: DeFi lending protocols like Aave and Compound rely on variable rates based on utilization, leading to unpredictable yields for lenders and borrowers. Fixed-rate lending markets exist but often suffer from fragmented liquidity and complex implementations.

Solution: Uniswap v4 hooks, combined with dedicated lending contracts, could enable fixed-rate lending markets that leverage Uniswap's liquidity infrastructure. The core lending mechanics (collateral management, liquidations, loan tracking) would live in external contracts, while hooks facilitate the trading of zero-coupon tokens representing future claims on assets.

In this design, the hook's role would be focused and specific:

• Enable trading between current and future token versions (e.g., USDC and future USDC which act as zero coupon bonds)

• Direct trading fees to the lending protocol

• Validate trade parameters against lending contract conditions

• Enforce maturity and settlement rules during swaps

The external lending contracts would handle the heavy lifting:

• Manage collateral deposits and requirements

• Track loan positions and maturities

• Handle liquidations and settlement

• Mint and burn zero-coupon tokens

This hybrid approach could offer unique benefits by combining Uniswap's efficient price discovery and deep liquidity with fixed-rate lending functionality. However, the success would depend on careful economic design and gas-efficient integration between hooks and the lending contracts. 

In conclusion, Uniswap V4 hooks' application to lending markets demonstrates the potential for DeFi infrastructure to evolve beyond simple token swaps. By enabling order book-based lending, these innovations could significantly improve the efficiency and sophistication of DeFi lending markets, potentially bridging the gap between DeFi and traditional finance. 

ve(3,3) Implementation via Hooks:

Current problem: The success of Aerodrome demonstrates the effectiveness of ve(3,3) tokenomics in attracting sustainable liquidity through aligned incentives. However, protocols must currently choose between implementing a complete ve(3,3) DEX from scratch (high development cost, fragmented liquidity) or using Uniswap's established infrastructure (deeper liquidity, better capital efficiency, but less aligned incentives).

Solution: Uniswap v4 hooks could offer a hybrid approach. Rather than implementing complex ve(3,3) mechanics directly in hooks, the core ve(3,3) system (token locking, voting, bribes) would live in external contracts, while hooks provide a simple but powerful integration layer. The hook's primary role would be directing a portion of trading fees to the ve system, while external contracts handle the heavier computation of reward distribution and voting outcomes in separate processes.

This design could potentially offer unique benefits over traditional ve(3,3) DEXs - combining Uniswap V4’s dynamic fee capabilities with ve(3,3)'s aligned incentives. For example, LPs could benefit from both vote-directed rewards and dynamic fees that adjust to market conditions, while maintaining access to Uniswap's deeper liquidity and established integrations. 

If successfully implemented, such a system could attract liquidity from existing ve(3,3) DEXs back to Uniswap, as it would offer LPs the best of both worlds: ve(3,3)'s sustainable incentives and Uniswap's capital-efficient infrastructure. However, the success of this approach would ultimately depend on the technical execution and whether the added complexity of coordinating between hooks and external contracts provides enough benefits to overcome the simplicity of dedicated ve(3,3) protocols. 

What is Unichain: Uniswap's L2 Solution

Launched by Uniswap, Unichain is an L2 built on Optimism’s Superchain, which is a unified network of Ethereum L2s built using the OP Stack, which is a modular and open-source software stack built by Optmism and is also used by chains such as Base and Mode. 

As a quick refresher of an ETH L2, it is essentially a chain that regularly takes all the transaction data from the L2 blocks and posts them onto Ethereum L1, so that all the data needed to verify the L2’s state is available on L1, for anyone to verify and detect if there are any malicious behavior. 

However, Unichain would not be a generic purpose L2 as it is purpose-built is to enhance DeFi and cross-chain liquidity capabilities while maintaining Ethereum's decentralization principles. 

It is already live on testnet but there is no timeline for a mainnet launch yet, although it is expected to be within the next few months. Let’s explore its key features. 

Significant Cost Reduction 

Unichain achieves a 95% reduction in transaction costs compared to Ethereum L1 by moving execution to a Layer 2 solution as part of Ethereum's scaling roadmap. As an optimistic rollup built on the OP Stack, it inherits the general cost benefits of L2 scaling solutions while maintaining the security guarantees of Ethereum. The whitepaper indicates that these cost savings are expected to increase even further over time as the system evolves.

Key benefits:

• 95% reduction in transaction costs compared to L1

• Potential for further cost reductions over time

• Maintained security through L1 

• Makes DeFi more accessible to broader range of users

Unichain Validation Network (UVN) 

Similar to most other L2s, Unichain will be running with a single sequencer for improved efficiency. Sequencers act as the primary transaction processor for the L2, responsible for accepting transactions from users and ordering them into blocks and posts the data to Ethereum L1, in exchange sequencer fees. 

To mitigate the centralization issue of having a single sequencer, Unichain is implementing the Unichain Validation Network (UVN), a decentralized network of node operators that independently validate the latest blockchain state. 

Node operators that stake UNI as collateral (to incentivize their honesty) can become validators. While node operators are parties that maintain a copy of the chain for data availability, validators have an additional role.

Validators have to sign block hashes and publish attestations once per epoch, basically to verify that blocks are not malicious (i.e. double spending, transaction reordering, posting incorrect data to the L1, etc). In exchange for posting valid attestations, they receive validation fees based on their stake-weight. 

The UVN specifically addresses two major risks in single-sequencer rollups that affect cross-chain settlement speed:

1. Block Equivocation Risk: The possibility of a sequencer proposing multiple conflicting blocks at the same height, creating uncertainty about which block will be finalized

2. Invalid Block Risk: The risk of a sequencer posting an invalid block, leading to chain reversion when fault proofs are submitted

Key benefits of the validation network:

• Enable node operators to independently verify that blocks produced by the sequencer follow protocol rules

• Faster economically secure finality for cross-chain settlement

• Provide an additional security layer by catching any malicious activity from the sequencer

• Create economic incentives (validation fees) for decentralized verification of the network

Trusted Execution Environment (TEE) 

Unichain has partnered with Flashbots to develop a "Verifiable Block Builder" that uses a TEE.

A TEE is like a secure, locked room inside a computer's processor that runs code in complete isolation from the rest of the system and no one can view or tamper with what's happening inside. It is a way of proving to others that the code running inside hasn't been modified. The entire code execution can be verified and attested to publicly, and the block builder's code is open source, allowing anyone to verify what rules are being enforced.

This technology provides several critical protections for Unichain users:

• Fair transaction ordering to prevent front-running and back-running attempts by malicious actors

• Improved transparency in transaction execution through verifiable block building

• Limited ability for validators to manipulate transaction order for profit

• Effective mitigation of toxic flows through a dedicated validator set

Traditionally, sequencers on an L2 have full control over block building and can manipulate transaction ordering. Unichain separates these roles - block building happens in the TEE, while the sequencer's role is limited to broadcasting these pre-built blocks. Through execution attestations posted publicly, users can verify blocks were built inside the TEE according to stated policies. 

Here's how blocks are built on Unichain:

1. Transactions are streamed to the TEE builder

2. The TEE creates "Flashblocks" - which are block pre-confirmations and each block is split into 4 Flashblocks, enabling effective block times of 200-250ms

3. The sequencer then broadcasts these Flashblocks as pending blocks

These protections are particularly significant given that trading volume worth approximately $83B has been exposed to MEV activities like sandwich attacks on Ethereum alone, resulting in roughly $300 million (0.34%) being extracted by MEV searchers. 

Additionally, in the past year alone, MEV net profits reached approximately $832 million cumulatively across major chains, with Ethereum accounting for $383 million, Base $359 million, Arbitrum $55 million, and Optimism $35 million. This demonstrates that MEV extraction remains a significant concern across the DeFi ecosystem, not just on Ethereum. 

Uniswap’s Unichain with TEE and verifiable block building could protect users from such value extractive activities like sandwich attacks or liquidation frontrunning, or captured this value within their ecosystem, potentially saving hundreds of millions in MEV losses annually, instead of letting it go to external MEV searchers and validators. 

Key benefits of the TEE:

• Verifiable Execution: Through attestations, users can verify blocks were built according to stated rules

• Revert Protection: Simulates transactions during block building and removes any that would fail, reducing wasted gas fees

• Framework for Improvement: Provides foundation for future features like:

  • Encrypted mempool for pre-transaction privacy

  • Scheduled transactions

  • Private, verifiable computation through TEE coprocessor

• MEV Protection: Unichain's advanced block production system enhances market efficiency and mitigates MEV concerns to: 

  • Prevent predatory MEV extraction

  • Capture legitimate MEV opportunities

  • Redistribute the captured value to benefit users or the protocol

  • Create a more efficient and equitable trading environment

This is particularly important as it provides a transparent and verifiable block building process, enabling applications to capture and redistribute MEV to benefit users rather than having it extracted arbitrarily. 

It also gives institutional players a strong guarantee that their large trades won't be manipulated by the sequencer.

Optimism Superchain Integration 

Unichain leverages its position within the Optimism Superchain which ensures consistent message processing and verification across all participating superchains, to deliver unique cross-chain capabilities. For chains outside the Superchain, interoperability initiatives like ERC-7683 are being developed to improve cross-chain communication. 

The integration enables the following core features.

Native Message Passing

This enables cross-chain message passing between any superchain where messages can be passed atomically and verified within the same block, significantly reducing cross-chain transaction times. 

It also allows for communication between smart contracts on different rollups, meaning smart contracts can track and verify cross-chain state changes in real-time, enabling complex cross-chain applications.

Key benefits:

• Instant cross-chain message verification

• Smart contract interoperability

• Real-time state tracking across chains

Optimized Liquidity Flow

Unichain is specifically designed to eliminate liquidity fragmentation across different superchains through shared infrastructure and optimized message passing. 

By aggregating demand from multiple superchains, it allows LPs to deploy their liquidity solely on Unichain resulting in deeper liquidity instead of fragmenting it. 

Key benefits:

• Reduced liquidity fragmentation

• Lower cross-chain transaction costs

• Deeper, unified liquidity pools

• Seamless multi-chain accessibility

Universal Compatibility through ERC-7683 

Expanding beyond the Superchain ecosystem, this standard creates a unified protocol for cross-chain trade execution, enabling developers to build cross-chain applications through an intents-based bridge functionality. 

Rather than specifying exact execution paths, users can indicate desired outcomes, while the system handles the complexity of cross-chain routing and settlement. 

The implementation supports atomic settlement of cross-chain trades, reducing counterparty risk and improving efficiency, while providing a framework for complex operations like multi-hop trades or cross-chain liquidity provision that can be adopted by any blockchain network.

Key benefits:

• Standardized cross-chain interface

• Intents-based trade execution

• Atomic settlement guarantees

• Complex operation support

Benefits and Considerations

Unichain's introduction, alongside Uniswap v4's innovations, represents a transformative development that will likely reshape DeFi market dynamics. Let's analyze the key impacts across institutional and ecosystem participants.

Institutional Benefits

Unichain's architecture directly addresses two critical barriers to institutional DeFi adoption: trading infrastructure and risk management.

The combination of cost reduction, execution speed, and customizable environments through hooks creates an institutional-grade trading infrastructure previously unavailable in DeFi. Large players can now deploy sophisticated strategies that were previously impractical due to high gas costs and execution uncertainty.

Traditional finance firms have historically been hesitant to engage with DeFi due to uncertainty around transaction ordering and MEV exposure. The TEE-based block builder provides the transparency and predictability these institutions require, while the validation network and verifiable execution provide the assurances needed for significant capital deployment.

Moreover, the ability to customize trading environments through hooks enables institutions to implement their specific compliance and risk management requirements directly at the protocol level - a critical feature for regulated entities looking to participate in DeFi markets.

Key institutional benefits:

• Institutional-grade infrastructure with reduced costs and improved execution

• Enhanced transparency and predictability through TEE-based block building

• Customizable compliance and risk management through hooks

• Robust security guarantees via the validation network

DeFi Ecosystem Effects

Similar to how Uniswap V3 set a new standard for the DEX space, Uniswap V4 and Unichain are poised to create even more significant ripple effects across the DeFi ecosystem by extending beyond token swaps and liquidity provision.

The protocol's enhanced efficiency through Flash Accounting and Singleton Design substantially reduces transaction costs, which should attract higher trading volumes. Hooks enable Uniswap to offer specialized trading needs, such as address exclusivity, that were previously not possible, while dynamic fees allow pools to optimize revenue generation based on real-time market conditions.

The most immediate ecosystem impact will be on market efficiency through liquidity consolidation. Rather than being fragmented across multiple chains, liquidity can be concentrated on Unichain while remaining accessible to users across the Superchain. This consolidation should lead to better price discovery and reduced arbitrage opportunities between chains.

Market makers and liquidity providers benefit from this consolidation through reduced capital requirements and operational overhead. The ability to serve multiple chains from a single liquidity pool improves capital efficiency and potentially enables better yields for liquidity providers.

From a developer perspective, hooks represent a paradigm shift in how developers can interact with the protocol, enabling the creation of new DeFi primitives without the need for complex forking or external contracts. This significantly reduces barriers to innovation, allowing developers to implement sophisticated trading strategies and custom pool logic while earning a cut for providing the hook.

For end users, Unichain simplifies the increasingly complex DeFi landscape. Cross-chain operations become more straightforward, and users benefit from better execution prices due to deeper liquidity. The reduction in failed transactions and faster finality creates a more reliable trading environment that more closely resembles traditional finance platforms.

Key ecosystem impacts:

• Enhanced market efficiency through liquidity consolidation

• Reduced barriers to innovation through the hooks system

• Improved capital efficiency for market makers and LPs

• Better user experience with simplified cross-chain operations

• Creation of new DeFi primitives through extensible architecture

By bridging traditional finance requirements with DeFi innovation, Unichain could accelerate the maturation of the entire DeFi market while fostering a new wave of ecosystem growth through its extensible architecture.

Considerations

While Unichain and Uniswap v4 offer significant improvements, historical patterns suggest adoption may follow a gradual path. When Uniswap v3 launched, Uniswap v2 retained substantial TVL for an extended period due to its simplicity and lower gas costs for basic swaps. A similar pattern might emerge with v4, particularly given the added complexity of hooks and the learning curve for developers.

In the L2 landscape, new networks have historically faced challenges in gaining immediate traction despite technical advantages. Base, zkSync, and other recent L2s demonstrated that building significant liquidity and user adoption takes time, even with strong technical foundations. Unichain may face similar initial headwinds despite its unique value proposition.

Key considerations for market participants:

• Potential for gradual migration from v3 to v4 as the hooks ecosystem matures

• Initial period of liquidity fragmentation across versions and L2s

• Time needed for developer ecosystem to build and optimize hook implementations

• Importance of monitoring early adoption metrics and liquidity trends

These considerations don't detract from Unichain and v4's long-term potential but suggest market participants should maintain realistic expectations about adoption timelines. 

Another crucial factor to consider is the competitive landscape, particularly as protocols like Raydium, Balancer, and ve(3,3) DEXs like Aerodrome develop their own innovative features to capture market share. The next section will analyze how Uniswap's latest innovations position it against these key competitors. 

Competitive landscape

Let’s explore how Uniswap stacks up against other popular DEXs. 

Uniswap vs Raydium

Raydium combines AMM with order book functionality for hybrid trading and has emerged as a significant competitor in the DEX space being the premiere DEX on Solana. It’s TVL has surpassed $1.40b and it currently generates roughly $1 billion of volume and $3m in fees daily. 

The protocol has seen remarkable growth recently, largely driven by the success of Solana and pump.fun’s popularity and resulting trading activity. As a result, RAY token price has increased over 3x in the past month. It also significantly outperformed UNI so far this year with a 2.5x against UNI since September. 

Key Similarities:

• Both utilize concentrated liquidity for efficient capital deployment

• Similar base pool mechanics (AMM-based)

• Multiple fee tiers for different trading pairs

• Protocol fees that can be directed to value accrual

Key Differences:

• Raydium implements automatic RAY buybacks (12% of all trading fees) and its treasury directly receives 4% of fees from certain pool types, while Uniswap has a 0.25% interface fee on selected token pairs through Uniswap Labs interfaces, plus potential protocol fee switch (up to 10%, currently inactive)

• Uniswap's upcoming V4 introduces hooks for customizable pool logic

Raydium capitalizes on retail momentum through user-friendly interfaces and is the AMM DEX for pump.fun tokens while Uniswap focuses on institutional adoption through cross-chain infrastructure and customizable trading environments

The protocols' divergent approaches highlight different visions for DEX evolution - Raydium optimizing for retail user experience and token value accrual, while Uniswap builds extensible infrastructure for institutional and sophisticated DeFi use cases. 

Uniswap vs Aerodrome

Aerodrome has quickly established itself as a leading DEX on Base, with its TVL reaching $1.3b and generating around $800 million in volume and $500k in fees daily. Originally known as Velodrome on Optimism, the protocol is a fork of Solidly, which was created by Andre Cronje, often referred to as the 'godfather of DeFi', on Fantom chain. 

While Velodrome saw moderate success on Optimism, Aerodrome's launch coincided with Base's meteoric rise to become the fastest-growing and now largest L2, surpassing even Arbitrum in TVL. 

This explosive ecosystem growth, combined with Aerodrome's ve(3,3) tokenomics model, created a powerful flywheel effect. The model allows $AERO token voters to earn significant yield through bribes, which in turn incentivizes deeper liquidity and higher trading volume, helping Aerodrome overtake Uniswap as the dominant DEX on Base. 

As a result, AERO token price has nearly 3x since the bottom in September. It also significantly outperformed UNI so far this year with a 2x since September. 

Key Similarities:

• Both operate as decentralized exchanges with liquidity pools

• Support for permissionless pool creation

• Fee generation for liquidity providers

• Cross-chain aspirations (Unichain for Uniswap, upcoming Aerodrome expansions)

Key Differences:

• Aerodrome implements a ve(3,3) tokenomics model where $AERO holders can lock tokens for voting rights and direct liquidity incentives, while Uniswap maintains a simpler fee structure with potential protocol fee switch

• Uniswap V4 introduces hooks for customizable pool logic, while Aerodrome focuses on optimizing the ve(3,3) system

• Aerodrome targets sustainable liquidity through vote-directed emissions, whereas Uniswap relies on organic market dynamics and capital efficiency

• Aerodrome's primary focus is Base chain optimization and Coinbase ecosystem integration, while Uniswap aims for broader institutional adoption across multiple chains

The contrast in approaches reflects different strategies for DEX evolution - Aerodrome leveraging proven ve(3,3) mechanics for sustainable growth and aligned incentives, while Uniswap develops novel infrastructure through hooks and cross-chain capabilities for more sophisticated use cases. 

Uniswap vs Balancer v3

Balancer, another leading DEX protocol, currently holds $845.89M in TVL and averages around $65M in daily trading volume and generates approximately $19K in daily fees. Like Uniswap v4, Balancer v3 is expected to launch later this year with hooks being a key feature, and they have also conducted hookathons and maintain an open source hooks repo.

$BAL has underperformed $UNI by approximately 50% year-to-date. This underperformance can be attributed to several factors: unlike Raydium on Solana or Aerodrome on Base, Balancer wasn't positioned to capture the explosive growth of an emerging ecosystem. Additionally, despite its technical innovations, Balancer faces the challenge of competing directly with Uniswap in mature markets where network effects and liquidity advantages heavily favor the incumbent. 

Without a clear differentiating catalyst or new market opportunity to drive growth, Balancer has struggled to expand beyond its core user base, who already have access to deeper liquidity and lower slippage on Uniswap for most common trading pairs. 

Architectural Approaches:

• Balancer v3 adopts a modular architecture with distinct components (Vault, Routers, and Pools) where hooks are one part of a larger extensibility system

• Uniswap v4 uses a singleton design where hooks are the primary method of customization, with all functionality running through a single contract

Looking at the current Balancer v3 testnet hooks and hackathon projects, both Uniswap v4 and Balancer v3 developers are building a diverse range of applications that shows that both protocols enable similar end-user functionality, but through different technical approaches:

1. Fee Management

   • Balancer: Built-in pool creator fees and structured fee hierarchy

   • Uniswap: Fee customization through hook logic

2. Integration Complexity

   • Balancer: More structured but requires understanding multiple components

   • Uniswap: Potentially simpler due to consolidated design

3. Customization Methods

   • Balancer: Multiple customization points (Hooks, Routers, Rate Providers)

   • Uniswap: Primary customization through powerful hook system

For developers and users, both protocols will likely enable similar functionalities despite their architectural differences. The choice between them may come down to development preferences and specific use case requirements rather than capability limitations. 

Uniswap vs Camelot

Camelot has established itself as the dominant DEX on Arbitrum and Orbit chains, processing over $30 billion in trading volume and securing partnerships with more than 75 protocols. Starting in 2022 through community bootstrapping, Camelot has become the largest protocol exclusive to Arbitrum and has evolved into the first Orbital Liquidity Network, expanding its infrastructure across multiple Arbitrum Orbit chains. 

While Uniswap maintains its position as the largest DEX across all chains, Camelot's focus on Arbitrum and its Orbit ecosystem has allowed it to capture significant market share in this specific L2 ecosystem. Camelot's strategic positioning as an Orbital Liquidity Network, connecting different Arbitrum Orbit chains, provides a unique value proposition in the growing L2 landscape. The protocol has already deployed on 8 Orbit chains, creating a unified liquidity infrastructure for the broader Arbitrum ecosystem.

Key Similarities:

• Both operate as permissionless decentralized exchanges

• Focus on building cross-chain liquidity infrastructure

• Strong emphasis on ecosystem development and project support

• Commitment to decentralized governance and community ownership

Key Differences:

• Camelot exclusively focuses on Arbitrum and its Orbit ecosystem, while Uniswap operates across multiple L1s and L2s

• Camelot's Orbital Liquidity Network creates network effects between Arbitrum Orbit chains, whereas Uniswap's Unichain aims for broader cross-chain interoperability

• Camelot prioritizes real yield and sustainable tokenomics through GRAIL, while Uniswap maintains potential for protocol fee switch activation

• Camelot serves as a dedicated launch platform for Arbitrum projects, having helped over 10 protocols launch, while Uniswap focuses on providing universal liquidity infrastructure through hooks and customizable pools

• The upcoming Uniswap v4 emphasizes technical innovation through hooks, while Camelot focuses on ecosystem alignment and cross-Orbit chain connectivity

The contrast in approaches highlights different strategies for DEX evolution - Camelot optimizing for deep integration within the Arbitrum ecosystem and creating network effects across Orbit chains, while Uniswap develops generalized infrastructure that can be deployed across any EVM-compatible chain. Camelot's focused approach has allowed it to become a central hub for Arbitrum's DeFi activity, while Uniswap's broader scope positions it as a universal liquidity layer for the entire blockchain landscape. 

Quantitative Comparison

Despite being the market leader with a $5.65B market cap, Uniswap is actually underperforming in several key metrics:

• Raydium generates 72% higher fees ($982.6M vs $571.5M annually) with lower volume

• Raydium has 5x more daily active users (3.78M vs 711K)

• Both Aerodrome and Camelot show significantly higher volume per user ($12.3M and $6.24M respectively vs Uniswap's $827K)

Worth noting is Camelot's unique position:

• Highest fee per user ($5,991) after Aerodrome ($7,935), far exceeding Uniswap ($804)

• Most conservative market cap to TVL ratio (0.16) suggesting potential undervaluation

• Tightest supply with only 23.73% float vs industry average of ~50%

Interestingly, Aerodrome stands out for efficiency:

• Shows strong capital efficiency with $12.3M volume per user

• Maintains healthy market ratios despite being a newer entrant

These metrics suggest that while Uniswap maintains market leadership by size, newer competitors are showing superior efficiency metrics and user engagement.

Investment Considerations

Short-term Catalysts

Unichain: The upcoming launch of Unichain mainnet represents a potential watershed moment for cross-chain trading efficiency. With its innovative 200-250ms Flashblocks and verifiable block building system, Unichain could fundamentally reshape how cross-chain transactions are executed and verified. 

Uniswap v4: The deployment of Uniswap V4 stands as another significant near-term catalyst. Its introduction of hooks technology will enable developers to create customizable pool logic, potentially sparking a new wave of DeFi innovation. If the hooks system becomes a success, it effectively creates a new developer ecosystem around Uniswap, functioning similarly to an "app store" for DeFi applications. Combined with Unichain's unified infrastructure, this positions Uniswap to potentially become the default liquidity layer across multiple blockchain networks. Key metrics to monitor during the initial rollout include hook deployment rates, the variety of new use cases being built by developers, and the pace of liquidity migration from V3 to V4 pools. 

Long-term Value Drivers

Unifying Liquidity: Uniswap's V4 hooks architecture presents a compelling solution to the persistent challenge of fragmented liquidity. By enabling ve(3,3) and Unichain’s unified liquidity with the Superchain ecosystem, the protocol could become increasingly attractive to both liquidity providers and traders. 

Fee Switch: Uniswap has already generated significant revenue through its 0.25% interface fee in 1 year, placing it as a top 20 protocol for year-to-date revenue at over $60 million, and over $2.4 billion in fees for liquidity providers. The protocol fee switch could enable up to 10% of trading fees to accrue to the protocol, which would significantly increase revenue stream, making Uniswap the top DEX by revenue. However, this fee switch requires careful consideration of its potential market share. 

Regulatory support: Uniswap stands to be a prime beneficiary of Trump's pro-crypto presidency. His pledges to make the U.S. the "crypto capital of the planet," remove SEC Chair Gensler, and provide regulatory clarity align perfectly with Uniswap's upcoming V4, Unichain launch, and fee switch. With its institutional-grade infrastructure, Uniswap is also ideally positioned to capture the wave of institutional capital that could flow into DeFi under Trump's crypto-friendly administration.

Uniswap Wallet: The protocol's growing mobile presence, evidenced by over 500,000 wallet downloads, provides a direct channel for user acquisition and engagement. They could develop more features to tap on this large mobile userbase, such as having a debit card to make spending their on-chain money more easily. 

Market Positioning Considerations: While Uniswap's position as the largest DEX by market capitalization might suggest limited upside potential compared to smaller competitors, recent underperformance relative to other DEXs could present an attractive catch-up opportunity for investors. This dynamic creates an interesting risk-reward profile for potential investors considering entry points in the current market environment. 

Thesis: Uniswap is positioned for a DeFi bull run

Uniswap stands at a pivotal moment in its evolution, with V4 and Unichain representing not just technical upgrades but a fundamental reimagining of DeFi infrastructure. These innovations address three critical challenges that have historically hindered DeFi adoption: liquidity fragmentation, execution inefficiency, and limited customization.

The protocol's strategic advantages emerge from several key dimensions. First, its technical innovation and infrastructure development set new standards for the industry. V4's hooks system creates an extensible platform that could become the "app store" of DeFi, fostering a rich ecosystem of customized applications. Complementing this, Unichain's 200-250ms Flashblocks and TEE-based block building provide institutional-grade execution quality. Through Superchain integration, the unified liquidity approach positions Uniswap to become the default cross-chain liquidity layer.

From a market leadership perspective, Uniswap has demonstrated strong revenue potential, generating over $60 million in interface fees within just one year. The potential activation of the protocol fee switch could capture up to 10% of $2.4 billion in trading fees, significantly enhancing value accrual. Furthermore, its growing mobile presence, with over 500,000 wallet downloads, provides a direct channel for user acquisition and engagement.

A particularly significant catalyst on the horizon is the potential shift in the U.S. regulatory landscape. Trump's campaign promises to make the U.S. the "crypto capital of the planet," remove SEC Chair Gensler, and provide regulatory clarity align perfectly with Uniswap's trajectory. As the largest DEX with institutional-grade infrastructure, Uniswap is ideally positioned to capture the wave of institutional capital that could flow into DeFi under a more crypto-friendly administration. This regulatory tailwind, combined with Uniswap's technical innovations in V4 and Unichain, could accelerate institutional adoption significantly.

Institutional readiness forms another cornerstone of Uniswap's positioning. Enhanced transparency and predictability through TEE-based block building, coupled with customizable compliance and risk management through hooks, create an environment suited for institutional participation. The robust security guarantees via the validation network further strengthen its appeal to traditional finance players seeking to enter the DeFi space.

However, several factors warrant careful consideration. Historical patterns suggest adoption may follow a gradual path, with migration from V3 to V4 likely to occur over an extended period as the developer ecosystem matures around hooks. The protocol also faces competition from specialized platforms like Raydium and Aerodrome, which have carved out successful niches in specific markets.

Market dynamics present both challenges and opportunities. While current underperformance relative to smaller competitors might concern some observers, it could also present attractive entry points for investors. The protocol's success ultimately depends on broader DeFi market growth and institutional adoption, with regulatory developments potentially playing a crucial role in determining the pace of expansion.

Looking ahead, Uniswap's combination of technical innovation, market leadership, and institutional readiness positions it uniquely in the DeFi landscape. While near-term catalysts like V4 and Unichain launches could drive growth, the protocol's long-term value proposition lies in its potential to become the fundamental infrastructure layer for decentralized finance, particularly as the regulatory environment becomes more supportive.

As the industry matures and institutional participation increases, potentially accelerated by a more favorable regulatory environment, Uniswap's strategic positioning and continuous innovation make it a compelling force in shaping the future of decentralized finance.

The protocol's evolution from a simple token swap platform to a comprehensive DeFi infrastructure provider demonstrates its ability to innovate while maintaining security and decentralization. This balanced approach to growth, combined with its strong technical foundation, market position, and potential regulatory tailwinds, suggests Uniswap is well-positioned to lead the next phase of DeFi evolution. 

Disclaimer

The Blockcrunch Podcast (“Blockcrunch”) is an educational resource intended for informational purposes only. Blockcrunch produces a weekly podcast and newsletter that routinely covers projects in Web 3 and may discuss assets that the host or its guests have financial exposure to.

Some Blockcrunch VIP posts are written by contractors to Blockcrunch and posts reflect the contractors’ independent views, not Blockcrunch’s official stance. Blockcrunch requires contractors to disclose their financial exposure to projects they write about but is not able to fully guarantee no such conflicts of interest exist. Blockcrunch itself will not buy or sell assets it covers 72 hours prior to and subsequent to the publication of a piece; however, its directors, employees, contractors and affiliates may buy or sell assets prior to or subsequent to publication of any content and will make disclosures on a best effort basis.

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There’s plenty of hype and fleeting trends in crypto, but then there’s Aptos—a stable foundation built for the long term. While others chase buzz, Aptos is becoming the backbone of real-world asset tokenization and institutional finance solutions, offering the scalability and security needed for lasting impact.

The Aptos blockchain was launched in 2022 and captured attention quickly as it differentiated itself by using the Move programming language, which was developed at Meta. It's a game-changer that tackles the EVM's long-standing headaches of security and scalability. This technological foundation has allowed Aptos to achieve impressive performance metrics and attract a diverse ecosystem of developers and institutions in a short span. 

Some of Aptos' remarkable strides which establish it as one of the major networks include the following.

Massive User Adoption: Since launch, Aptos has onboarded an impressive 27 million unique users, showcasing its broad appeal and user-friendly approach. That's like onboarding the entire population of New York State!

Nearly 2 Billion Transaction Volume: With nearly 2 billion transactions processed, Aptos demonstrates its capacity to handle high-volume, real-world use cases.

Fast-growing TVL: The platform's TVL is over $700 million—6 times higher since the start of 2024—indicating growing confidence and investment in the Aptos ecosystem.

Fastest Layer 1: Aptos has recently emerged as the fastest Layer 1 blockchain, achieving sub-second transaction speeds without raising gas fees. With 99.99% uptime and gas fees up to 100 times lower than comparable L1 networks, Aptos combines exceptional performance with cost-efficiency, making it a standout in the blockchain space.

Advancing Global Financial Inclusion: Digital assets giant Tether recently announced plans to launch its leading stablecoin, USDT, on the Aptos network. This launch expands USDT's reach into emerging markets and represents a big step toward global financial inclusion. With unmatched transaction efficiency, low gas fees, and rapid processing, USDT on Aptos is poised to become the ideal choice for both micro-transactions and large-scale operations, reinforcing Aptos as a pivotal platform for digital finance.

These metrics paint a picture of a blockchain platform that is not just fundamentally sound but viable for large-scale adoption and ready for the future. 

As we look to the future, Aptos is well-positioned to be utilized for the growing interest in RWAs and enterprise blockchain solutions. The numbers behind this revolution are staggering:

• According to a 2022 BCG report, the market cap of tokenization of global illiquid assets is projected to reach $16 trillion by 2030, representing 10% of global GDP.

• A more conservative 2024 McKinsey analysis projects the total tokenized market capitalization could reach around $2 trillion by 2030.

These projections and real-world examples underscore the massive potential of RWA tokenization. As this sector continues to grow, platforms that can provide the necessary infrastructure, security, and scalability will be positioned to capture significant use.

In this report, we will explore Aptos and its role in the RWA tokenization revolution and enterprise solution, covering the following key topics:

1. RWA and Enterprise Solutions: Use cases and partnerships

2. Exploring Aptos Ecosystem: Overview of Aptos dApp Verticals

3. Technical Infrastructure: Sub-second latency, 99.99% uptime, and 100x lower gas fees 

4. Future Implications: Assessing Aptos’ potential impact on global finance

RWA Projects: Use cases and partnerships

Aptos is making significant strides in the real-world asset (RWA) tokenization space, with innovative projects like Ondo Finance and Propbase leading the charge. These initiatives demonstrate Aptos' capability to support complex, real-world use cases and its potential to revolutionize traditional industries.

Ondo Finance: Bridging Traditional Finance and DeFi on Aptos

Ondo Finance, a leading player in the tokenization of real-world assets (RWAs), has integrated with Aptos, marking a significant milestone in the RWA space. Aptos’ institutional-grade security, scalability, and flexibility provide the ideal foundation for handling complex financial instruments like tokenized US Treasuries.

This integration goes beyond technical implementation. Ondo's roots in traditional finance and its collaboration with BlackRock align perfectly with the growing institutional interest in RWAs, positioning Aptos as a prime destination for institutional-grade RWA solutions. By combining Ondo's financial expertise, BlackRock’s potential support, and Aptos' unique technology, this integration is poised to seamlessly bridge traditional finance and blockchain efficiency, unlocking new opportunities for on-chain and real-world asset integration.

Ondo’s integration with Aptos is a significant move towards advancing real-world asset tokenization on the blockchain. Key initiatives include:

USDY Integration: Ondo's tokenized US Treasuries product, USDY, is being natively integrated with Aptos.

Institutional Backing: Founded by Goldman Sachs Digital Assets team veterans, Ondo brings institutional-grade expertise to the Aptos ecosystem, working closely with established players like BlackRock.

Security and Efficiency: Aptos' Move programming language, with features like the Move Prover and pre-transaction transparency, provides the ideal foundation for Ondo's secure and efficient financial products.

Ecosystem Expansion: Ondo is also integrating with Thala, a DeFi protocol on Aptos, to enhance liquidity options and introduce USDY as collateral for CDPs.

By choosing Aptos, Ondo validates Aptos' potential in the RWA space and sets the stage for future innovations in tokenized assets and yield-generating products.

Propbase: Democratizing Real Estate Investment

One of the standout RWA projects on Aptos is Propbase, a tokenized property transaction platform that's transforming real estate into a modern, liquid asset class. Propbase's tokenization process is a comprehensive, end-to-end solution that blends traditional real estate practices with blockchain technology. 

The journey begins with a token application, where property developers submit their assets for tokenization. This is followed by a thorough due diligence phase and formal incorporation of the asset, ensuring all legal requirements are met coupled with an external audit to provide an additional layer of verification. 

Once approved, the Propbase Web3 DApp, secured by a systems administrator using ECDSA private keys, generates the property token. This token is then listed on the platform, allowing investors to participate. Upon reaching the soft cap, ownership is transferred to successful bidders, and yields are allocated through smart contracts and the entire process is recorded on the registry blockchain, providing transparency and immutability. 

What sets Propbase apart is the ability for token holders to sell and trade their assets directly on the platform, creating a liquid market for traditionally illiquid real estate assets. This sophisticated yet user-friendly system demonstrates how Aptos' blockchain infrastructure can support complex, real-world financial operations, potentially revolutionizing the real estate investment landscape.

Here's how Propbase is leveraging Aptos' blockchain to revolutionize property investment:

Instant Liquidity: Unlike traditional real estate investments, Propbase enables users to buy and sell property shares within minutes through its P2P marketplace.

Fractional Ownership: Propbase allows investors to purchase shares of properties for as little as $100, dramatically lowering the barrier to entry for real estate investment.

Global Access: The platform focuses on high-quality properties in Southeast Asia, with plans to expand to MENA, US, and EU regions, offering investors from all over the world global diversification opportunities after KYCing. 

Smart Contract Integration: Propbase utilizes Aptos smart contract capabilities to automate processes like rental yield distribution, enhancing efficiency and transparency. It also uses the Aptos blockchain as its registry, recording an immutable history of every transaction for every property and minimizing administrative overhead as there is no need to update the registry when investors make transactions. 

Regulatory Compliance: The project operates within legal and regulatory frameworks, with all properties securely stored in LLCs and ownership documents publicly available on the blockchain.

The Propbase tokenization model showcases how Aptos can support complex real-world applications, handling everything from property applications and audits to tokenization and marketplace listings. This end-to-end solution demonstrates Aptos' potential to transform traditionally illiquid assets into easily tradable digital tokens.

Libre: Bringing Blockchain-Based Funds On-Chain

Libre, a joint venture between Brevan Howard’s WebN group and Nomura's Laser Digital, has officially launched on the Aptos Network. Through this integration, institutional investors can trade tokenized real-world assets (RWAs) on the Aptos blockchain. 

Through Aptos Ascend by Aptos Labs, institutional investors using the Libre Gateway gain the reliability and compliance of traditional financial systems, combined with the decentralization, scalability, and security of the Aptos blockchain. This enables seamless trading, collateralized lending, and secondary market activities on-chain, while ensuring institutional-grade efficiency and security. This integration underscores Aptos’s role as a leading platform in bridging TradFi and DeFi to bring the world of finance on-chain.   

Franklin Templeton: Decentralizing Asset Management

Global asset management giant Franklin Templeton recently announced the launch of its onchain money market fund, FOBXX, on the Aptos network. Represented by the BENJI token on Aptos, Franklin Templeton’s FOBXX has surged past $20 million in subscriptions — signaling a rise in institutional blockchain adoption. The collaboration with the Aptos Foundation aims to increase the interoperability of real-world assets (RWAs) and treasury-backed assets across non-EVM blockchain environments, such as those utilizing Move. 

Notably, Franklin Templeton is the second-largest tokenized fund by market cap and the first and only fund to leverage blockchain technology for transaction processing. 

Enterprise Projects: Use Cases and Partnerships

Microsoft and Aptos Labs: Pioneering AI and Web3 Integration

Microsoft, a leader in AI technology, has formed a groundbreaking partnership with Aptos Labs, a team dedicated to developing products and applications on the Aptos blockchain. Microsoft's deep expertise in AI and cloud computing, combined with Aptos Labs' innovative approach to blockchain, creates a powerful synergy.

The partnership is uniquely positioned due to Aptos' high-throughput capabilities, which currently support up to 13,000 transactions per second with sub-second finality. This performance is crucial for AI-related applications that require rapid data processing and verification. 

By leveraging Microsoft's AI prowess and Aptos' blockchain technology, the partnership seeks to enhance the trustworthiness of AI-generated content while simplifying web3 development for a broader audience.

The collaboration between Microsoft and Aptos Labs currently focuses on the following areas:

Financial Services Solutions: Exploration of use cases including asset tokenization, payments, and Central Bank Digital Currencies (CBDCs), showcasing the potential for AI and web3 integration in finance.

Enhanced Development Tools: Integration with GitHub Copilot to support Move programming language development, including contract development, unit testing, formatting, and prover specifications.

Blockchain Infrastructure: Improving tooling and support for validators to run efficiently on Azure cloud infrastructure, enhancing the security and reliability of the Aptos network.

AI Model Training and Verification: Utilizing Aptos blockchain data to enhance the reliability and trustworthiness of AI-generated content, addressing AI's perception problem through blockchain's transparency and security.

By partnering with Aptos Labs, Microsoft validates Aptos’ potential in the AI space and sets the stage for future innovations at the intersection of AI and web3. This collaboration represents a significant step towards creating a more transparent, efficient, and accessible digital ecosystem that combines the power of AI with the trust and security of blockchain technology.

As Rashmi Misra, General Manager of AI & Emerging Technologies at Microsoft, stated, "The intersection of AI and blockchain is one of the most interesting combinations of emerging technologies and can generate transformational use cases." This partnership aims to democratize blockchain use, enabling seamless onboarding to web3 and fostering innovation in decentralized applications using AI.

This collaboration between Microsoft and Aptos Labs is poised to redefine the landscape of digital experiences, making web3 more accessible and user-friendly while maintaining the highest standards of security and performance.

Aptos Ascend: Revolutionizing Institutional Finance

Earlier this year, Aptos Labs launched Aptos Ascend, a platform that simplifies the deployment of blockchain solutions for financial institutions to improve how they create, deploy, and administer financial products. This groundbreaking initiative leverages partnerships with industry giants including Microsoft Azure, Boston Consulting Group (BCG), Brevan Howard, and SK Telecom. 

The collaboration between Aptos Labs and its partners through Aptos Ascend currently focuses on the following areas:

Advanced Digital Asset Controls: Enhancing security and compliance using zero-knowledge proofs, limiting transactions to pre-approved entities.

Sophisticated Network Controls: Offering fully permissioned networks with customizable features, allowing institutions to tailor governance and access controls.

High-Performance Infrastructure: Leveraging Aptos’ scalability to process millions of transactions daily, meeting the demands of modern finance.

Innovative Financial Products: Exploring use cases such as asset tokenization and pioneering new lending practices within regulated frameworks.

Strategic Partnerships: Combining BCG's network, Brevan Howard's investment expertise, and SK Telecom's regulatory-compliant Web3 technology to expand decentralized finance to institutional capital.

This initiative by Aptos Labs and its partners is poised to redefine the landscape of institutional finance, making blockchain technology more accessible and beneficial for traditional financial entities while maintaining the highest standards of security and regulatory compliance.

Aptos Ecosystem Overview

The Aptos blockchain has attracted a vibrant ecosystem, hosting a diverse array of decentralized applications (dApps) across various verticals. Let's dive into some of the key verticals that are flourishing on Aptos consisting of DeFi, Gaming, NFTs, and Social apps. 

Decentralized Finance (DeFi) dApps

DeFi applications on Aptos are leveraging the blockchain's high throughput and low latency to offer financial services that rival traditional systems in speed and efficiency. Let’s explore some notable dApps within this category. 

Aries Markets: Lending Market and More

https://ariesmarkets.xyz/

As the pioneer lending market on Aptos, Aries Markets has recently hit a milestone of 1 million users. By positioning itself as a comprehensive all-in-one DeFi solution, it tackles the fragmentation often seen in DeFi ecosystems. How? By combining borrowing, lending, and margin trading within a single platform.

Aries even have a unique feature called sub-accounts for risk isolation, aiming to provide a centralized exchange (CEX) experience within a decentralized framework. 

Key features of Aries Markets:

1. Lending and Borrowing:

   • Over-collateralized lending and borrowing

   • Users can deposit assets to earn yield or borrow against collateral

2. Margin Trading:

   • Offers spot margin trading

   • Users can capitalize on asset movements using borrowed funds from a shared liquidity pool

3. Token Swaps:

   • Integrated with various Automated Market Maker (AMM) markets

   • Enables efficient token swaps within the platform

4. Risk Management:

   • Unique sub-account feature for risk isolation

   • Allows users to manage multiple trading strategies separately

5. Security and Reliability:

   • Leverages Move's security features and tooling

   • Utilizes coverage testing and formal verification for institutional-grade security

6. Market Position:

   • Total Value Locked (TVL): $618+ million 

   • Recently achieved 1 million users

7. Technological Edge:

   • Built on Aptos, benefiting from its high throughput and low latency

   • Demonstrates how Aptos enables sophisticated DeFi applications that can compete with centralized alternatives

Aries Markets TVL of $250+ million shows' rapid growth and comprehensive offering showcase the potential of the Aptos ecosystem to support complex, user-friendly DeFi applications. Its success in attracting both liquidity and users highlights the increasing adoption of DeFi solutions built on high-performance blockchains like Aptos. 

Thala: Liquid Staking Superapp 

Thala Protocol stands out as a comprehensive DeFi ecosystem on Aptos, with a particular strength in liquid staking. While Thala offers multiple products, including a stablecoin (Move Dollar) and an AMM (Thala Swap), its liquid staking derivative (LSD) solution is a cornerstone of its offerings.

Key features of Thala's liquid staking:

1. Dual Token Model:

   • thAPT: A non-rebasing token pegged 1:1 with APT

   • sthAPT: A rebasing token that accrues staking yields

2. Enhanced Yield Distribution:

   • sthAPT receives 100% of its own validator rewards plus 80% of thAPT validator rewards

   • This model offers potentially higher yields compared to traditional LSD solutions

3. Flexible Staking Options:

   • Users can choose between immediate liquidity (thAPT) or maximized yields (sthAPT)

4. Incentive Structure:

   • 20% of thAPT validator rewards incentivize the thAPT-APT liquidity pool on Thala Swap

   • This mechanism helps manage thAPT supply and maintain its peg

5. Fee Structure:

   • 0.15% redemption fee (thAPT to APT)

   • 0.01% stake fee (thAPT to sthAPT)

   • 5% commission on staking rewards (12% total including validator commissions)

6. Integration with Broader DeFi Ecosystem:

   • Both thAPT and sthAPT can be used in other Thala products and across the Aptos DeFi landscape

Thala's TVL of $200+ million and its innovative approach to liquid staking demonstrate the growing sophistication of DeFi applications on Aptos. The protocol's ability to offer enhanced yields while maintaining liquidity highlights how Aptos' high-performance infrastructure enables complex financial products that can compete with traditional finance offerings.

Cellana: Ve(3,3) DEX & Launchpad

Cellana is a standout decentralized exchange (DEX), pioneering the implementation of the Ve(3,3) model in the Move language. Aiming to foster DeFi growth, this community-owned platform leverages a sustainable liquidity incentives model. Through these innovations, Cellana has positioned itself as a crucial liquidity pillar within the burgeoning Aptos ecosystem.

Key features of Cellana:

1. Ve(3,3) Model for Sustainability:

   • First Ve(3,3) DEX on Aptos, inspired by successful projects like Aerodrome

   • Balances incentives for LP and revenue for governance token holders

   • Addresses issues faced by traditional DEXes 

   • Balances token emissions with long-term price stability

2. Community-Driven Governance:

   • Empowers the community to influence token emissions and incentives

   • Allows projects to add their own incentives to liquidity pools to attract LP

3. Innovative Fee Structure:

   • Trading fees are directed to voters (CELL token holders)

   • CELL emissions attract and reward liquidity providers

4. Launchpad for New Projects:

   • Offers a platform for emerging protocols to bootstrap liquidity

   • Supports established protocols with cost-effective liquidity stimulation

5. Ecosystem Integration:

   • Aims to become a DeFi leader on Aptos

   • Serves as a gateway for protocols seeking innovative liquidity solutions

Cellana’s TVL of $70+ million makes it the DEX with the highest TVL, showing that a successful implementation of the Ve(3,3) model makes it more advantageous compared to traditional DEXs. By addressing common challenges in liquidity provision and token economics, Cellana aims to create a more sustainable and efficient DeFi ecosystem on Aptos. 

Merkle Trade: Gamified Derivatives

Merkle Trade stands out as a pioneering gamified perp platform. It offers a unique blend of high-leverage trading, gamification elements, and a user-friendly experience, aiming to make derivatives trading accessible and fun for users of all experience levels.

Key features of Merkle Trade:

1. Diverse Trading Options:

   • Offers crypto, forex, and commodities (gold and silver) trading

   • High leverage up to 1,000x (150x for crypto, up to 1000x for forex)

2. Advanced Trading Infrastructure:

   • Sub-second order execution with fair pricing and minimal slippage

   • Leveraging Aptos for low-latency performance

   • Decentralized, non-custodial trading without counterparty risk

   • Price feeds from Pyth Network for accurate and decentralized pricing

   • Charting solutions powered by TradingView

3. Gamified Trading Experience:

   • Bi-weekly Trading Seasons with unique themes and rewards

   • Level-up system with equipable items (NFTs) offering trading benefits

   • Weekly trading missions with varying difficulty levels and rewards

   • Loot box system with Merkle Gears and Shards as potential loot

   • Points system for seasonal trading incentives

4. Innovative Liquidity Provision:

   • Merkle LP acts as the counterparty to every trade

   • Synthetic trading model allows any asset with a reliable price feed to be listed

   • Soft and hard thresholds to prevent sudden liquidity draining

   • LP Circuit Breaker as an additional safety layer

Merkle Trade's implementation of gamified derivatives trading on Aptos showcases the blockchain's capacity to support complex financial products with high-performance requirements. By combining advanced trading features with engaging gamification elements, Merkle Trade aims to create a more accessible and enjoyable trading experience, potentially attracting a broader user base to decentralized derivatives trading on Aptos.

Echo: Pioneering Bitcoin Liquid Restaking, Bridging, and Lending on Aptos

Echo is a groundbreaking protocol that brings Bitcoin liquid restaking, bridging, and yield infrastructure to the Aptos ecosystem, marking a significant milestone in cross-chain interoperability and yield generation.

Key Features of Echo Protocol:

1. Secure Bitcoin Deposits: 

   • Echo enables seamless bridging of Bitcoin assets (uBTC) to the Aptos ecosystem, expanding the utility of BTC within a high-performance blockchain environment

   • Echo addresses trusted bridge issues by restaking BTC through Hash-Timelock contracts on the Bitcoin Layer-1, ensuring high reliability. A decentralized, community-based relayer system further secures the bridging process

2. Liquid Restaking: 

   • Users can stake their bridged Bitcoin assets to earn yield and receiving an LRT token, maintaining liquidity while participating in network security

3. Yield Infrastructure: Echo provides a comprehensive yield generation platform, allowing users to earn rewards through multiple avenues:

   • Bridging uBTC assets from Bitcoin to Echo (earning Echo and B2 points)

   • Depositing aBTC on Echo Lend for boosted APT yield up to 12%

   • Staking earned APT for additional Echo Points and 7% staking rewards

Echo currently has over 2,000 BTC of TVL worth over $160 million. Its integration with Aptos showcases the blockchain's ability to support complex cross-chain operations and innovative DeFi products. By bringing Bitcoin's massive market capitalization into the Aptos ecosystem, Echo opens up new opportunities for new groups of users, sustainable yield generation and capital efficient asset utilization.

This partnership not only enhances Aptos' DeFi offerings, it positions it as a key player in the broader blockchain interoperability landscape from BTC to EVM and non-EVM chains. As the crypto industry moves towards greater cross-chain collaboration, Aptos is proving itself to be at the forefront of this evolution, capable of supporting sophisticated protocols that bridge traditionally siloed blockchain networks.

Gaming, NFTs, and Social dApps on Aptos

Aptos has become a thriving ecosystem for gaming, NFT projects, and social dApps, leveraging the network's high performance and user-friendly features to create engaging experiences. Let's dive into some of the standout projects in this vertical.

Aptos Monkeys: The most popular NFT collection on Aptos

Aptos Monkeys has quickly established itself as one of the most popular and influential NFT collections on Aptos. Launched in October 2022, this collection of 10,000 unique monkey avatars has captured the imagination of the Aptos community and beyond. With over 150 traits ensuring each monkey is one-of-a-kind, Aptos Monkeys has created a strong sense of community and exclusivity with an active Discord server of over 30,000 members.

The project's success is evident in its market performance, with a floor price hovering around 20 APT and a total trading volume of approximately 600,000 APT. This success showcases the potential for NFT projects on Aptos while demonstrating the blockchain's ability to efficiently handle high-volume transactions.

Wapal: Dominating the Aptos NFT landscape

Wapal has emerged as the largest NFT marketplace on Aptos, revolutionizing the way digital assets are bought, sold, and traded. 

With a total trading volume of $2 million, the platform has become the go-to destination for NFT enthusiasts on Aptos. But it's not just about the volume – Wapal has fostered a thriving community of traders. The marketplace boasts 270,000 unique buyers and 200,000 unique sellers, a testament to its wide-reaching appeal and user-friendly interface. With 700,000 total trades executed and 260,000 unique NFTs listed, the platform showcases the Aptos blockchain's ability to handle high-volume, low-latency transactions easily. 

This level of activity demonstrates the popularity of NFTs on Aptos and its technical prowess in managing such a high throughput.

Aptos Arena: Pioneering the future of Aptos gaming

Aptos Arena is shaking things up with its no-nonsense skill-based approach to mixing shooters with crypto rewards. Pay a small entry fee to spawn, and take on other players. If you kill them you get to pocket their entry fee straight into your wallet. 

What's cool about Aptos Arena is how easy it is to jump in. No fancy gaming rig is needed - just fire up your browser on your phone, Mac, or PC, have some Aptos tokens in your wallet and you're good to go. No expensive NFT needed.

It’s not pay-to-win too. Whether you're a crypto whale or just dipping your toes in, everyone's got an equal shot at making some coin while they play. 

Aptos Arena is showing off what the Aptos blockchain can really do. Fast-paced action, real-time rewards, all without breaking a sweat. It's setting the bar for what Web3 gaming can be - fun, fair, and potentially profitable.

Kade: Social Media Gets a Blockchain Makeover

Enter Kade, a social network built on Aptos that's reimagining how we interact online. Picture Instagram or Twitter, but with a blockchain twist: all the crucial elements are on-chain. This means that everything from posts to usernames (which, interestingly enough, are actually NFTs) is recorded on the blockchain. Moreover, even interactions like likes, follows, and DMs are permanently etched into the Aptos blockchain.

Kade is also building an off-chain indexer called ‘docks’ which takes on-chain data, processes the events, and persists them into a relational database with an API that makes it easy to query this data. 

Kade is showing us what social media could look like in the Web3 world. It's taking the stuff we love about regular social apps and adding that extra layer of ownership and transparency that blockchain brings to the table. It's a glimpse into a future where you have more control over your online presence and your data isn't just floating around in some company's server.

So, if you're on Aptos and you're curious about what the future of social media might look like, Kade's worth keeping an eye on. Who knows? You might just end up preferring your social life on the blockchain.

Aptos Ecosystem Accelerator: Movementum Accelerator

Aptos Foundation is actively fostering innovation and growth within the Aptos ecosystem and has recently launched the Movementum Accelerator program and is focused on empowering Web3 innovators in the APAC region.

The Movementum Accelerator has a total grant pool of $1 million with finalists eligible for up to $150k in incentives and grants. Teams will receive customized mentorship training from experts in important topics such as product development, legal considerations, fundraising, and go-to-market strategies. They will also be introduced to over 200 VCs, communities, and partners, to ease the team’s funding and strategic partnership process. 

The program targets projects across infrastructure, gaming, DeFi, CeFi, and other innovative blockchain applications. 

Aptos Technical Infrastructure Explained

At the heart of Aptos' impressive performance lies its innovative use of the Move programming language and a unique blockchain architecture. This combination allows Aptos to achieve unparalleled speed, security, and cost-efficiency in the blockchain space.

For readers coming from Ethereum, here’s a cheat sheet explaining the similarities and differences between Ethereum and Aptos. 

The Move Programming Language

At the heart of Aptos' technical prowess lies Move, a programming language originally developed at Meta (formerly Facebook) for the Libra blockchain. As a statically-typed language, Move is designed with both safety and flexibility in mind, making it particularly well-suited for digital asset management.

Resource-Oriented Programming in Move:

1. First-class citizens: In Move, resources (which represent digital assets like tokens or NFTs) are treated as fundamental data types, similar to how integers or strings are treated in other languages. This means they have full language support and can be used in all parts of the program.

2. Linear logic: Resources in Move can only be moved, not copied or implicitly discarded. This ensures that digital assets can't be duplicated or lost accidentally.

3. Explicit resource management: Programmers must explicitly create, transfer, or destroy resources, making asset flow clear and reducing errors. 

4. Type safety: The Move compiler enforces strict rules about how resources can be used, preventing many common smart contract vulnerabilities at compile-time.

Practical implications:

1. Double-spending prevention: In Move, if a token is transferred, it's automatically removed from the sender's account. There's no way to accidentally or maliciously spend the same token twice.

2. Asset safety: Resources can't be accidentally lost or destroyed without explicit programming.

3. Intuitive asset representation: Developers can model complex digital assets more naturally, leading to clearer and potentially safer code.

4. Compile-time guarantees: Many errors that would be runtime issues in other languages are caught at compile-time in Move.

Comparing Move with other programming paradigms:

This resource-oriented approach in Move provides a more intuitive and safer way to handle digital assets, reducing the risk of many common blockchain vulnerabilities by design. Here is how Move compares with two popular blockchain languages, Solidity and Rust. 

Smart contract languages (e.g., Solidity for Ethereum):

Similarity: Both are designed for blockchain environments and digital asset management.

Difference: Solidity relies more on developer discipline to prevent issues like double-spending, while Move enforces these rules at the language level.

Systems programming languages (e.g., Rust):

Similarity: Rust's ownership system is conceptually similar to Move's resource handling.

Difference: Move's resource system is more specialized for digital assets and blockchain use cases.

Aptos' Blockchain Architecture

Aptos leverages Move within a novel blockchain architecture. Let’s dig deeper to understand what makes Aptos unique and stand out from traditional blockchains. 

Block-STM (Software Transactional Memory)

At the core of Aptos' blockchain architecture lies Block-STM, a component that enables parallel execution of transactions. This feature significantly boosts the network's throughput, setting Aptos apart from its competitors. 

Key Features:

1. Parallel Execution: Unlike traditional blockchain systems that process transactions sequentially, Block-STM allows multiple transactions to be executed simultaneously. As modern computers have multiple cores, Block-STM takes advantage of this by using all available processing power instead of just a fraction. It's like having multiple cashiers in a store, each serving different customers at the same time.

2. Speculative Execution: Transactions are executed speculatively, assuming they will not conflict with other concurrent transactions. Imagine multiple cashiers in a store, each serving different customers simultaneously.

3. Conflict Resolution: If conflicts are detected during execution, Block-STM efficiently resolves them and re-executes only the necessary transactions. For example if two chefs are reaching for the same ingredient, Block-STM identifies this and only the conflicting transactions are re-executed, not the entire block.

4. Memory Access Tracking: The system tracks read and write sets of each transaction, using this information to detect and resolve conflicts. 

How it Works:

1. Grouping: Transactions are bundled into blocks.

2. Assignment: Each transaction dynamically assigned to a different "worker" (think of these as individual processors) for optimal performance.

3. Parallel Processing: All workers process their transactions at the same time, keeping track of what data they're using.

4. Validation: Once processing is done, the system checks for any conflicts between transactions.

5. Conflict Resolution: If conflicts are found, only those specific transactions are redone.

Benefits:

• High Throughput: Enables processing up to 160,000 transactions per second under optimal conditions.

• Efficient Resource Utilization: Makes full use of multi-core processors.

• Scalability: Performance scales with the number of available CPU cores.

• Accessibility: Unlike static parallel execution, users do not need to specify any transaction information.

Recently, Aptos Labs unveiled Block-STM v2 which is set to change how Web3 thinks about parallel execution. v2 of the industry-leading parallel execution Block-STM is designed to scale efficiently across 256-core machines while improving parallel transaction processing and boosting throughput. This dynamic infrastructure allows Aptos to maintain low gas fees (~$0.00005/tx), even under massive network pressure. Already, Block-STM has set the standard for safe and simple parallel execution—in the Aptos ecosystem and beyond—with adoption from Polygon, Sei, Monad, Starknet, Flow and others that recognize this innovation for scalability and performance. 

Optimistic Concurrency Control

Optimistic Concurrency Control (OCC) works hand in hand with Block-STM to enable Aptos' high-performance architecture.

Key Concepts:

1. Optimistic Execution: Transactions are executed assuming they will not conflict, without acquiring locks.

2. Version Control: Each data item has a version number, used to detect conflicts.

3. Validation Phase: After execution, transactions are checked for conflicts based on their read and write sets.

4. Commit or Abort: Transactions without conflicts are committed; conflicting ones are aborted and re-executed.

Advantages:

• Reduced Locking Overhead: Improves performance in low-conflict scenarios.

• Increased Parallelism: Allows for higher concurrency compared to pessimistic approaches.

• Deadlock Prevention: Eliminates the possibility of deadlocks that can occur with lock-based systems.

This diagram illustrates how multiple transactions are grouped into blocks, each with its own timestamp. Each transaction is associated with a digest (a unique identifier), timestamp, and Proof of Availability Vector (PoAV). This structure allows for efficient parallel processing and conflict resolution, key features of Aptos' high-performance architecture.

Modular Architecture

Aptos' modular architecture is like a well-oiled machine, with each part doing its own thing. By keeping consensus and execution in separate corners, this setup brings some serious perks to the table:

Components:

1. Consensus Layer: Responsible for ordering transactions and agreeing on the blockchain state.

2. Execution Layer: Handles the parallel execution of transactions using Block-STM.

3. Storage Layer: Manages the blockchain state and transaction history.

Benefits:

• Flexibility: Allows for independent optimization and upgrading of each component.

• Scalability: Enables future implementation of sharding for horizontal scalability.

• Specialization: Each layer can be optimized for its specific function without affecting others.

Performance Synergy

The combination of Block-STM, Optimistic Concurrency Control, and modular architecture results in Aptos' impressive performance metrics:

• Sub-second Finality: Transactions are confirmed in less than a second, rivaling traditional payment systems.

• High Throughput: Aptos can process up to 160,000 transactions per second (TPS) in optimal conditions.

• Low Gas Fees: Fees are up to 100 times lower than comparable L1 networks.

• 99.99% Uptime: Ensuring reliable operation for critical applications.

Comparison with Other Blockchain Architectures

• Ethereum: Uses sequential execution, limiting throughput. Ethereum 2.0 aims to improve this with sharding, but still doesn't match Aptos' native parallelism.

• Solana: Also uses parallel processing but with a different approach (Gulf Stream). Aptos' Block-STM potentially offers better conflict resolution.

• Algorand: Focuses on fast consensus but doesn't have Aptos' level of parallel transaction execution.

Security Advantages for Aptos

In the Wild West of crypto, security isn't just important - it's make-or-break. We're talking about billions of dollars worth here, and hackers have already made off with a king's ransom through various exploits. Let’s understand how Aptos is solving the security challenges posed by other blockchains. 

Resource Safety

Resource safety ensures that digital assets (like tokens or NFTs) can't be accidentally or maliciously duplicated or destroyed. This feature was already mentioned earlier when talking about the Move programming language. 

Module Isolation

Module isolation restricts how different parts of the code can interact with each other, reducing the potential attack surface.

This is achieved by organizing code into modules with clear boundaries. Each module controls its own data and defines how other modules can interact with it. What’s important is that direct access to a module’s internal state is prohibited unless explicitly allowed. 

This limits the spread of potential vulnerabilities, makes it easier to audit code, and allows for more modular and maintainable smart contracts

Formal Verification

Formal verification is a technique to mathematically prove that a program behaves correctly according to its specification. 

Developers can write formal specifications for their smart contracts. Automated tools can then verify if the code meets these specifications. This process can catch subtle bugs that might be missed by traditional testing. 

This dramatically increases confidence in critical smart contracts, and is particularly valuable for high-stakes financial applications, as it can catch complex, edge-case bugs before deployment. 

Synergy of These Features

Together, these security features create a robust environment for blockchain development:

1. Resource safety ensures that assets are handled correctly.

2. Module isolation contains potential issues and simplifies auditing.

3. Formal verification provides mathematical certainty about contract behavior.

This combination addresses many of the vulnerabilities that have plagued other blockchain platforms, making Aptos an attractive option for enterprise and financial applications where security is paramount. 

Comparison with Other Blockchain Platforms

• Ethereum (Solidity): Lacks native resource safety and module isolation. Formal verification is possible but more challenging.

• Cardano (Plutus): Offers similar security features but with a steeper learning curve.

• Rust-based chains (e.g., Solana): Provide memory safety but lack Move's specific optimizations for blockchain use cases.

Move's security features in Aptos represent a significant advancement in blockchain security, addressing many of the vulnerabilities that have led to high-profile hacks and losses on other platforms.

Future Directions

Looking ahead, it's clear that the minds behind Aptos have their eyes firmly on the horizon. Their architecture isn't just built for today - it's primed for the future. 

Here's what we might expect:

1. Sharding: The modular design allows for potential implementation of sharding for even greater scalability.

2. Hardware Optimizations: As hardware improves, Aptos can take advantage of increased cores and memory for better performance.

3. Adaptive Execution: Future versions might dynamically adjust execution strategies based on transaction patterns.

This architecture positions Aptos as a highly scalable and efficient blockchain platform, capable of handling the demands of enterprise-grade applications and large-scale DeFi operations.

Thesis: Aptos is Uniquely Positioned to be the Blockchain for RWAs and the Future of Finance

As we look towards the future of blockchain technology, Aptos stands out as a formidable contender in the race to become the premier platform for Real World Assets (RWAs) and institutional solutions. With its impressive technological foundation, growing ecosystem, and strategic integrations, Aptos is well-positioned to capture a significant share of the burgeoning RWA market, projected to reach trillions of dollars by 2030.

Aptos' achievements speak volumes:

• A thriving user base of 22 million unique users

• Sitting around $550 million in Total Value Locked (TVL), nearly quadrupling since the start of 2024

• Processing of over 1 billion transactions, demonstrating robust network activity

These metrics underscore Aptos' rapid growth and adoption, setting the stage for its expansion into RWA tokenization and institutional blockchain solutions.

The blockchain's innovative use of the Move programming language, coupled with its high-performance architecture featuring Block-STM and Optimistic Concurrency Control, enables Aptos to deliver unparalleled speed, security, and cost-efficiency. With sub-second finality, 99.99% uptime, and gas fees up to 100 times lower than comparable L1 networks, Aptos is uniquely equipped to handle the demands of institutional-grade applications.

Strategic initiatives like Aptos Ascend, developed by Aptos Labs in collaboration with industry giants such as Microsoft, BCG, and Brevan Howard, position the blockchain as a bridge between traditional finance and the world of decentralized technologies. This institutional-ready financial suite exemplifies Aptos' commitment to meeting the complex needs of enterprise clients while maintaining the benefits of blockchain technology.

In the realm of RWAs, integrations with projects like Ondo Finance and Propbase showcase Aptos' potential to revolutionize asset tokenization, from US Treasuries to real estate. This not only validates Aptos' capabilities, it paves the way for broader adoption of blockchain technology in traditional finance.

As the blockchain landscape evolves, Aptos' combination of technological prowess, strategic partnerships, and a vibrant ecosystem spanning DeFi, gaming, NFTs, and social applications positions it at the forefront of the next wave of blockchain innovation. With its focus on scalability, security, and real-world utility, Aptos is not just participating in the future of finance – it's actively shaping it. 

Disclaimer

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This post was brought to you by the Aptos Foundation, an organization dedicated to supporting the growth and development of the Aptos protocol and developer ecosystem. Aptos is the secure, scalable, and feature-rich L1 blockchain of choice for both developers and users—delivering the best performance, the highest throughput, and lowest latency.

Bitcoin on Solana - that’s Ore for you. Reigning in a new era of experimentation on Solana, Ore explores the possibilities of deploying a Proof-of-Work (PoW) contract on Solana, a Proof-of-Stake (PoS) chain. This seemingly unique architecture took the industry by storm, with Ore’s popularity skyrocketing upon its launch in April, becoming the top-used Solana application in record time.

 Ore isn’t just making waves, it’s causing tsunamis. And I mean that as the overwhelming mining activity on Ore caused Solana to face chain-wide congestion, with users facing a high volume of failed transactions (throwback to 2021 days). Eventually, Ore v1 had to be paused. But this was not the end, as Ore v2 is now back with improved mechanism designs, a $50,000 victory from the Solana Renaissance Hackathon, and a $3 million fund raise.

Despite the improvements in v2, Ore’s price has been on a downward trend as shown above. Is this the end of Ore? This article seeks to answer that by diving into the architecture of Ore, analyzing its traction, the potential use cases (a building block of PayFi, a critical piece to decentralized and efficient AI), and questions whether this is really the next Bitcoin or just bare metal.

The Origin of Ore

Ore was founded by a pseudonymous developer known as HardHat Chad (who distributed hard hats during Token2049 as merch - definitely unique). In an interview with Empire, HardHat chad shared that the idea stemmed while he was brainstorming around the possibilities of bringing Bitcoin onto Solana. Going back to Q1 and Q2 2024, the market saw an influx of new projects as well as significant price increases of projects within the Bitcoin ecosystem - primarily Runes and Ordinals, widely perceived as NFTs (non-fungible tokens) on Bitcoin.

Following this wave of attention that fell upon the Bitcoin ecosystem, multiple projects explored the potential of bringing Bitcoin assets onto either Etheruem or Solana. Some examples include Zeus Network and Pups. HardHat Chad on the other hand, employed a different approach from these ‘bridges’, and thought about re-writing Bitcoin as a smart contract to be deployed on Solana. Instead of bringing the Bitcoin over, build the Bitcoin. HardHat Chad also highlighted that the main aim of doing so was to reinvent the fair launch meta, with an aim to realize Bitcoin’s original vision of being a currency that everyone can mine and use for transactions.

The Team Behind Ore

HardHat Chad, alongside his co-founder and teammates are part of an entity known as Regolith Labs, which is in charge of maintaining Ore’s software. In addition to Ore, Regolilth Labs is also developing other software tools, with one recent example being Steel - a modular framework for building smart contracts on Solana.

With the traction it has received for Ore, Regolith Labs raised a $3 million round led by Foundation Capital, with significant support from Solana, with the round seeing participation from Colosseum (powers Solana’s online hackathons) and Solana Ventures. Nonetheless, HardHat Chad made sure to keep to his promise of creating a fair system for Ore, and no investors were allocated $ORE.

With an understanding of the origin of Ore, let’s transition into the mechanism of Ore - the realization of HardHat Chad’s ideation.

Ore’s Mechanism

At the heart of it, Ore utilizes a PoW mechanism, similar to Bitcoin where miners are required to solve computational puzzles to earn $BTC. The architecture is designed in a manner where Ore is able to leverage Solana’s consensus, and inherit the corresponding security.

In Ore, each miner is being assigned a custom computational challenge. As long as miners are able to provide a valid solution to the challenge issued to them within a minute, they are guaranteed a portion of the 1 $ORE that is being generated every minute. Miners that submit hashes more frequently than required will likely encounter errors and higher fees. This serves as a sybil disincentive to those that spam the network.

The chances of earning rewards are dependent on the hashpower, which refers to the computational power within the mining device. A higher hashpower indicates greater computational capabilities which increases the chances of miners finding a number of higher rarity, yielding them a higher reward.

With a high level understanding of the mining mechanism of Ore, let’s dive into the key architecture features, including it’s novel hash function, and sybil disincentives for upholding network integrity.

DrillX Hash Function

At the heart of Ore lies DrillX, an innovative hash function that builds upon the foundation of Equix, which was built to circumvent DOS (denial of service) attacks. Equix, in turn, is a variation of Equihash, an AISC-resistant algorithm that was previously used by the likes of Zcash.

DrillX helps fulfill HardHat Chad’s vision of democratic mining through an unique feature known as ‘memory hardness’. This feature allows Ore to be CPU-friendly, making it possible for everyone to mine from even a simple smartphone or laptop. This distinctive feature differentiates Ore from the traditional PoW assets, where large entities could utilize specialized hardware (e.g. ASICs) to maximize their mining earnings. In particular, DrillX is non-parallelizable, this means that even if an individual were to specialize a chip, or string together a series of strong GPUs / ASICs together, the improvement in hashpower will be meagre. 

In addition to mining inclusivity, DrillX’s reliance on memory hardness over raw computational power (as with traditional PoW) significantly reduces the energy consumption of mining $ORE. This power efficiency is a breakthrough given Bitcoin’s infamous reputation when it comes to massive emissions generated from mining rigs.

Immutable contracts

In the initial phases of launch, the Ore smart contract will be kept upgradable. The goal is to eventually freeze the contract, and ensure that it becomes immutable, similar to Bitcoin. This ensures that all data within Ore is stored permanently, and cannot be tampered with. Nonetheless, there might be emergency situations in the early innings of the launch that may require a change in the smart contract, which explains the founder’s choice to keep it upgradable till mining dynamics have stabilized. 

Some may argue that this is not in tandem with ‘Bitcoin’s vision of being immutable’. But it’s worth noticing that if the contracts were immutable to begin with, the Solana network might just have continued to be congested till this day, should Ore had no ability to amend the contract and change the mining mechanism to mitigate the congestion. Such can be thought of as ‘training wheels’, which are important to stress-test the system.

Phases of Development

Ore v1

On April 2nd, 2024, Ore was born - a PoW network implemented on top of Solana. The concept of Bitcoin on Solana quickly latched onto people’s heart, and the crowd mining Ore increased rapidly. Here are some statistics:

• Ore program received 1.58 million transactions in 24 hours

• Ranked 2nd in contributing to Solana transaction count within 48 hours

• Became the most used program on Solana within a week from launch as shown below:

Holding true to the promises of a fair launch, there was no pre-mined supply or insider allocation for Ore. The Ore smart contract is also open source to ensure transparency and fairness.

Nonetheless, all these achievements came with their fair share of downsides.

1. Solana Congestion

   This was a result of v1’s mining algorithm being too easily gameable. Participants were spamming Ore with a large number of transactions in hopes of landing a transaction, and eventually getting rewarded. Nonetheless, this spam resulted in Solana being congested, and an increase in failed transactions, as shown below.

2. $ORE’s Price Downfall

   Mentioned in the beginning of this particle, the $ORE price has been decreasing since it’s launch. This is mainly due to the lack of utility of $ORE, which prompted miners to instantly sell. In addition, Ore v1 was launched with unlimited supply, which contributed to severe inflation and potentially contributed to the decrease in the ORE price.

As a result of the above issues, $ORE mining was paused shortly after its launch on April 16th, 2024. This was decided after a vote through Realms.

Ore v2

Following the network pause, the team worked on multiple mechanism improvements, and eventually resumed mining on August 6th, 2024, with the following new features:

1. DrillX Hash Function for Fairer Mining

   This has been described in detail in the earlier section ‘Ore’s Mechanism’. At its core, DrillX aims to enhance the fair distribution of mining rewards by democratising mining, which can be carried out even on phones and laptops.

2. Supply Cap

   A supply cap of 21 million $ORE was introduced. This created an element of scarcity for $ORE, which was supposedly meant to protect holders from dilution over the long term, and reduce selling pressure.
   
   Keeping a rate of 1 $ORE distributed per minute, all ORE is slated to be mined by 2064.

3. Staking Multiplier to Drive $ORE Utility

   To tackle the selling pressure encountered with v1 (evident with an approximate 90% drawdown in price), v2 introduced $ORE staking. Users that stake $ORE will be able to boost their mining rewards through a staking multiplier. A multiplier creates a compounding reward curve, allowing stakers to scale their $ORE holdings much more rapidly. In addition, miners that stake will get prioritized access to leaders, increasing the chances of their hash submission being included. These new features create a demand sink that incentivizes people to hold onto $ORE.
   
   Additional efforts have been put in to ensure that the staking rewards cannot be gamed. In particular, the multiplier is only available to miners that actively submit valid hashes consistently. An individual that takes a flash loan to mine and stake will not be eligible for the multiplier.
   
   It was mentioned by HardHat Chad in an interview that the miner with the most stake will be receiving a 2x multiplier, while other miners will receive a multiplier between 1x to 2x, proportional to their stake amount. To this, I’ve got two main concerns:

   1. What is contributing to the multiplier? Is it going to be sustainable?

   2. The multiplier might not be sufficient to encourage miners to stake $ORE. Miners, especially those with a smaller quantum of $ORE, will likely continue to sell to pocket the profit

Thus, it remains to be seen as to whether the staking multiplier will be able to mitigate selling pressure.

Following the launch of v2, all v1 $ORE will be upgraded to the new $ORE with the following details:

• Optional, opt-in process that has to be initiated and signed by holders

• v1 $ORE will be burnt to mint the new $ORE in a 1:1 exchange rate

• 1-way upgrade

• Upgrade will be open for 3 months till November 2nd, 2024

For folks that are looking to upgrade their tokens, they can do it through either of these methods:

• Through the web page, guide can be found here

• Through a blink by Dialect

Analyzing Ore from a Quantitative Perspective

From a high-level overview, the improvements made in v2 have been successful in reducing the spam on the Solana network, resulting in higher successful transaction rate. Nonetheless, it seems that efforts to encourage miners and promote the utility of $ORE have not been fruitful, with the network seeing a decrease in the number of unique active miners.

Failed Transaction Rate

As seen in the figure below, v1 saw a large proportion of failed mining transactions, where sometimes there are twice or more failed transactions than successful transactions. Even when transactions fail, they use up compute units, resulting in blocks being filled with failed transactions. This inefficiency was the cause of Solana’s congestion in April 2024 when Ore first launched.

With the mechanism improvements made in v2 to prevent spam, Ore saw a significant increase in successful mining transactions.

Number of Active Miners

Surprisingly enough, the number of unique miners per hour since has been decreasing drastically since v2’s launch, dropping by close to 93% in close to 2 months. This seems to inculcate that the mechanism improvements made to increase $ORE’s utility and improve the attractiveness of $ORE mining rewards might not have pulled off its intended effect.

Mining Difficulty & Mining Rewards

Since the launch of v2, the mining difficulty has been on the rise, seemingly reaching a plateau in the month of September. However, this is a slightly strange phenomenon, given that there are fewer unique miners per hour, as highlighted above, it would have been expected that the difficulty will decrease to allow successful mining, corresponding to Bitcoin’s ‘Difficulty Adjustment Algorithm.’

Yet, it seems like there’s an inverse relationship between number of unique miners and difficulty of $ORE mining. This could potentially indicate that the remaining miners own devices with higher hashpower, increasing the average hashpower present within the mining network. Thus, the average difficulty increases given the increase in capability of miners to search for hashes.

Ore Price: Up and Down

Within a short span of 5 months, $ORE has encountered its fair share of ups and downs. The price of $ORE increased significantly from $350 on April 9th by an approximate 70% to the highs of $1,200 on July 30th. But has since then come down from the highs, with prices decreasing by almost 95%.

The high selling pressure is evident from the steep drop in price and this raises concerns as to whether Ore’s efforts in enhancing yield (through staking multipliers) is a sufficiently strong enough strategy to incentivize holding $ORE.

The Value of Ore: Gold, Silver, or Just A Metal?

Is Ore just a gimmick, chasing the trends with Bitcoin on Solana, or is there merit in what HardHat Chad is trying to build? Below are two examples of how Ore could play a pivotal role in enhancing the usage of Solana.

1. Powering PayFi Solutions on Solana

   In recent times, Solana has seen partnerships with financial giants including PayPal, Visa, and Huma Finance. The core concept of a PayFi (payment financing) network revolves around bringing dollars onchain, and leveraging blockchain to move these dollars in seconds, without having to suffer huge spreads or costs. The main element making this possible is stablecoins.
   
   Presuming you are sending money overseas, instead of having to go to the remittance centre, pay a hefty cost and wait for 3 - 5 business days, you can do the following on the blockchain:

   1. Key in the wallet address of the recipient

   2. Set transaction amount and send

   3. Within seconds, the recipient receives the payment

   
   For this above scenario to hold true and be widely adopted, it is important that Solana has sufficient blockspace at all times to handle the transaction load. In addition to the immense transaction load, it is important to ensure unwavering uptime for transactions to go through at all times.  This is where Ore can potentially play a part. By mining blockspace on Solana, Ore is essentially creating a reservoir of transaction processing capacity that could be leveraged to support this financial activity. Ore could potentially be the backbone to support Solana’s burgeoning financial applications.

2. Fundamental Piece to AI Use Cases

   As artificial intelligence (AI) continues to evolve at rapid speeds, there is the potential that open-source AI models may face censorship in the future. It is of critical importance that a solution is built to verify AI inferences and models.
   
   Imagine the following

   1. You want to find out whether there are pizzas with pineapples as a topping

   2. You query an AI model that could be either close-source or open-source, but censored

   3. As a matter of fact, there are pizzas with pineapples. But you don’t have insights as to how the model was trained, or the validity of the inference

   4. You receive an answer that there are no pizzas on earth with pineapples - which is wrong

   
   Ore’s PoW network can serve as the verification method for such scenarios. Its’ computational network can be integrated into the various protocols to run proofs to validate that the inferences were run in a censorship-resistance, accurate, and fair manner. In addition, people often claim AI models to be black boxes, as the training process is often unseen. Ore’s PoW network can also be used to prove that models have been trained accordingly based on accurate and legally-obtained data.
   
   In addition, it’s worth noting that the AI vertical has been seeing increased attention in Small Language Models (SLMs), which are models that are trained for specialised tasks, and bring with them faster inference times. An important feature of SLMs are the lower level of compute required for it to run.
   
   Ore has the potential to propel the onset of Edge AI, where SLMs are directly deployed on edge devices, with a simple example being, phones. This is how the computational power used in $ORE can potentially power such a paradigm:

   1. A phone is mining $ORE

   2. $ORE is a proof of compute, which can be used to pay for computation in SLMs that are embedded within the phone

   3. Natural language input can be processed real-time with or without internet given that the data is readily available in the phone

There are huge merits to such a system:

• Data privacy given that it does not have to rely on cloud systems

• Near-instant processing given SLM’s features and readily available compute

• Users can get rewarded based on the data they contributed to the SLM, since it is clear that it comes from the user’s device

There has been experimentations similar to this by Microsoft and Exo Labs, which has managed to clinch wins at hackathons. This is an exciting realm that Ore has the potential to drive mass adoption.

Risks

As the founder calls it, Ore is an experiment. With it come certain risks.

1. Platform Risk

   Despite the improvements made to the mechanism to prevent spam, it still does not entirely omit the potential of Solana being congested in the future by Ore mining activity. Given that the Equihash algorithm, which was utilized by Zcash to be ASIC-resistant for democratization of mining, eventually couldn’t hold it’s value proposition when ASICs evolved to bypass the resistance, DrillX may potentially run into the risk of being gamed in the future.
   
   In addition, given that Ore anticipates a large number of miners to be mining using CPU devices, including mobile and laptops, the mining would be severely affected should there be an outage that affects mobiles and laptops. There are also questions around the reliability of mining using phones and laptops e.g. what happens when these devices run out of battery - will the miners be penalised for not submitting hashes actively?

2. Integration Risk

   The main question to be answered would be: how interoperable will $ORE be with other protocols on Solana. The market has seen the rise of applications being developed on Bitcoin, including liquid-staked tokens (LSTs), lending markets, decentralised exchanges (DEXs) and more.
   
   Given that Solana already has a vibrant ecosystem, with strong liquid staking players like Sanctum, DEXs like Jupiter, lending markets like Kamino, how will $ORE be utilised within these protocols? This ultimately affects the ease of adoption of $ORE and its ‘worthiness’.

3. Market Risk

   For people to perceive $ORE as a valuable asset, alike to Bitcoin, is an uphill battle. Even with Bitcoin, it took time for people to understand it’s value proposition, and it was many years before corporations became willing to purchase Bitcoin as part of their treasury. Back in 2010, we even had a pizza man give up 10,000 Bitcoin.
   
   It is evident from the previous section 'Analyzing Ore from a Quantitative Stance’ that mining activity has been decreasing. This is likely due to the lack of market interest, which is difficult to drive up. The lack of adoption is also apparent from the volume of the trading pair ORE-SOL on Meteora, which is merely $17,174 in the past 24 hours. Such illiquid markets make it slightly more difficult for folks to acquire $ORE from secondary markets with ease.

How to Mine Ore? Tip: It’s Simple

There are two ways to mine Ore:

1. Web App Mining Guide

2. CLI Mining Guide

A tip to increase mining rewards would be to mine using devices that have higher hashpower. You can check the hashpower of your device by visiting this website. In general, a device with more cores will be able to compute faster.

What’s Next on The Roadmap?

Mining Pools

The team has noticed the struggles of smaller miners with lower hashpower, as their proportion of $ORE earned from mining may at times be unable to cover transaction fees and mining costs. 

The creation of mining pools is aimed at democratizing mining, where individual miners are able to collaborate and combine their hashpower. This collective then stands a chance of finding higher-difficulty hashes, which translates to a higher proportion of $ORE rewards, coupled with lowered transaction costs for individual miners as only a single hash is submitted.

$ORE rewards are then distributed back to individual miners based on their contribution of hashpower to the pool. This ensures that all miners, regardless of how small their contribution, stand a chance to earn.

Nonetheless, there are certain concerns with this model that have to be overseen. It is especially important to have a transparent mechanism that can ensure fair reward distribution to the miners involved in the pools. 

MEV Bot Game

Not much detail has been shared with regards to this game that is being built.

The only details shared were:

• It is going to be an easily and highly botted game (on purpose)

• A territory game of sorts

• Every move will incur a payment

• The winner will earn half of the game pool, with the other half distributed to the rest of the players

• The goal is to increase the pool size significantly to incentivize participation

It seems that this game is aimed at increasing the number of miners on the platform, with the incentivization being the prize pool. Definitely an interesting approach, but some of the areas that I would like clarification on include

• Who contributes to the prize pool?

• What happens to miners that do not have the knowledge to bot or participate in the game?

Ore: The Next Bitcoin or Just a Hype?

In many ways, Ore's journey echoes the early days of the meta ‘putting utility on Bitcoin’, reminiscent of the recent Runes and Ordinals phenomena that sent gas fees skyrocketing with the network being congested by the sheer number of participants. 

Ore's ambitious vision to reinvent the fair launch meta on Solana's high-speed rails is an interesting experiment to keep a lookout for. Time will tell whether the market perceives $ORE as a store of value and whether people are open to using $ORE as a currency for peer-to-peer (p2p) transactions.

Should Ore achieve success, which could come from widespread integration of $ORE into protocols, or a surge in $ORE’s price reflecting its value, there is a high likelihood that we witness a domino network across other PoS chains looking to adopt the same experiment. It will be a curious case to see whether these chains will have the capacity to withstand the influx of activity.

Moreover, Ore's triumph at the Solana Renaissance hackathon tantalizes us with the possibility of a greater narrative at play - perhaps Solana sees in Ore a key to unlocking a new era of blockchain democratization. Or perhaps, even something more?

Disclaimer

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For more detailed disclaimers, visit https://blockcrunch.substack.com/about

This post was brought to you by the Aptos Foundation, an organization dedicated to supporting the growth and development of the Aptos protocol and developer ecosystem. Aptos is the secure, scalable, and feature-rich L1 blockchain of choice for both developers and users—delivering the best performance, the highest throughput, and lowest latency.

This cycle we have seen most established Layer 1 (L1) chains stumble while new L1 chains failed to continue the hype after mainnet and fade into obscurity. However, one chain has been silently defying market trends by having a steady upclimb through the downturn. 

I am talking about TRON (TRX), the brainchild of controversial crypto mogul Justin Sun. It has not just survived the recent market turbulence – it's thrived. Since the start of the crypto downturn this year in April, the crypto market has plummeted with big names like POL and AVAX down over 40%, while TRON has actually climbed 30% back to its 2021 all-time-high, outperforming all major L1s from April to now. This leaves both supporters and critics wondering: what fueled TRON's resilience this cycle? 

TRON was founded in 2017 by a Singapore non-profit called TRON Foundation and its governance and gas token is TRONix (TRX). The token was launched through an Initial Coin Offering (ICO) that took place from August 31 to September 2, 2017. The ICO was a mega success, raising 15,200 BTC, roughly $70 million at the time, or around $1 billion at today’s price if they kept the BTC. TRX is currently showing an ROI of 83x against the US dollar, making it top 15 in terms of ICO ROI. 

This funding allowed TRON network into the successful ecosystem today. Its goal was to decentralize the web and revolutionize the entertainment industry by creating a global, free content entertainment system that aims to decentralize content creation and distribution. 

As I am sure most of us do not think of decentralized entertainment when thinking of TRON, I can confidently say that its success in that domain has been limited. Instead, TRON has found unexpected success in other areas. The platform's true strengths have emerged in the realms of decentralized finance (DeFi) and, most notably, in facilitating stablecoin transfers. Today, TRON stands as a formidable player in DeFi, challenging even Ethereum in terms of transaction volume and network revenue. 

As TRON has solidified its position as a top performer in the cryptocurrency market, particularly among Layer 1 platforms, let’s explore some of its key stats:

Market Capitalization: TRON’s market cap exceeds $10 billion, ranking in the top 15 cryptocurrencies, representing a significant increase from its position in early 2023.

Price Performance: While many cryptocurrencies have struggled to regain their all-time highs, TRX has maintained a price level near its historical peak, showing remarkable stability and growth in a volatile market.

Active wallets: The TRON network has over 2.5 million active users, while Ethereum has around 400 thousand active users, a testament to TRON’s widespread adoption.

Trading Volume: Daily trading volume for TRX consistently exceeds $300 million, making it a top 20 cryptocurrency by volume, indicating high liquidity and active market participation.

Network Activity: TRON blockchain processes over 3 million transactions daily, surpassing many of its Layer 1 competitors in terms of network usage, including Ethereum which only has around 1 million transactions daily. 

Source: TRONscan

Total Value Locked (TVL): TRON has seen substantial growth in DeFi, with TVL in TRON-based protocols exceeding $7 billion, placing it as the second largest chain by TVL, behind just Ethereum.

Source: DefiLlama

USDT Dominance: TRON has become the preferred network for USDT transactions, handling over 70% of all Tether transfers, surpassing Ethereum in this regard. 

Source: Dune

Revenue: In August, TRON has already generated approximately $435 million in fees, outpacing Ethereum's $364 million. This represents a substantial 50% lead over Ethereum in monthly protocol revenue. However in terms of year-to-date Ethereum is still leading at $1.55 billion in fees while TRON is catching up at $1.34 billion. If TRON maintains its pace, it will be the first time that Ethereum is dethroned in terms of blockchain revenue. 

Source: Cryptorank

As TRON has performed admirably this year, it’s time to understand why. In this article, I will delve deep into the TRON ecosystem, exploring its technology, key partnerships, and the factors driving its impressive market performance. Read on to discover why TRON is not just surviving but thriving in the competitive world of cryptocurrencies.

TRON’s Background

TRON's Historical Milestones 

Key Milestones in TRON's History:

• September 2017: TRON Foundation established and TRX’s ICO completed, existing as an ERC-20 token on the Ethereum Network

• May 2018: TRON Mainnet launched, marking independence from Ethereum

• June 2018: TRON Virtual Machine (TVM) goes live, enabling smart contracts

• July 2018: TRON acquires BitTorrent, expanding its decentralized ecosystem

• December 2021: TRON becomes TRON DAO, with over $1 billion in assets, while Justin Sun steps down as CEO of the TRON Foundation, transitioning to a TRON DAO ambassador

• 2021: Expansion into DeFi with the launch of JustSwap (later rebranded as SunSwap) and other DeFi protocols.

• 2023: TRON's DeFi ecosystem experiences significant growth, with Total Value Locked (TVL) reaching new highs

• May 2024: TRON is the second non-EVM chain to integrate with LayerZero to connect with other ecosystems

• April 2024: TRON introduces Stake 2.0, introducing TRON LSTs

Justin Sun's Leadership and Influence

TRON was founded by Justin Sun, who was born in 1990 in China. 

He has been the key figure in TRON's development and promotion. His background and achievements have played a crucial role in shaping TRON's trajectory:

Early Career: Before founding TRON, Sun joined Ripple Labs from 2013 to 2016 as chief representative and adviser, gaining valuable experience in the blockchain industry. Justin Sun had previously gained recognition as the founder of Peiwo, a popular audio content aiming to become China's equivalent of Snapchat, which has matched over 4 billion chats. He was also personally mentored by Jack Ma, the co-founder of Alibaba Group. He eventually founded TRON and the TRX token in 2017.

Strategic Acquisitions: In 2018, Sun acquired BitTorrent, Inc. for $140 million, later launching the BTT token on the BitTorrent network. He also acquired the crypto exchange Poloniex, though this acquisition has been associated with controversy, including allegations of mishandling user funds. 

Other Ventures and Investments: As of February 2023, Sun was reported to be the largest individual staked ether holder, with a balance of $500 million. In August 2024, he launched SunPump, a platform allowing users to create their own cryptocurrency tokens.

Ongoing Influence: Despite stepping back from direct TRON operations in December 2021, Sun remains a significant figure in the crypto space, advising for exchanges like HTX (formerly Huobi) and continually launching new projects.

Ecosystem and Key Partnerships

TRON's ecosystem has shown remarkable growth and resilience, contributing significantly to the token's strong performance. This section delves into the key components of the TRON ecosystem and their impact on TRX's market position.

DeFi Landscape on TRON

The decentralized finance (DeFi) sector on TRON has experienced substantial expansion, becoming a major driver of the network's growth. As of September 2024, TRON's Total Value Locked (TVL) stands at an impressive $8 billion which is primarily in DeFi. Let’s explore some of these DeFi protocols. 

JustLend

JustLend is TRON’s leading protocol that has several DeFi features and currently accounts for over 60% of the network's TVL. 

Its primary application is a lending market similar to AAVE where users can lend, supply collateral, and borrow all major assets on TRON. Source: Justlend

It also a liquid staking feature where users can deposit TRX and mint stTRX which is a liquid staked token of TRX, earning 16% APY and can be further used in other DeFi applications, such as lending directly on JustLend itself. The unstaking period for TRON is 14 days. 

TRON uses a unique resource system called Energy which we will dive deeper into later. Energy can be obtained via TRX staking or burning, which can be cumbersome to procure, which is why Justlend created an Energy Rental feature where you can just borrow Energy (no pun intended). This service aims to address the high costs and lengthy procedures of obtaining Energy through by allowing users to rent Energy at significantly lower prices, aiming to make Energy more accessible and cost-effective for users. 

SunSwap & SunPump 

As TRON's primary decentralized exchange (DEX), SunSwap has seen its daily trading volume surpass $500 million, a 200% increase from the previous year. The platform's low fees and high liquidity have made it a preferred choice for traders within the TRON ecosystem. 

On 13 August 2024, SunSwap launched SunPump, a fairlaunch memecoin generator platform that is inspired by the popular Pump.fun on Solana.

SunPump offers a user-friendly, efficient, and cost-effective way to launch meme coins on the TRON network. Here's how it works:

1. Token Creation: Issuers pay a nominal fee of 20 TRX (approximately $3) to create a token. The process is straightforward, requiring basic token details such as name, ticker, description, and logo.

2. Fair Launch System: All tokens must adhere to a fair launch protocol, prohibiting team allocations and presale rounds. This system aims to create a level playing field for all participants.

3. Security Measures: The platform offers options to prevent automated bot purchases, enhancing the security of the launch process.

4. Trading Mechanism: Users can easily browse, evaluate, and purchase meme coins through SunPump's interface. A 1% transaction fee applies to all trades.

5. Bonding Curve: Newly created tokens utilize a bonding curve mechanism, designed to potentially increase token value as more purchases occur.

6. Integration: SunPump is fully integrated with the TRON network and SunSwap, facilitating seamless buy and sell operations.

Within just over a week of its debut, the platform reached a remarkable milestone of over 7,500 daily token launches on August 21, 2024. This rapid ascent allowed SunPump to surpass its main competitor, the Solana-based Pump.fun, in terms of both daily token launches and revenue. It has achieved a revenue of over $30 million in about a month since launch. 

Despite a slight cooling off in early September 2024, SunPump has maintained its position as a leading meme coin crypto platform, generating more than $20,000 a day. By September 16, 2024, it had facilitated the launch of more than 80,000 tokens, cementing its status in the burgeoning meme coin ecosystem.

As of September 30, 2024, several SunPump meme coins have achieved significant market capitalizations:

1. Sundog (SUNDOG): The current market leader that has performed token buybacks

2. TRON Bull (BULL): The only other coin to surpass $100 million in market cap

3. Various other coins with market caps ranging from $5 million to $20 million

The prevalence of "Sun"-themed coins on the platform reflects the influence of TRON founder Justin Sun within the ecosystem.

The introduction of SunPump further boosted SunSwap’s activity and revenue. The platform’s dual-token mining and governance features have attracted more users and liquidity providers, enhancing its overall liquidity and trading efficiency. SunSwap remains a vital component of TRON’s DeFi infrastructure, continually evolving with new features and community-driven initiatives. 

JustStable 

Juststable is a CDP protocol and is crucial in TRON's DeFi landscape, with over $1 billion in collateralized debt positions (CDPs) and $129 million USDJ minted. It allows users to collateralize TRX to mint USDJ, the JUST stablecoin that is pegged to the dollar through algorithmic mechanisms. 

However the price of USDJ often deviates from a dollar and overpegging instead, making it unreliable to be used as a stablecoin. When USDJ spikes up, it can cause liquidations to TRX or other collateral as the borrow value of USDJ goes up, resulting in health factors decreasing. 

Staked USDT (stUSDT)

Staked USDT (stUSDT) is a Real World Asset (RWA) protocol on TRON, allowing users to stake USDT and gain exposure to yield from real-world assets like U.S. Treasury bonds, offering an annual yield of around 4.2%. It has over $250 million in Total Value Locked (TVL) with over 350,000 stakers. It operates through smart contracts and have both a rebase and yield-bearing version. However, it has also faced scrutiny over its governance structure, associations with Justin Sun, lack of credible attestations, smart contract audits, and clarity of reserves. Despite these challenges, stUSDT's success demonstrates TRON's ability to host sophisticated financial products, attracting both crypto enthusiasts and traditional finance participants. 

Infrastructure on TRON

TRONLink: Most Popular Wallet

Officially endorsed by TRON, TRONLink is the most popular wallet on TRON. It boasts a user-friendly interface and is available as both a mobile app and a browser extension. It allows users to securely store, send, and receive TRX, along with various TRC-standard tokens. TRONLink also features built-in support for decentralized applications (dApps) and staking, enhancing its utility within the TRON ecosystem. 

WINkLink: Main Oracle Network

WINkLink, launched in 2021, serves as the primary oracle network for TRON. It provides smart contracts with secure access to off-chain data to DeFi applications with features like decentratized price feeds and Verifiable Random Function (VRF) capability. While relatively basic compared to some oracles on other chains, WINkLink plays a crucial role in TRON's growing DeFi landscape by providing essential price feeds and other off-chain data to protocols like JustLend, SUN.io, and stUSDT. 

BitTorrent File System (BTFS): Decentralized File System

BTFS is a crucial component of the TRON ecosystem, enhancing its capabilities in decentralized storage and file sharing. Following TRON's acquisition of BitTorrent in 2018, BTFS was integrated into TRON's blockchain infrastructure, leveraging TRON's high-throughput network and smart contract capabilities. This integration allows BTFS to offer scalable, cost-effective storage solutions that complement TRON's focus on decentralized applications (DApps) and digital content distribution.

BTFS utilizes the BitTorrent Token (BTT), which runs natively on the TRON blockchain, to incentivize users for sharing storage space and bandwidth. This tokenomics model aligns with TRON's broader vision of creating a decentralized internet infrastructure. By incorporating BTFS, TRON expanded its ecosystem beyond financial transactions and smart contracts, positioning itself as a more comprehensive blockchain platform capable of handling diverse decentralized services, including file storage, content delivery, and data management.

Key Partnerships

USDT

The partnership between Tron and Tether has been transformative for the Tron ecosystem. As of August 2024, the total market capitalization of USDT on Tron reached $58.5 billion, with more than 99% of stablecoins on the platform being USDT tokens. This dominance in the stablecoin space has made Tron a key player in global cryptocurrency transactions. 

In fact in USDT settlement volume has grown rapidly, and in the most recent quarter USDT on TRON made around one-third of Visa’s annual settlement volume of around $1.25 trillion per quarter. 

With such massive volume, security becomes increasingly important, which is why TRON has recently collaborated with USDT and TRM to launch the T3 (TRON, Tether, TRM) Financial Crime Unit initiative. This initiative aims to enhance security for users but also raises considerations about privacy and asset control. With approximately 254.8 million unique addresses and over 2.1 million daily active users on the Tron blockchain, the impact of this partnership on the broader cryptocurrency ecosystem is substantial.

LayerZero

On May 28, 2024, Tron DAO announced support for LayerZero, marking a significant milestone in blockchain interoperability. This integration makes Tron the second non-EVM chain to be incorporated into LayerZero's cross-chain protocol. The partnership enables Tron developers to seamlessly expand their applications across more than 70 networks supported by LayerZero. 

This could enhance the versatility of TRON-based applications and open up new avenues for cross-chain interactions. However, despite the high potential, at the moment there are no actual deployments using LayerZero, so it remains to be seen how this partnership would impact TRON. 

Poloniex Acquisition

Tron's acquisition of Poloniex, a well-established cryptocurrency exchange, has significantly bolstered its market presence and liquidity. This strategic move has provided Tron with a direct gateway to the crypto trading market, enhancing the visibility and accessibility of TRX and other Tron-based tokens. 

The acquisition has enabled preferential listing of Tron ecosystem projects, facilitating easier access to capital and users for Tron-based initiatives. Moreover, it has strengthened Tron's position in the broader cryptocurrency market by providing valuable insights into trading patterns and user behavior, which can inform future development and strategic decisions.

Future Roadmap

TRON zkEVM

In April 2023, Justin Sun announced that TRON is exploring ways to integrate zkEVM to enhance TRON’s capabilities, potentially offering improved privacy, security, scalability, and interoperability with other blockchain platforms.

The exploration of zkEVM technology aligns with the growing momentum in Zero-knowledge proof development across the blockchain industry. Recent mainnet launches by projects like Matters Lab and Polygon zkEVM underscore the increasing importance of this technology in addressing scalability and privacy challenges faced by many blockchain networks.

However, TRON has not launch much developments about TRON’s zkEVM solution since this annoucement. 

TRON Bitcoin L2 Solution

In February 20, 2024, TRON DAO has unveiled that it is developing a Bitcoin Layer 2 solution, aiming to enhance blockchain interoperability and expand stablecoin usage in the Bitcoin ecosystem. 

The plan involves: (1) introducing TRON ecosystem tokens to the Bitcoin network using cross-chain technology, (2) forming partnerships with Bitcoin Layer 2 protocols such as its partnership with Merlin, and encouraging TRON users to participate in re-staking initiatives, and (3) launching a unified Layer 2 solution that combines TRON, BTTC, and Bitcoin networks. 

This solution aims to incorporate the low fees of Proof of Stake systems with the security of Proof of Work and UTXO systems. Additionally, TRON plans to venture into Ordinals, develop a user-friendly wallet, and create tools for BRC-20 tokens, all to enhance blockchain usability, scalability, and interoperability.

However, similar to the zkEVM announcement, TRON has not launch much developments about TRON’s Bitcoin L2 solution since this annoucement. 

TRX Tokenomics

Let's delve into the key aspects of TRX tokenomics:

Initial Total Supply: 100 billion TRX

• 40% (40 billion TRX): ICO investors

• 34% (34 billion TRX): TRON Foundation

• 10% (10 billion TRX): Private sale investors

• 16% (16 billion TRX): TRON open source project and ecosystem development

Staking and Governance:

• TRX can be staked to vote for Super Representatives

• Staking earns rewards, aligning incentives with network security

Token Utility:

• Transaction fees

• Content creation incentives

• Data sharing rewards

• Governance (staking and voting)

• DeFi applications

• In-app payments

Token Burning:

• 1% of TRX is burned in various scenarios (account creation, token issuance, etc.)

• Circulating Supply: Approximately 86.66 billion TRX (as of writing)

• Over 14.3 billion TRX (>10% of total supply) burned as of September 2024

• Current deflation rate of 2.52% per year

Justin Sun currently holds over 2% of TRX tokens, or around 2.3 billion TRX tokens, making him the top verifiable individual holder of TRX. 

TRX is not just one of the few deflationary L1s, it is also generating immense revenue as shared previously. In fact, in terms of fully diluted P/S ratio, TRON ranks first amongst L1 at 5.5x. For comparison, Ethereum is at 415x and Solana is at 715x and TON is at 878x, and the rest of the L1s is over 1,000x.

TRON’s Technology Explained

Consensus Mechanism: Delegated Proof-of-Stake (DPoS)

TRON utilizes a Delegated Proof-of-Stake (DPoS) consensus mechanism.

How TRON's DPoS works:

1. TRX token holders stake their tokens and vote for super representatives.

2. The top 27 candidates become super representatives, elected every six hours.

3. Super representatives validate blocks and receive rewards, which are shared with voters.

TRON’s DPoS shares similarities with Solana's Proof-of-Stake variant, while differing from Ethereum's pure Proof-of-Stake (PoS). Each approach offers unique characteristics:

Validator Selection:

• TRON's DPoS: TRX holders vote for 27 "super representatives" to validate transactions.

• Solana: Uses a variant called Proof-of-Stake with History (PoH), where validators are selected based on stake weight and a verifiable delay function.

• Ethereum's PoS: Allows any participant with 32 ETH to become a validator, potentially leading to greater decentralization with over a hundred thousand validator.

Transaction Speed and Throughput:

• TRON's DPoS: Achieves fast block creation and high throughput (reportedly up to 2,000 TPS).

• Solana: Known for extremely high throughput (theoretically up to 65,000 TPS) due to its unique PoH mechanism.

• Ethereum's PoS: Improved speed post-merge, but still slower than TRON and Solana (currently around 15-30 TPS on the base layer).

Centralization Concerns:

• TRON's 27 super representatives set have raised some centralization concerns.

• Solana’s validators require powerful hardware requirements which can be costly posing a financial barrier to entry and have also raised some centralization concerns.

• Ethereum's larger validator set aims for greater decentralization.

Unique Resource Model

One unique feature of TRON is its resource management system that uses bandwidth and energy to govern how network resources are allocated and consumed. This model is crucial for maintaining network efficiency and preventing abuse. 

The three primary resources in the TRON network are:

1. Voting Rights (TRON Power - TP)

   • Obtained by staking TRX

   • Used to vote for super representatives

   • 1 TRX staked = 1 TP

2. Bandwidth

   • Required for all types of transactions

   • Each account gets 600 free bandwidth points daily

   • Additional bandwidth obtained by staking TRX

   • When insufficient, TRX is burned to pay for bandwidth (1000 sun per TRX)

3. Energy

   • Consumed by smart contract operations

   • Obtained only by staking TRX

   • When insufficient, TRX is burned to pay for energy (210 sun per unit)

Note: 1 TRX = 1,000,000 SUN

There are additional features that TRON has to maintain healthy network operations. 

• Staking Mechanism: Users can stake TRX to obtain both bandwidth and energy

• Resource Recovery: Consumed bandwidth and energy recover gradually over 24 hours

• Dynamic Energy Model: Adjusts energy consumption based on contract popularity to prevent resource concentration

• Flexible Resource Allocation: Users can choose to allocate their staked TRX towards bandwidth or energy based on their needs

Although TRON's unique resource model offers innovative solutions for network management, it creates additional complexities in developer experience, which will be discussed in more detail in later sections of this analysis. 

Three-Layer Architecture

TRON employs a three-layer architecture designed to optimize performance, scalability, and flexibility. However, it is similar to older blockchains such as Ethereum and it is not particularly groundbreaking when considering the more innovative blockchains nowadays. 

The three-layers include the storage layer using LevelDB, the application layer running the TRON virtual machine, and the network layer managing consensus. These are standard components in the blockchain space. 

Although this three-layer structure is similar to what Ethereum does, in fact there are key disadvantages for TRON when compared to Ethereum which we will explore next. 

TRON Virtual Machine (TVM) vs EVM

While TRON's TVM is designed to be compatible with Ethereum's EVM, it is not 100% identical. There are several key differences between TVM and EVM which results in migration from EVM to require hefty adjustments. This could be one of the reason why TRON’s ecosystem is less vibrant than Ethereum. 

Here are the main differences between TVM and EVM. 

Network Performance Comparison

TRON's network design prioritizes high throughput and quick transaction finality in exchange for a higher degree of centralization. Here's a breakdown of its key performance metrics while comparing with Ethereum and Solana.

Challenges and Criticisms

Despite its early headstart compared to other blockchain networks and strong market performance, TRON has faced some criticisms. 

Centralization Concerns: 

TRON's centralization issues have been a significant point of contention within the cryptocurrency community. The network's Delegated Proof-of-Stake (DPoS) system, which relies on 27 Super Representatives to validate transactions, has been criticized for concentrating power in the hands of a few. 

This centralization is exacerbated by allegations that Justin Sun, TRON's founder, exerts undue influence over many of these Super Representatives. More controversially, there have been accusations that Sun uses TRON’s lending protocols as a personal "piggy bank." These claims stem from instances where large amounts of TRX tokens were moved from TRON's reserves to addresses allegedly controlled by Sun or his associates.

Technological Stagnation: 

TRON's technological framework is outdated in the rapidly evolving blockchain landscape. While TRON boasts high transaction speeds and low fees, it has struggled to keep pace with the technological advancements offered by newer blockchain platforms like Solana and Sui. 

It has no plans to introduce newer blockchain techniques like parallelization that can significantly outperform TRON's transaction processing capabilities, or enshrined liquidity similar to what Berachain or Initia is looking to achieve. 

TRON's reliance on a modified version of Ethereum's technology stack, while initially advantageous for compatibility, is now severely lagging behind and hampers its ability to implement cutting-edge features such as zero-knowledge proofs or more sophisticated sharding solutions. 

The platform's slow pace of core protocol upgrades and lack of significant innovations in areas like interoperability and developer tooling further highlight its technological inertia. This stagnation poses a serious threat to TRON's long-term competitiveness and relevance in the blockchain ecosystem, particularly as developers and users increasingly gravitate towards more technologically advanced platforms that offer superior performance and functionality.

TVM Hampers DeFi Migration: 

As described previously, the differences between TVM and EVM makes the migration of complex DeFi applications to TRON significantly more challenging. 

The process requires substantial refactoring efforts due to TRON's unique address handling, resource models, and ecosystem tools, often necessitating a complete overhaul of smart contracts and supporting infrastructure. 

This technical adaptation triggers a cascade of additional requirements, including comprehensive retesting and frequently, re-auditing of contracts - a process both time-consuming and financially burdensome. 

TRON's ecosystem limitations further complicate matters, with the absence of battle-tested oracle solutions and other critical DeFi infrastructure posing major roadblocks for sophisticated applications. Even after overcoming these technical hurdles, DeFi protocols face the daunting task of building liquidity and a user base on TRON, which lacks the DeFi-centric community prevalent on platforms like Ethereum. 

Thesis 

During the recent market downturn from April, TRON’s USDT stablecoin activity continued to climb. With its low fees and high transaction speeds, it became a preferred choice for these stablecoin transfers. This increased activity is clearly visible in the steadily rising USDT volume on the TRON network throughout 2023 and into 2024. Consequently, this surge in stablecoin transactions generated a consistent stream of fees for the TRON network, providing a steady revenue source even as other cryptocurrencies struggled. This unique positioning allowed TRX to maintain its value and even grow, bucking the overall bearish trend in the crypto market.

However, the long-term sustainability of this growth may be challenged by technological limitations and centralization concerns. For TRON to maintain its competitive edge, it must address these challenges head-on. Innovating its core technology to keep pace with emerging blockchain solutions will be crucial. Equally important is addressing centralization concerns to build trust within the broader crypto community. Improving developer tools and EVM compatibility will be essential to attract a more diverse range of applications and users, further enriching the TRON ecosystem.

While TRON has shown impressive resilience and growth in the current market conditions, its future success will depend on its ability to evolve technologically, maintain its strong market position in stablecoins and DeFi, and address the critical concerns surrounding centralization and technological stagnation. As the blockchain landscape continues to evolve, TRON's adaptability and strategic decision-making will be crucial in determining its long-term position in the cryptocurrency ecosystem. The coming years will be pivotal for TRON as it navigates these challenges and opportunities in its quest to remain a leading force in the blockchain space.

In the end, TRON’s future rests on its ability to adapt. Can it maintain its stablecoin and DeFi stronghold while pushing technological boundaries? So far, TRON’s adaptability is questionable. Despite announcing ambitious technological roadmaps like Bitcoin L2 solutions and zkEVM integration when these concepts were trending, Tron has consistently failed to deliver on these promises. These announcements often seem to coincide with market hype, only to be quietly abandoned once public interest wanes. This pattern of chasing trends without meaningful follow-through raises serious concerns about TRON’s commitment to genuine innovation and its ability to evolve in a rapidly changing blockchain landscape.

As the crypto ecosystem continues to advance, TRON’s resilience will be put to the test. Its success will depend not just on maintaining its current strengths, but on actually delivering the cutting-edge technologies it promises. The crypto community watches with a mix of curiosity and skepticism, wondering: can TRON break its cycle of unfulfilled promises and truly innovate, or will it continue to rely on its existing advantages in a tech landscape that waits for no one?

Disclaimer

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This post was brought to you by the Aptos Foundation, an organization dedicated to supporting the growth and development of the Aptos protocol and developer ecosystem. 

Aptos is the secure, scalable, and feature-rich L1 blockchain of choice for both developers and users—delivering the best performance, the highest throughput, and lowest latency.

Introduction

Over the years, many web3 startups have struggled to scale and retain a stable user base. Despite the initial hype around decentralisation, the core challenge remains in building sustainable long-term business models across competitive sectors like gaming, entertainment, social media, and DeFi.

Understanding fundamental economics - such as low high / high FDV, market caps will become increasing important.

Unfortunately, many projects continue to prioritize short-term token pumps over sustainable growth. After the cycle peak in 2021, many startups failed to even reach close to their previous ATHs let alone break their ATHs (only $BTC, $BNB have managed to do that in the top tokens), with hardly a handful of them a few managing to even survive from previous cycles of 2017-2018.

One major issue in past Web3 cycles has been the absence of robust business models. While software development cycles typically takes 5-7 years to mature, projects like even Ethereum are still only 8 years in, and others like Solana are hardly 5 years in. It’s just very difficult . As a result, many projects have fallen into the trap of relying on token hype, which generates short-term excitement but really doesn’t offer any strong long-term value beyond governance.

This imbalance between speculation around the token and actually being able to have any value accrual and token utility is one of the major whitespaces in the ecosystem even currently.

I believe the true potential of web3 lies in its intersection with real-world industries like energy, AI, IoT, and supply chain. By focusing on these building applications, web3 can finally deliver on its promise of ownership, transparency, and broader societal impact - moving beyond speculation to create lasting value.

What’s changing?

There’s a clear shift toward creating tokens that are tied to real business models and tangible revenue. Projects should no longer rely on hype and narrative positioning to boost token prices; instead, the focus should be on delivering real value - through mechanisms like voting rights, access to services, or utility that drives long-term engagement to the users and accrues value back the the token via burning, staking.

Both investors and users are now prioritizing projects that offer sustainable benefits. Concepts like staking, token burning, and user rewards are helping to strengthen these projects and ensure their growth. For example, Uniswap recently decided to rewards its users with fees for trading and providing liquidity

This shift points to a future where tokens are not just tools for trading on the secondary but actually become an integral part of the project.

Which sectors are performing well?

So, now let’s try to really understand which are a few sectors or ecosystems that are doing pretty well and able to generate a consistent cash flow and actually usage by the users.

Even though many of the projects are still in the development phase or just launched, most are shifting towards figuring out important business metrics and justifying them like revenue, profits and user-base other than only focusing on volume and no.of txns.

Here are a few industries that have been doing pretty well and are known to be cash-rich sectors which actually have less of a speculative problem but more issues around bootstrapping, distribution in the initial stages, once they are figured out - these turn in cash-cow businesses.

→ DePIN

• It’s been one of the hottest sectors lately, with a lot of attention moving towards it from AI, gaming which did well initially in the year thanks to some real numbers around usage and metrics being brought about by the projects in the space, led by Helium.

• Projects like Helium, a decentralized wireless network, demonstrate the power of real-world utility. Helium’s HNT token is earned by users who set up hotspots to provide wireless coverage, with value driven by IoT device usage, not speculation.

• There are projects like GEOD and Hivemapper which follow a similar model, crowdsourcing physical data such as location and dashcam footage, which can be then monetized.

• All of these projects have really been doing well on the revenue levels and being able to generate some good cashflow and actually being able to translate it back to the token value accrual.

→ Social Platforms

• Web3 social has always been interesting and exciting for everyone. Consumer apps are one of the major ways by which the tech can actually reach to the millions of users around the world. But for a long time, consumer crypto has really struggled to take off.

• Recently, alliance and other firms have really been pushing the narrative strongly and chains like solana / base are becoming more and more consumer friendly, encouraging users to build on top of them.

• Apps like Farcaster, Lens Protocol, Fantasy top are actually tying to change this sentiment around consumer crypto. Some of them have actually been also Abel to generate some meaningful revenues and usage numbers.

• But it’s still too early to tell since it’s a very small user base as compared to the broader web2 world, but it’s a good start.

→ Launchpads

• Projects often struggle the most in their initial phase of launch - they lack the most important thing required for them: relevance and distribution.

• This is where launchpads can really help change the game, they offer a platform and an ecosystem of users / investors / supporters to these projects.

• Launchpads like Pump Fun and Multiplier have been able to genarte millions in revenues as a platform in a very short span of time, thanks to hype and adoption of memecoins as a category.

• Though I personally believe, this is not a very sustainable model in the long run, since it’s only caused more harm than bring about any value to the space, but it’s good to be aware of the different verticals that have managed to do well and actually take inspiration from them to replicate them into building something more long-term in other sectors.

→ DeFi Products

• Defi remains to an evergreen category - and one of the only categories that has consistently been able to bring in a good share of revenues in web3 with leaders like uniswap, aave, maker, curve contributing massive numbers.

• I believe that these are the “boring“ yet sustainable businesses that will seize to exist for the long term and it’ll be interesting to see if apps can be built on leveraging the first principles of defi and combine them with other sectors like prediction markets, gaming to experiment if there’s a new market or angle that can open up.

Web3 vs web2 models

The core difference between Web3 and Web2 companies lies in how they generate revenue and operate. Web2 relies on centralized models like subscriptions, ads, and enterprise sales. In contrast, Web3 leverages decentralized models such as tokenomics, transaction fees, staking, and DeFi yields, creating value for both the platform and its users.

Web2 derives value by:

• Controlling user data

• Monetizing premium content

• Providing platform services

Web3 shifts control to communities through:

• Token ownership

• DAOs and governance

• Voting and participation incentives

While this decentralization offers new opportunities, it also introduces hurdles like complex UX, regulatory challenges, and scalability issues (e.g., blockchain congestion, high gas fees).

Web3 startups benefit from quick product launches using smart contracts but struggle with:

• Lack of onboarding ease

• Limited retention mechanisms

• Product utility beyond speculative value

For long-term success, the focus must shift to building sustainable revenue models and converting them into real token utility rather than relying on hype.

Here are a few different types of models and how they are used across sectors:

• Token-based

  • Tokens drive platform operations, often serving governance roles.

  • As the platform grows, so does token value through mechanisms like burning.

  • Example: MakerDAO burns MKR tokens as debts are repaid, which reduces supply and increases value over time.

• Subscription

  • Web3 platforms, like Audius, offer premium features or content via recurring fees, cutting out intermediaries.

  • Artists and creators earn directly from their audiences, just like in traditional web2 subscriptions.

• Platform fees

  • Platforms like Zora earn revenue by taking a small percentage of each transaction.

  • User activity directly drives revenue growth

• DePIN networks

  • These projects in this sector reward users for contributing real-world resources, like bandwidth or wireless coverage or location data.

  • Helium allows users to earn tokens by providing wireless hotspots that support IoT devices.

• DeXs

  • DeFi platforms generate revenue by charging fees on services like token swaps or lending.

  • Uniswap, for instance, shares swap fees with liquidity providers, ensuring continuous income for both parties.

• Social tokens

  • Creators mint their own tokens for fans to buy or trade.

  • Revenue is driven by token sales and fan engagement.

  • Rally enables creators to build stronger ties with their communities through token ownership.

• Marketplaces

  • Platforms like Blur, opensea, rarible generate revenue by taking a percentage of each NFT/ asset sale.

  • As trading activity grows, so does the platform’s revenue, directly linking profitability to user participation.

• Web3 gaming / entertainment - freemium

  • Revenue in web3 gaming comes from in-game purchases, marketplace fees, or play-to-earn models.

• Decentralised AI

  • Decentralized cloud service providers, like Akash Network, rent out computing power.

  • Users pay for these resources with tokens, competing directly with traditional cloud providers.

  • There are projects solving for decentralised training, workflows, data scrapping/ colleciton as well.

• Launchpads

  • Launchpads like DAO Maker help projects raise funds via token sales, earning a percentage or charging fees.

Projects generating revenue

Projects that have some real-world utility have consistently outperformed those reliant on speculative tokenomics on a long term level.

Revenue-driven models are slowly becoming become the foundation for the most successful web3 ventures, proving their value through sustainable business models that appeal to both users and investors alike.

This chart provides a comprehensive view of top revenue-generating crypto projects.

It’s great to see projects like tether, tron, eth have been dominating the space and are all chains / coins in themselves, which forms the base layer of web3.

When looking at the fastest apps to reach $100M in revenue, we notice a strong connection between real utility and financial performance of the project.

• Projects that focus on real-world applications, like decentralized exchanges and DeFi platforms, tend to grow quicker.

• Their ability to generate steady revenue from transaction fees, staking rewards, % for the reward pool are some of the methods that has helped grow them so fast to doing almost $100m in revenue in such short spans of time

Let’s look at some of the most interesting projects out there currently.

1. Helium

Helium has been one of the top-performing projects in 2024, focusing on mobile carrier services as an alternative to traditional providers. It’s focusing on consumer scale and onboarding, and leverages solana for settlement.

Its token’s value is tied to network usage, not hype.

Since June, the network has attracted 756,000 users, transferring over 19.1 TB of data. The best part is that most users don’t even realize they’re interacting with blockchain. The sign-ups have surged over the past year, reflecting Helium’s solid push towards mainstream adoption.

According to depin.ninja’s stats, helium ranks as the top project in terms of revenue generated in recent times. They’ve been doing some amazing work and with halving in 2025, it’ll be interesting to see how the revenues rise.

2. DeX’s (Uniswap, Jupiter)

Uniswap remains the largest DEX, consistently generating strong trading volumes. However, with the recent surge in Solana’s popularity, Solana-native DEXs like Jupiter have started to take a notable share of the market away from Uniswap.

Overall, the DEX landscape looks promising, with platforms generating fees per transaction and handling large volumes. Across the top five DEXs alone, trading volumes are approaching $45 billion, a figure that’s impressive compared to almost all other sectors.

3. Farcaster

Farcaster is probably the biggest crypto social media platform focused on user-owned content and engagement. Instead of relying on token speculation, users pay for permanent storage of their accounts, which has helped the platform generate some decent revenues.

It has also gained traction thanks to support from the memecoin community and degens joining the app. Although its revenue is lower compared to other sectors, Farcaster stands as the leading protocol in the crypto social space. It will be interesting to see how they scale to reach their goal of 10 million users in the coming years.

4. GEOD

GEODNET is the world’s largest Web3-based RTK network, providing highly accurate location services for AI, IoT, and autonomous systems. By using Real-Time Kinematics (RTK), GEODNET aims to deliver a 100x improvement in position accuracy compared to traditional GPS.

This enhanced precision is crucial for applications that rely on on-device sensors like

• cameras

• LiDAR

• IMUs

Which makes it a key player in powering AI-driven autonomous systems.

• The network has scaled rapidly, with over 9,000 miners deployed globally and consistent 10-15% month-over-month revenue growth since the start of the year.

• GEODNET is on track to achieve $2-3M ARR by year’s end, making it one of the largest high-margin DePIN projects with strong potential for further growth.

• Their tech is not only more accurate but also 90% cheaper than competitors, offering broader global coverage.

• Working with partners like the US Department of Agriculture, GEODNET is proving that long-term, steady growth can yield significant outcomes, with the company already showing 20x revenue growth from $5K to $100K+ monthly.

5. Across Protocol

Across Protocol is a cross-chain bridge that enables seamless asset transfers between different blockchains. It earns revenue by charging fees for these transfers, making its success directly tied to the demand for fast and secure cross-chain liquidity. As more assets move across chains, especially with the increasing adoption of multi-chain ecosystems, Across has positioned itself as a critical player in this space.

Over the past month, Across Protocol has dominated Ethereum chain transactions through JumperExchange, handling over 60% of all bridges from Ethereum. This strong performance shows its growing influence in cross-chain operations. Powered by "intents," a new approach to cross-chain interoperability, Across is setting the standard for smooth and efficient user experiences when moving assets between blockchains.

As compared to other bridges, it tends to offer an extremely low wait list in seconds as compared to that of minutes by other providers.

It’s also been slowly climbing up in the race of cross-chain transfer provider networks.

6. Kamino Finance

Kamino specialises in optimizing liquidity management and offers users a suite of tools like lending, borrowing, and leverage strategies.

The platform has seen impressive growth, reaching an annual recurring revenue (ARR) of nearly $14 million.

Over the past year, Kamino has generated around $30 million in cumulative interest for its users, highlighting its ability to deliver consistent returns through its DeFi offerings.

7. Stablecoins (Tether & Circle)

Stablecoins have become essential in the Web3 space, with Tether (USDT) and Circle (USDC) leading the charge. These two giants dominate the market, serving as the go-to stablecoins for traders, developers, and users alike. Their widespread adoption and liquidity make them the backbone of many decentralized finance (DeFi) platforms.

Tether, in particular, is often compared to major Web2 financial players like JPMorgan, Visa, and Mastercard, due to its rapid rise and dominance in the financial ecosystem. In a short span, it has managed to surpass many traditional giants in market reach and integration within crypto markets.

Both Tether and Circle consistently outperform other stablecoin providers and blockchain-based protocols, commanding the largest market share in web3. Their stability, liquidity, and integration across various chains and dApps set them apart, making them a crucial part of the space.

Takeaway:

• Each of these projects showcase the growing importance of real-world utility in driving crypto revenues.

• Whether through infrastructure, social, gaming or defi ,the future of web3 will be shaped by projects that successfully align their tokenomics with real-world utility and sustainable revenue based dynamics.

What has not worked?

Friend.tech is a good case in how a project can generate buzz and revenue quickly but fail to build long-term sustainability.

A good example of “Why not all revenue-making startups are successful?”

The apps’s rise was driven by users buying 'keys' (shares) of others, hoping their value would rise as users gained popularity and more and more users will start joining in over a period of time. However, with no real utility beyond speculative trading, users quickly lost interest once the initial excitement faded. And moreover the initial hype can also be attributed to the fact that the team had teased an airdrop to the early participants - but since the airdrop happened, hardly there’s been any utility and usage of the platform.

Speculation-driven economies are inherently fragile—users seek quick gains but leave when no substantial value is offered. In contrast, platforms like Uniswap and Helium have maintained long-term engagement by offering real-world utility, proving that sustainable success comes from creating lasting value, not hype.

Friend.tech lacked this foundation, and once the speculative buzz wore off, there was little to keep users engaged.

The takeaway is clear: for web3 platforms to thrive, they need to offer something of substance beyond speculation.

Why heavy token reliance projects struggle in long term?

Projects that lean too heavily on token-pumping may achieve rapid success but struggle to maintain that momentum. Token prices in these ecosystems are often driven by hype and speculation, but without a solid foundation of utility, users quickly lose interest. Once the excitement fades and users realize there’s no deeper value, token prices crash, leading to a downward spiral as users exit.

This issue was clear in Axie Infinity, which relied on a dual-token system to support its growing player base. As more users joined, the economy became overinflated, and token rewards could no longer sustain the user growth. Eventually, the entire system collapsed as the token economy couldn’t keep pace with the influx of players.

A similar problem occurred with STEPN, a fitness app that initially attracted users by offering token rewards for physical activity. However, as token supply increased and prices fell, user engagement dropped, revealing a fundamental flaw in relying solely on token incentives to drive long-term participation.

Even though Axie made significant revenue through marketplace fees and in-game purchases, the project’s dependence on token growth and user expansion ultimately failed when the growth rate slowed.

Similarly, STEPN, a fitness app that initially attracted users with token rewards, failed to maintain engagement once token prices fell due to oversupply.

Even though Axie made money through purchases and marketplace fees, its model relied too much on user growth and token rewards, which eventually failed when growth slowed down.

Web3 gaming vs Web2 gaming

The challenges faced by projects like Friend.tech and Axie Infinity highlight a broader issue within the Web3 gaming space. Compared to traditional web2 games, web3 games struggle to generate similar revenue. For example, a recent web2 game made $600 million in its first week alone— web3 games haven’t come close to achieving such numbers. This isn’t because web3 gaming is a bad concept; rather, it’s because the technology isn’t being used to its full potential, leading to missed opportunities.

One major issue is that many web3 games still focus too much on token-based systems, where players are incentivized by financial rewards instead of the actual gaming experience. This over-reliance on tokenomics creates unrealistic expectations, with players left disappointed when the gameplay doesn’t live up to the hype. To truly compete with web2 gaming, web3 projects need to shift their focus to what makes games fun and engaging in the first place. The technology should enhance gameplay, not become the focal point.

To succeed, web3 gaming must pivot towards gameplay-first models. Blockchain technology has the potential to provide innovative experiences, but it should serve as a tool to enhance immersion, not as the driving force behind the entire economy. Web3 games will only reach their potential when the emphasis moves from token economies to creating truly enjoyable and engaging player experiences.

So what should change?

→ Financial metrics for success

• Web3 projects must move beyond focusing solely on token prices. Traditional tech companies track key metrics like revenue, profit margins, and active users, and Web3 projects should do the same by measuring real user activity and value creation happening.

• The focus should be on figuring out and defining the right set of north star metrics that might be suitable for a specific business in a particular sector - this will only happen with more concrete benchmarking against web2 counterparts and also talking to the customers actively.

→ User-centric design

• Another important shift is focusing on UX - easy to use interfaces and interactions with the tech.

• Web3 platforms need intuitive, user-friendly designs to ensure long-term growth. Currently, most of the experiences are complex, with complicated wallet management and steep learning curves, which force new users to drop-off early.

• Simplifying onboarding and improving wallet usability are key steps. Players like privy, dynamic, turnkey are some of the amazing projects who are working towards solving it.

• Long-term engagement is essential too. Platforms must deliver real value that keeps users coming back, not just speculative rewards. Audius, for example, enables artists to connect with fans in meaningful ways, adding value beyond token incentives. This combined with the right set of solutions to use the tech is what is exactly required.

→ Challenges to implementing utility

• One of the biggest challenges is scalability. Blockchains often struggles with handling large transaction volumes at low costs. High gas fees on Ethereum, for example, have discouraged wider adoption, developers are moving to other chains like Sui, solana.

• Interoperability is also an ongoing issue, as many platforms operate in isolation. Crosschain solutions like Polkadot and Cosmos are making progress, but they have not really been able to become market leaders.

• Finally, regulation has always remained a significant challenge. With the ETF approvals this has reduced a bit, but this there alway remains concerns and grey areas that need to be figured and addressed.

Conclusion

Web3 holds immense potential, but lasting success requires moving beyond token speculation. Projects like Friend.tech and Axie Infinity show that while hype can create quick wins, but it doesn’t translate into sustained long-term growth.

To boom, web3 platforms must focus on building real value - that starts with:

• building real utility based products

• tracking meaningful metrics like active users and transaction volumes, not just token prices

• building for the users

• creating seamless and engaging experiences for the users

• not hyping up only on the basis of speculation, but rather utility first.

Simplifying user experience and addressing real-world needs will drive lasting engagement. Overcoming technical challenges like scalability, interoperability, and navigating regulations will be crucial for wider adoption. The future of web3 lies in projects that blend innovative technology with practical, user-focused solutions, creating lasting impact beyond just token economics.

Disclaimer

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Introduction

Over the last decade, crypto has primarily focused on infrastructure and tooling. However, with much of this infrastructure now in a "ready to use" condition, there's a significant opportunity for consumer apps to gain traction and run experimentations with.

Despite this potential, consumer apps in the crypto space have struggled to achieve the scale they anticipated. A few, such as Notcoin, KaiKai launched this year, have managed to reach more than 1mn+ users already.

Notion has been particularly successful, being able to reach a massive global audience and having a community-led ecosystem built with the underlying game mechanics being super simple. Meanwhile, other categories, like social, prediction markets and betting, are now seeing a rise of apps going off the roof (polymarket) and new apps being developed as well.

The main metric for any consumer app is retention, which hinges on delivering an enhanced user experience that is not only engaging and interesting but also rewarding and entertaining.

However, retention and user loyalty remain significant challenges. Many new users are drawn to speculative event-based applications, with recent consumer interest driven partly by external factors, such as elections being one of the hot topics of discussions.

It's interesting to see that there have been various use cases have already been emerged in the crypto, including social apps, RWA, web3 gaming, and DeFi.

However, the standout use case for blockchain technology hasn't been fully nailed down yet. The areas where it’s likely to make the biggest impact include applications that:

• bring together a global audience

• facilitate seamless cross-border payments

• enable product-led rewards distribution

• ensure transparency

It will be interesting to see how these areas evolve as the crypto ecosystem continues to develop.

Challenges in building social apps

It's a well-known fact that building successful social applications is challenging, even outside the web3 ecosystem. Acquiring the first thousand users is difficult, and scaling to the next ten thousand is even more complicated. Once a user base is established, the focus shifts to identifying the best features, creating effective notification strategies, and ultimately driving retention and loyalty.

Even after these elements are figured out, making the business sustainable requires developing a strong business model. Interestingly, out of every 1000 applications, only about 4-5 are actually able to achieve lasting success in the market. This highlights just how tough and competitive the landscape is.

Some of the existing challenges in web3 first consumer apps are:

→ User experience and onboarding challenges

In web3, the challenges are compounded by constraints such as

• inadequate onboarding processes

• broken user experiences

• a lack of personalization

These factors make it difficult for users to become daily active users of a product, presenting a significant hurdle for Web3 applications.

→ Token dynamics and it’s impact

Another major challenge for web3 products is managing the token along with the app. Balancing the token to prevent it from being sustainable while still driving project relevance and supporting operations is difficult. A well-managed product-led token can help fund the project and demonstrate long-term user interest rather than just attracting users seeking short-term gains like airdrops.

→ The Issue of incentive-driven engagement

Unfortunately, many current crypto applications fall into the category where a small set of users continuously try out different applications, not out of genuine interest but because of high incentives associated with them. A recent study by 6thman ventures supports this, showing that many "lurkers"—users who don't fit the core audience—are often rewarded, which can gather traction and eyeballs but doesn't lead to genuine engagement.

This remains a persistent challenge in the market, where products must navigate between attracting a wide audience and ensuring that core engagement is meaningful and long-lasting.

Infra vs Apps

Generally speaking, there’s a well-established cycle between building infrastructure and developing applications. This cycle was illustrated effectively by Union Square Ventures showing how, after each wave of infrastructure development, the focus naturally shifts to building apps. Once the potential of these applications has been explored and exhausted, the cycle returns to addressing new infrastructure challenges, before eventually moving back to applications again.

Currently, we find ourselves at a similar inflection point in this web3 cycle. The infrastructure that has been built over recent years is now decently ready - though not entirely complete - to start testing how it performs at scale. This phase is crucial because it allows us to experiment with the existing infrastructure, determining whether it truly works and meets the needs of the current audience. One of the best ways to conduct this testing is through building consumer apps and actually interacting with the users, which can serve as a proving ground for the broader crypto ecosystem.

What makes this moment particularly exciting is the potential for breakthrough applications. My prediction is that we might be on the verge of seeing a purely crypto-based product that can attract and retain over 10 million users. Achieving this milestone would be a significant success for the consumer crypto ecosystem and could mark a turning point in how crypto is perceived and utilized by the broader public.

However, the success metric shouldn’t just be about user acquisition; but about retention and engagement. For an app to truly make an impact, it must not only draw users in but also keep them coming back as daily/ weekly active users who are genuinely interested in the product. A high number of DAUs will be a key indicator of an app’s success.

Looking ahead, certain categories seem particularly ripe for this kind of growth. Social applications, socialfi , gamefi, and rewards-based apps are all promising areas where we might see these breakthrough products emerge. These sectors are likely to play a significant role as the current cycle continues to unfold and could lead to the next big leap in mass crypto adoption.

What’s hot in the space?

The space is ripe with many experiments being run by builders who are trying to create entertaining and interesting products.

It’s interesting to compare different blockchain ecosystems, especially when looking at the number of active addresses on various chains like Near, Solana, BNB, Polygon, Ethereum, and Base. These chains are showing a lot of activity, and it's intriguing to see how they stack up against each other in terms of user engagement.

But it's not just about counting active addresses; it's also about understanding how transactions are happening across these chains and what kinds of use cases are emerging. Some key areas to watch include:

• Memecoin trading

• Social products

• Gaming

• P2P payments

• Bridging

• NFTs

In this report, we’ll take a closer look at some of the projects that have been getting a lot of attention recently. The focus will be on projects that are “investible,” meaning they have a live token, product, or asset that you can acquire and start using right away. I’m particularly interested in projects that stand out for their unique approaches or innovative methods.

So, let’s dive into some of the interesting categories, trends, and products currently in the ecosystem.

Prediction markets

Prediction markets have shown some fascinating use cases, particularly in political forecasting currently. Platforms like Polymarket have demonstrated how community-based interactions really help with finding out patterns and providing early insights against speculation. For instance, Polymarket accurately predicted that Biden might drop out of the 2024 election race well before mainstream media outlets began discussing it. This example underscores the potential of these markets to provide valuable foresight.

However, the success of prediction markets often hinges on specific events, like elections, which are inherently seasonal. The real challenge lies in sustaining activity during periods when such events aren't taking place.

Polymarket has emerged as a leader in this space, some key highlights are:

• recently integrating with Perplexity

• registering highest volume in 100+ years of prediction market history

• making headlines by being one of the first to predict Biden’s potential exit from the 2024 race

This success has spurred the emergence of several competitors, especially on Solana, as others aim to capture a share of this growing market.

The diversity of active prediction markets on Polymarket is impressive, covering everything from political events to cryptocurrency ETFs and public figures. Notably, the market predicting Biden’s potential withdrawal from the presidential race has seen the highest engagement, with over $20 million in bet volume and more than 14,000 bets placed. This variety highlights the wide-ranging appeal of these platforms and their potential to become a more integral part of the speculative landscape.

While political forecasting has been a strong focus so far, the potential for these platforms to expand into other areas is significant, especially with the development of verticalized prediction markets for specific use cases. There’s a lot of untapped potential in areas like sports, entertainment, and other speculative environments. Imagine using these markets to predict outcomes in horse racing, Formula 1, football, and more—these could become new and exciting segments for prediction markets.

Hyper-financialized Apps

Hyper-financialized social apps like Pump.fun, Friend.tech, and Fantasy Top often feel like amusement park rides—thrilling at first, but quickly losing their appeal after a few uses. They’re similar to TikTok’s short-form content, offering a quick burst of entertainment without much staying power.

The real challenge for these apps lies in user retention. To keep users engaged, these platforms need a constant stream of fresh, diverse content that keeps people coming back for more. Without this, users might lose interest just as quickly as they were drawn in.

However, if we view these apps as early-stage experiments in a new content genre, there’s significant potential for future innovation. These platforms could evolve into something more sustainable and engaging, offering experiences that are not only exciting at the start but also retain their appeal over time. The key will be finding the right balance between financial incentives and genuine user engagement, potentially leading to the creation of a new class of social apps that combine the best of both worlds.

Pump.fun

Launched earlier this year, Pump.fun has quickly emerged as one of the most revolutionary consumer products in the market. This rapid success can be attributed to two key factors. First, the platform has expertly tapped into the booming meme coin category, which has dominated consumer interest over the past 6 to 12 months. By positioning itself at the intersection of meme coins and speculation, Pump.fun has become a hotspot for users eager to capitalize on the latest trends.

One of the platform's most exciting features is its role as a launchpad for new, buzzworthy tokens. There’s always hype around which tokens to jump into and which ones might hold their value over time, driving significant user engagement. This speculative element makes Pump.fun a go-to platform for those looking to stay ahead in the ever-evolving crypto space.

Additionally, Pump.fun has made it easier than ever to launch a token, lowering the barrier to entry and attracting a diverse range of users. This accessibility has been a major contributor to the platform’s rapid growth. Financially, Pump.fun has been nothing short of impressive, generating over $85 million in revenue—an achievement that sets it apart as a major player in the market.

What’s even more impressive is that Pump.fun has, at times, surpassed major platforms like Solana, Ethereum, and Tron in 24-hour daily revenue volume. This milestone underscores the platform’s significant impact and highlights the positive trajectory it is on.

While Pump.fun has seen significant success, it's important to acknowledge that not everything is as promising as it seems. Since its launch, nearly 1.7 million tokens have been created on the platform. However, the success rate of these tokens is extremely low, with only about 0.5% to 1% achieving any notable success.

For example, out of the nearly 1.7 million tokens launched on Pump.fun, only 15 have managed to maintain a market cap of over $10 million—a strikingly small number. Similarly, just 41 tokens have crossed the $1 million market cap threshold. These figures highlight a critical issue: while it’s relatively easy to launch tokens on Pump.fun, the real challenge lies in sustaining their relevance and value in such a competitive market.

The main issue is that most tokens fail to build lasting utility or a strong community. While meme coins often thrive on cult-like followings, the majority of tokens launched on Pump.fun haven’t been able to establish a culture or vibe that can sustain them over time. This lack of retention is a significant concern, as it suggests that many tokens may only enjoy brief success before fading into obscurity.

This short-term focus is one of the biggest challenges for Pump.fun, as it tries to balance the thrill of new launches with the need for lasting value and utility.

Fantasy Top

Fantasy Top is a social crypto app that combines daily fantasy sports with the influence of popular Twitter accounts. Players purchase NFT "cards" of Twitter personalities, known as "heroes," and enter competitive tournaments where they score points based on the engagement and interactions these accounts generate on Twitter. The more attention a "hero" receives, the more valuable their card becomes, with players competing for prizes.

When Fantasy Top launched, it quickly gained attention, recording one of the highest trading volumes, with nearly 22,000 ETH traded in the first three months. The innovative use of Twitter influencers and the appeal of daily fantasy tournaments attracted a significant number of users.

However, maintaining that initial momentum has been a challenge. In the following five months, trading volume dropped significantly, with only about 3,000 ETH traded in total. This decline highlights a key issue for Fantasy Top: keeping users engaged over the long term. While the initial excitement around speculation and competition brought users in, their interest faded as the novelty wore off.

The game’s reliance on continuous Twitter engagement to drive value may have contributed to this drop-off, as users moved on once the initial buzz subsided. Like many other apps, Fantasy Top has struggled to keep players interested and engaged over time

Despite these challenges, the Fantasy Top team has been actively working on new initiatives to improve user retention. One of their most successful efforts has been the voting system, which has been well-received and frequently used by the community. This feature, along with a solid overall product experience, has helped maintain impressive D1 retention rates, averaging between 35% and 40% over the past 5 to 6 months. However, the real challenge emerges by D30, where retention rates drop off significantly. This drop-off is a key reason why apps like Fantasy Top struggle to achieve long-term sustainability, as keeping users engaged beyond the initial excitement remains a difficult hurdle to overcome.

Maintaining long-term user engagement is a significant challenge for Fantasy Top, especially in the fast-paced world of Web3, where users expect constant innovation and fresh content. This high standard can be tough for any app to consistently meet.

Fantasy Top has been trying to find its “equilibrium” in the ecosystem, particularly through its tournament offerings. However, the platform has faced some hurdles.

Some key stats of the current tournaments and the progress of the game (h/t 0xBreadGuy):

• Since May, Fantasy Top has seen a steady decline in the number of holders, losing about 30 holders per day on average. Although this decline is beginning to level off, the platform has yet to experience a day of positive growth in holder numbers.

• Despite the drop in holders, tournament participation has remained relatively stable, with around 18,000 decks submitted each week. However, participation in higher leagues like Gold and Elite has fluctuated, with some weeks seeing fewer entries even as more cards are upgraded.

• On the supply side, the circulating supply of cards reached a low of 168,000 cards 30 days ago but has since risen by 5,500 cards, marking a 3% increase. This uptick is largely due to the net growth in card supply outpacing the burn rate during weekly tournaments.

• In terms of market activity, card trading volumes are averaging about 40 ETH per day outside major tournaments. The number of card listings tends to peak at around 5,000 outside of tournament periods, dropping to about 2,400 during tournaments.

• The team’s treasury currently holds approximately 3,600 ETH, which is sufficient to sustain weekly games for about 1.5 years at the current reward pace. To ensure long-term sustainability, the team is focusing on converting tactics users into full-ecosystem participants and carefully managing card dilution, especially at the higher levels.

Friend tech ($friend)

Friend.tech emerged as one of the most notable breakout applications in the crypto social ecosystem, backed by Paradigm and supported by some of the most influential figures on crypto Twitter. The platform quickly generated a lot of hype when it first launched, with prominent influencers creating their own channels, trading keys, and inviting users into exclusive groups. This activity created a sense of community and excitement, driving keys to trade for as much as 10 ETH or more.

However, the platform’s early success was heavily fueled by an incentive-based loop, where the promise of future airdrops and rewards attracted users. This led to a spike in engagement, but much of it was driven by anticipation of these incentives rather than genuine interest in the platform. As the initial excitement waned, the team struggled to maintain long-term engagement and failed to reinvent the platform in a way that could keep users interested over time.

Another major challenge was the delay and lack of clear communication around the token launch. The absence of a defined roadmap and ongoing updates created uncertainty and frustration among users, further eroding trust in the platform. Despite these challenges, Friend.tech offered a relatively seamless experience for web3-native users, especially as a mobile-first platform. The ease of installing the app, setting up wallets, and participating in the ecosystem was a key factor in its early adoption and success.

However, the delayed token launch, lack of new product updates / innovation including many other reasons led to a sharp decline in the platform’s . What was once a highly anticipated token, boasting a FDV of over $350 million, has now plummeted to just $10 million. This dramatic drop not only underscores their struggle to sustain its initial momentum but also highlights the difficulty in maintaining user interest over the long term.

Farcaster Ecosystem Tokens

Farcaster has established itself as a builder-first ecosystem, focusing on fostering a community where creators and developers thrive. This collaborative environment encourages people to come together, interact, and support each other in building new products, features, and services that enhance the platform. This approach has been particularly effective in keeping users engaged, entertained, and motivated to return regularly.

One of the standout features within the Farcaster ecosystem is Frames. Since its launch, Frames quickly became one of the most engaging and entertaining aspects of the platform. Integrated natively within the Farcaster mobile app, Warpcast, Frames is easily accessible and seamlessly fits into the user experience. Its success has set a high standard for other applications in the ecosystem, with new developments like Wildcard also adding further value and diversity to the Farcaster community.

Farcaster has built a user base of around 50,000 daily active users (DAUs), which can be divided into three main groups:

• Builders: These are the active creators and developers who drive innovation on the protocol, continuously building new features and products.

• Lurkers or “Degens”: Engaging more passively, this group is always on the lookout for the next “shiny” token or trend within the ecosystem, often driving speculative interest.

• Marketers or BDs: Focused on creating and managing engagement for their projects, these users leverage “channels” to connect with the broader community and promote their initiatives.

Since its inception, the Farcaster protocol has generated approximately $2 million in revenue. This revenue reflects the platform's ability to monetize its growing user base, driven by the diverse activities of these user groups.

A significant portion of Farcaster’s “adoption“ success can also be attributed to the rise of specific tokens within the ecosystem, particularly $degen and $higher. These tokens have not only driven user engagement but have also played a crucial role in expanding the Farcaster user base.

Let’s take a closer look at them to understand how they have contributed to the ecosystem and how they have evolved over time.

Degen L3 ($degen)

$degen is an intriguing case within the Farcaster ecosystem, as it started not as a serious project, but as a simple meme coin. Over time, it has evolved into an L3 chain, expanding beyond the Farcaster ecosystem. Initially, $degen gained traction as a way for users to tip others, rewarding valuable content or insights shared within the community. These tips, awarded in $degen, allowed users to support one another, which helped the token gain popularity.

At its peak, $degen was distributed over 200,000 times in a single day, and currently, almost 4 million $degen tokens have been tipped out.

A major airdrop also took place, targeting OG users of Farcaster who were early adopters and actively contributed to the community. This airdrop rewarded these users for their support, further solidifying $degen’s role in the ecosystem.

The token’s significance was further boosted when One Confirmation, a prominent venture capital firm, invested $1 million to support $degen. This investment sparked a rally, transitioning $degen from a simple meme coin to a utility token within the Farcaster ecosystem, with tipping increasingly done in $degen.

Since then, $degen has expanded into a full-fledged L3 chain, supporting various features and functionalities typical of a blockchain, including bridging, an explorer, and a name service for $degen. It has essentially become an end-to-end ecosystem on its own, with several applications being built on top of it. What’s particularly interesting is how $degen, initially rooted in meme coin culture, has evolved into a valuable asset within the Farcaster ecosystem. This has driven increased participation in challenges and communities, with $degen being leveraged to bootstrap channels and enhance community engagement on Farcaster.

Higher ($higher)

$higher followed a trajectory similar to $degen, quickly gaining popularity with its simple yet powerful concept that users should always aim higher in life. The token resonated strongly within the Farcaster ecosystem, maintaining a robust presence in the market for a significant period. At its peak, $higher saw daily trading volumes exceed $20 million, showcasing the substantial demand for Farcaster-native tokens.

However, like many hype-driven projects, $higher eventually experienced a decline as the initial excitement began to fade. Despite this, $higher's early success highlights how early movers can shape a strong narrative and build a dedicated following, helping a token gain significant traction, even in a developing ecosystem.

Gaming

Gaming has emerged as one of the most significant categories where tokens have found substantial value, far beyond the meme coin culture. In gaming, tokens serve a variety of important functions, such as purchasing NFTs, buying in-game items, unlocking skins or characters, and enabling extra moves or abilities based on the game's offerings. This range of utility makes gaming one of the key areas where tokens have demonstrated their true potential.

In this section, we'll delve into some of the most intriguing gaming applications that have successfully integrated tokens. We'll explore what makes these examples stand out, and consider how their success might guide future developments at the intersection of gaming and crypto.

Pirate Nations by Proof of Play ($pirate)

The first token in the gaming ecosystem worth discussing is $Pirate, which plays a central role in Pirate Nations, a game developed by Proof of Play. Pirate Nations has quickly become one of the most widely adopted on-chain games, boasting an impressive 40,000 to 50,000 daily active users (DAUs). Even amid broader market challenges, the floor price of the game's NFTs has remained strong at around 1.18 ETH, a clear indicator of the game’s solid market performance and strong community support.

What sets Pirate Nations apart is its community-driven development approach. The team actively engages with users, prioritizing features and services that resonate with their player base. By incorporating feedback and insights directly from the community, they have maintained a highly engaged and loyal user base that keeps returning to the ecosystem.

The team behind Pirate Nations is also noteworthy. It is led by the former founder of FarmVille, a well-known and successful social game. The team’s credibility was further reinforced when they secured $33 million in a seed funding round led by a16zcrypto.

The game’s economic model is also noteworthy, with approximately 30% of the total token supply currently circulating—higher than many other gaming tokens launched around the same time, which tend to have less liquidity.

One of the key takeaways from Pirate Nations is the effective balance the team has struck between the token economy and product-led growth. They have ensured that $Pirate token holders are genuinely invested in the game’s development and long-term potential, rather than merely speculating. This careful management has helped preserve the integrity and value of $Pirate within the ecosystem, contributing to the game’s continued success.

Currently, Pirate Nations is available only on desktop, but the team is actively working on expanding to mobile platforms. This move is expected to introduce the game to a broader audience, potentially driving significant user engagement and growth.

One of the most impressive aspects of Pirate Nations is its Day 7 retention rate, which stands at over 65%—an exceptional figure, especially when compared to other hyper-casual games. However, it’s worth noting that the current user base is still relatively small. As the game scales to new geographies, user types, and devices, maintaining this high retention rate could become more challenging. How the team navigates this will be crucial to sustaining growth.

Despite its successes, Pirate Nations faces notable challenges. The total addressable market for on-chain games remains extremely small, with limited adoption even within the Web3 ecosystem. This presents a significant hurdle that Pirate Nations will need to overcome to achieve broader success.

However, given its strong foundation, Pirate Nations has the potential to lead and expand this emerging category. The key will be in how the team drives adoption and sustains engagement in what is currently a niche market. It will be fascinating to see how Pirate Nations tackles these challenges and whether it can solidify its position as a leader in the on-chain gaming space.

Echelon & the Parallel Ecosystem

Next up is $Prime, a key token developed by the Echelon Prime Foundation, has become a significant player in the Web3 gaming ecosystem, particularly within the Parallel economy. As one of the biggest breakout successes of 2023 and 2024, $Prime's rise can be attributed to the team’s focus on product-led growth, integrating the token natively within the game’s economy for purchasing NFTs, trading cards, and other in-game items.

What’s particularly noteworthy is how the team has successfully attracted key opinion leaders and investors, further boosting $Prime's traction. Since its inception, $Prime has facilitated over $10 million in NFT sales, underscoring its strong market presence. The token performed exceptionally well over the past few months, positioning itself as a potential market leader in the Web3 gaming space.

However, the introduction of AI Wayfinder and its associated token, $Prompt, has complicated the landscape. The challenge of balancing a two-token economy has raised questions about which token—$Prime or $Prompt—will hold more value in the future. This shift has been particularly challenging, as $Prime was previously the cornerstone of the gaming economy. The introduction of $Prompt has sparked speculation and led to a significant decline in $Prime’s market value, with a drop of around 60-65% in the last four months.

One of the key challenges now is ensuring that $Prime remains relevant and valuable as the ecosystem evolves. The speculation surrounding $Prompt has made the situation more complex, especially as the team works on projects serving different markets. The market’s mixed reaction to the tiered staking system for $Prime, with concerns about the locking mechanism, has further contributed to the token’s decline.

Despite these challenges, the Echelon team is well-connected and appears to have a solid strategy moving forward. They are expanding into the Southeast Asian market, aiming to capture a broader audience. Recently, they launched a staking program where $Prime holders can stake their tokens and earn rewards in $Prompt, set to launch within the next 6 to 12 months. This staking program includes multipliers based on the staking duration, ranging from 0 to 3 years. Impressively, about 40% of the $Prime token supply has already been staked, with a significant portion locked in for the maximum duration of three years. This has effectively created a supply shock, reducing the circulating supply of $Prime and potentially boosting its value.

However, there are significant concerns about how the $Prompt launch will be managed. It’s crucial that the team avoids a scenario where 100% of the $Prompt supply is unlocked at once, as this could trigger a massive sell-off and destabilize the market. This is a critical point that the team must handle with caution.

On the positive side, strong support from big players like OSS Capital, which has staked around $30 million worth of $Prime for the maximum duration of 1,095 days, underscores confidence in the long-term potential of $Prime and the broader ecosystem. This bullish stance reflects a strong belief in the project's future, particularly as the team works to integrate AI into the gaming economy.

Overall, $Prime has made a significant impact in the Web3 gaming space, but the introduction of $Prompt adds a new layer of complexity that the team will need to navigate carefully. The future success of $Prime will hinge on how effectively the team can manage these challenges while continuing to innovate and expand the ecosystem.

It's very interesting to look at the collections or NFTs held by those who own Parallel Avatars, the native NFTs of the Parallel ecosystem. Many of these holders boast portfolios filled with blue-chip NFTs, including Bored Apes, Azukis, Art Blocks, and Pudgy Penguins. But what’s even more intriguing is that these holders aren’t just focused on a single asset within the Parallel ecosystem. Collectively, they have invested nearly $60 million into various other assets within the ecosystem, with Parallel Alpha being the most significant holding.

This level of investment demonstrates that the Parallel ecosystem has successfully created an experience where holders are not only incentivized but are also genuinely excited to be part of the economy. Their eagerness to invest heavily across multiple assets within the ecosystem showcases a deep commitment and interest. This kind of engagement from the community is a strong indicator of the ecosystem’s strength and the value it provides to its users.

Pixels ($pixel)

Lastly, let’s take a look at $pixel, which has carved out a unique space among games operating at scale. It has emerged as one of the breakout games on the Ronin ecosystem, particularly excelling in targeting different markets, especially the Southeast Asian market. The game has attracted a significant number of users who are genuinely interested in playing, rather than just engaging for incentives. This genuine interest in gameplay has been a key driver behind it’s product-led growth.

A major factor behind the initial hype and rapid user base growth was its play-to-earn model, which created an ecosystem where players were incentivized through token rewards, driving high levels of engagement. While the token launched at a strong valuation, the past few months have seen a noticeable drop in activity. Despite this, there are signs of recovery, with activity gradually picking up again—an encouraging development for the ecosystem.

Here’s a look at the amazing stats and numbers the game has been able to have over the last few months

The game’s simplicity has been a major advantage, making it easy for new users to adopt and start playing, unlike some other games that can be more complex and harder to get into. As the product continues to evolve, it will be interesting to see how $ixel adapts and maintains its audience’s engagement in the coming months. The way the game and its ecosystem develop will be crucial in determining its long-term success.

Music NFTs

Music NFTs have been one of the slower sectors to gain momentum in the broader NFT landscape. While other categories, like gaming NFTs, have rapidly grown and captured significant market share, music NFTs haven’t yet reached the same level of adoption.

One significant reason for this slower adoption is the speculative nature of the current NFT user base. Many users are drawn to NFTs that offer clear incentives, such as access to exclusive communities, in-game utility, or potential future rewards. Music NFTs, however, often lack this speculative element, making them less appealing to those looking for immediate or tangible benefits. Unless the artist tied to the NFT achieves significant success, the potential for future earnings is uncertain, which doesn’t align well with the speculative mindset that drives much of the NFT market today.

Another challenge is the uncertainty surrounding the actual ownership and utility of music NFTs, particularly regarding their financial benefits. While supporting an artist holds cultural value, many potential buyers are unclear about the tangible benefits of owning a music NFT. This uncertainty contributes to the slower adoption rate, as the current NFT community has yet to fully embrace the idea of long-term investment in an artist’s career through NFTs.

The lack of top-tier artists in the music NFT space is another major barrier to broader adoption. Without prominent musicians launching their work as NFTs, the appeal remains limited to a niche audience. If more well-known artists were to enter the space, it could drive much higher engagement and interest. Additionally, once a music NFT is purchased, it often remains in the buyer’s wallet with little activity on the secondary market. This lack of trading is also probably due to the absence of a speculative market around music NFTs, resulting in lower overall trading volumes and visibility within the broader NFT ecosystem.

To boost adoption, music NFTs might need to be tied to more tangible and desirable utilities, such as access to exclusive artist events, concerts, or other unique experiences. However, implementing this approach presents its own challenges, especially when trying to cater to a global audience with diverse preferences. Building a global network of artists and events to support such utilities requires significant coordination and buy-in from the music industry.

Recently, a few projects have attempted to change this dynamic. For instance, Crate achieved about $300,000 in trading volume shortly after its launch, but it still struggled to “really take off” compared to other more established genres in the NFT space. This highlights the ongoing challenges faced by platforms trying to bridge the gap between music and NFTs, particularly in terms of attracting high-quality and diverse artists.

Despite these challenges, the potential for music NFTs remains exciting. The space offers a unique intersection of art, culture, and technology that could see wider adoption as the market matures. As someone who has always been passionate about music, I’m particularly interested in seeing how this space evolves and whether it can go mainstream in the coming years. The idea of music NFTs becoming a significant part of the broader NFT ecosystem is compelling, especially if the right strategies and innovations are implemented to overcome the current barriers.

Chain abstraction

Chain abstraction is likely one of the biggest opportunities in the consumer crypto market, holding immense potential for the future. The core idea is to create a user experience where blockchain technology operates entirely behind the scenes, invisible to the end user. This mirrors how the internet functions today—users engage with applications for search, discovery, or entertainment without worrying about the technical complexities that run underneath.

In the same way, chain abstraction seeks to hide the complexities of blockchain technology beneath the application layer. This approach could greatly expand blockchain use cases, especially in mobile-first ecosystems where user experience can be more nuanced and challenging. By abstracting the blockchain layer, developers can create applications that are far more user-friendly, eliminating the need for users to understand or interact with the underlying technology.

As the consumer crypto space grows, chain abstraction may shift from being an optional feature to a fundamental requirement. The goal isn’t just to make blockchain technology more accessible, but to make it so seamless that users don’t even realize they’re interacting with a blockchain. This could lead to broader adoption and more innovative use cases, particularly in environments where ease of use is crucial. Chain abstraction has the potential to revolutionize how blockchain technology is integrated into everyday applications, making it a key part of the infrastructure for future developments in the crypto space.

It’s interesting to see how different chains are already gaining traction in chain abstraction. For example, Polygon has been a major player, with platforms like Polymarket enabling transactions that hide the complexity of the underlying blockchain. Similarly, Base has become the backbone for apps like Friend.tech and Farcaster, where all transactions occur on the Base chain. What’s notable is that these transactions happen without users needing to be aware of the blockchain layer at all.

This level of abstraction allows users to interact with these applications without thinking about the technology powering them. It’s not about removing the blockchain entirely, but about making it invisible so users can focus on the functionality and experience rather than the underlying tech. This approach improves user experience and lowers barriers to entry, making it easier for new users to get involved without needing to understand complex blockchain technology.

Kai Kai: a prime example of chain abstraction

Kai Kai stands out as a project that exemplifies what ideal chain abstraction looks like in practice. This application has gained significant traction, boasting nearly 1,000,000 daily active users, all while operating on the NEAR blockchain. What’s fascinating is how Kai Kai leverages blockchain technology without making it visible to the user.

Initially, Kai Kai partnered with Stripe, a traditional Web2 payment provider, which charged a 2.7% transaction fee. To reduce costs, they transitioned to NEAR, a move that not only proved to be cost-effective but also fueled massive growth for both Kai Kai and the NEAR ecosystem. This shift has led to nearly 1 million wallets being used daily and a significant increase in daily active users on NEAR.

Here’s how Kai Kai works: whenever a user makes a purchase on the platform—a Web2 commerce shopping app—they are rewarded with a native token that operates on NEAR. All transactions are logged and recorded on the NEAR blockchain, yet the user experience remains seamless. Despite over 1 billion transactions being processed, users interact with the app just as they would with any Web2 platform, without needing to be aware of the underlying blockchain technology. This makes Kai Kai a prime example of effective chain abstraction in action.

Ton x Telegram

Ton x Telegram has emerged as one of the most hottest ecosystems & narrative the consumer crypto space, with several applications coming out of it. While not all these apps have been massive hits, the ecosystem has proven to be a robust launchpad for new projects and tokens. With integrated wallets, products, and features, Telegram provides a ready-made distribution network, allowing users to interact with mini-apps directly within the interface, without the need to download external wallets. This ease of access has significantly contributed to the ecosystem’s rapid growth.

However, one of the key challenges facing this ecosystem is that many applications have yet to offer strong value accrual for their tokens. Despite the high user numbers, the quality and value these users bring to the broader economy are sometimes lacking. This issue could impact the long-term sustainability and success of tokens within this space. There’s a need to find ways to ensure these tokens can deliver tangible value to a larger audience over time.

While I’ll not dive deep into all the mini apps on Telegram, you could actually check out them in our previous coverages, I will like to pick projects as case studies that stand point, especially those who have a live token. Notcoin and BananaGun have both managed to capture significant traction and volume within the ecosystem. These apps have effectively leveraged the Ton x Telegram infrastructure, drawing considerable attention and activity to their respective protocols. Their success offers valuable insights into how other projects might achieve similar results in this rapidly evolving space.

Notcoin ($not)

Notcoin was among the first free-to-play games to launch on Telegram within the TON ecosystem, quickly becoming one of the most notable success stories in the global crypto landscape. The game has achieved remarkable growth, with over 11.5 million holders—far surpassing other prominent projects like zkSync, which has 695,000 users, and LayerZero with 1.28 million users. At its peak, the Notcoin airdrop was valued at an astonishing $2.5 billion, making it larger than the combined airdrops of zkSync and LayerZero, which were valued at $954 million and $323 million, respectively.

This success can be largely attributed to the game’s broad reach and effective user engagement strategies within the Telegram ecosystem. Nearly 30% of all Telegram Premium users participated, driven by a referral system that rewarded users for inviting others, especially those who subscribed to Telegram Premium. This model not only fueled adoption but also ensured wide distribution of rewards. For instance, one top referrer brought in 200,000 users but earned only 0.2% of the total airdrop, reflecting the highly distributed nature of token allocation due to the vast number of participants.

Initially a simple play-to-earn app, Notcoin quickly evolved into a full-fledged project with a dedicated team focused on expanding its ecosystem and adding value for its users. The game’s success has been further enhanced by its social features, allowing users to form squads and compete on leaderboards, either as part of a team or individually. Influencers within Telegram communities played a crucial role in its spread, with some inviting thousands of participants to join.

Beyond its impressive user growth, Notcoin has been recognized in the broader crypto space. A recent report by Delphi Digital ranked it among the top 10 tokens in the web gaming ecosystem, highlighting its rapid ascent. The game's user base is also geographically diverse, with participants spread across the globe, further strengthening its position.

The success of Notcoin underscores the importance of being an early mover in a strong narrative. Its early entry allowed it to capture significant attention and maintain momentum, something many other tap-to-earn and click-to-play games have struggled to achieve. While these other games face challenges in sustaining their ecosystems, Notcoin continues to thrive, demonstrating that early adoption and widespread engagement are critical to long-term success in the rapidly evolving crypto space.

Banana Gun Trading Bot

The Banana Gun bot, which began as a simple trading tool on Telegram, has quickly become one of the most talked-about tokens in the ecosystem. Its recent listing on Binance has only amplified its relevance and visibility. With a lifetime trading volume of approximately $5.7 billion, the bot has attracted around 230,000 users and facilitated over 10 million trades. On average, it sees nearly $15 billion in daily trading volume—remarkable figures that underscore the significant impact Banana Gun has made in the space.

One of the standout features of the Banana Gun bot is its seamless integration within the Telegram ecosystem. Users can execute trades directly within the app, without needing to switch platforms. This convenience has been a key factor in its popularity, making it easy for users to stay engaged and actively manage their trades or investments. The bot’s user-friendly experience has contributed to its widespread adoption and success.

Beyond its trading capabilities, the success of the Banana Gun bot highlights a broader trend in the ecosystem: the rise of integrated financial services within Telegram. This trend is not limited to trading; it also parallels the potential for P2P payments to become a major feature in the future. The ability to conduct trades, manage investments, and potentially make peer-to-peer payments all within the Telegram platform points to a growing movement where users can handle various financial activities without leaving their preferred messaging app.

Let’s also check out a few fun apps that have recently launched.

Time fun

Time.fun is a fascinating example of how Web3 is tackling traditional Web2 problems by reinventing the concept of time as a tradable asset. Instead of individuals setting their own hourly consultancy rates, Time.fun allows the community to determine the value of a person’s time through a speculative market. This flips the traditional model on its head, turning time into a dynamic asset that can be bought and traded by those who see potential value in it. I call it the calendly of web3.

What makes Time.fun particularly intriguing is its ability to create a market where the “time” of influential individuals can be bought, held, and traded. Someone might purchase the time of a high-profile individual, either because it’s valuable to them personally or because they believe they can resell it at a higher price. The market collectively decides the worth of a person’s time, adding a strong speculative element that makes it a fluid and potentially lucrative asset.

The platform gained early traction, with adoption from top influencers like Ansem, Mert, Nikita Bier, which boosted its visibility. However, like many speculative-driven products, Time.fun struggled to maintain momentum over the long term. The initial surge in trading activity quickly plateaued, with volumes flattening out over time. This highlights a recurring challenge for Web3 projects: generating significant early excitement is one thing, but translating that into sustained user engagement and retention is another.

While Time.fun is innovative, it faces the challenge of turning initial traction into sustainable growth. The speculative nature that drives early adoption doesn’t always lead to lasting user loyalty, which is something Time.fun will need to address moving forward. It will be interesting to see how the platform evolves and whether it can find ways to keep users engaged beyond the initial novelty of trading time.

Elements Fun

Elements.fun introduces a simple yet engaging gaming concept where players combine different elements to create new ones. Built on on-chain economics, the game allows players to either purchase new elements or acquire them from the secondary market, such as OpenSea. The core mechanic revolves around discovering new elements, with a unique reward system tied to these discoveries.

What makes Elements.fun particularly interesting is its communal reward system. Whenever a new user buys or discovers an element, existing players in the ecosystem are rewarded based on the number of successful combinations made within the game. Essentially, the more you play and explore, the more everyone in the ecosystem benefits. This approach brings a collaborative aspect to the gameplay, encouraging players to participate and contribute to the game’s growth.

Although Elements.fun is still in its early stages and hasn’t yet gained significant traction, its innovative concept has the potential to evolve in exciting ways. The game’s unique approach to rewarding players for their contributions could help build a strong and engaged community if it gains the right momentum. It will be interesting to see how this concept develops and whether it can capture the attention of a broader audience in the future.

Closing thoughts

The consumer crypto space is incredibly exciting yet still in its early stages. With advancements, investments, and ongoing research and development across various products, features, teams, ecosystems, and narratives, the potential in this space is vast. Opportunities are particularly ripe in areas like integrating or creating NFT-based communities, entertainment experiences, and driving user engagement.

However, significant challenges remain, particularly in scaling the infrastructure to serve a broader audience. The need for infrastructure that can handle mass adoption is critical, and this is something that projects like KaiKai and $Sweat are beginning to experiment with by abstracting the underlying chain and focusing on seamless user experiences.