Key Insights
The EOS network has undergone significant changes recently, notably reducing its maximum token supply from 10 billion to 2.1 billion with the release of EOS System Contracts v3.4.0, establishing a fixed supply for the network. In terms of performance, the EOS network witnessed a 33% increase in daily transactions and a 5.5% rise in active addresses quarter-over-quarter (QoQ). Despite a substantial price decline of 48.18% from $1.10 to $0.57, EOS managed to move up in market capitalization rankings from 90th to 79th during the same quarter. Furthermore, Tether announced its decision to halt the minting of USDT on the EOS network, paving the way for potential opportunities for alternative stablecoins and decentralized finance (DeFi) solutions within the ecosystem. Meanwhile, the introduction of the exSat Network has expanded EOS’s capabilities by launching a Bitcoin scaling solution based on EOS, thereby enhancing its role in cross-chain interoperability and scalability.
Introduction
EOS is a Layer-1 blockchain that employs a Delegated Proof-of-Stake (DPoS) consensus mechanism and is built on the open-source Antelope protocol, previously known as EOSIO. The EOS Network Foundation, a non-profit organization created through a community-driven initiative, aims to ensure the project’s continuity and revive the ecosystem. This grassroots movement has led to several important upgrades, including the implementation of inter-blockchain communication (IBC), an Ethereum Virtual Machine (EVM) solution, and the successful Savannah hard fork that improved transaction speed from 6 minutes to just 1 second, launched on September 25. For a detailed examination of EOS, please refer to our Initiation of Coverage report (IOC).
Key Metrics
In the second quarter of 2024, EOS’s price fell by 48.18%, dropping from $1.10 to $0.57, aligning with broader market trends. Despite some recovery seen in the overall crypto market during this period, EOS experienced a downward trend, contrasting sharply with major cryptocurrencies like Bitcoin, which showed signs of recovery. The overall crypto market capitalizations diminished during the quarter, a trend mirrored in EOS’s performance, leading to a 25% decrease in its circulating market cap, which fell from $1.2 billion to $900 million. Despite this decline, EOS improved its market cap ranking from 90th in Q1’24 to 79th in Q2’24, indicating a relative resilience compared to other assets.
EOS Token Unlocks and Staking
In Q2’24, EOS underwent a major revamp of its tokenomics model, decreasing the maximum total token supply from 10 billion to 2.1 billion and introducing a halving schedule intended to slow inflation over time. This new model, proposed by the EOS Network Foundation (ENF), aims to ensure long-term stability and predictability for users and investors. A key element of this new structure is the cap on total EOS supply at 2.1 billion tokens, with an 80% reduction in the Fully Diluted Value (FDV) due to the burning of a significant portion of future tokens, promoting a more stable economic environment for stakeholders.
The newly established four-year halving cycle aims to gradually decrease the rate of new token issuance, similar to Bitcoin’s token issuance model. Between April 1 and June 30, 2024, the EOS token supply surged by 33.61% due to a one-time mint, but as the halving cycle takes effect, the introduction of new tokens will taper off, helping to mitigate inflation over time. The revised tokenomics also includes plans for future minting of 950 million EOS tokens, allocated for various ecosystem activities, including 85 million for ecosystem growth, 15 million for public goods funding, and 100 million for block producer rewards, among others.
Updated EOS Staking Mechanisms
The updated EOS staking mechanism introduces several enhancements designed to improve user experience and bolster the network’s long-term security. A notable feature is the introduction of high-yield staking rewards, allowing users to earn compounded returns over time by staking their EOS tokens. This is supported by a dedicated pool of 250 million EOS set aside for staking rewards, with an annual release of 31.25 million EOS to ensure ongoing engagement from the community.
The unstaking period has been extended from 4 to 21 days, promoting greater network stability and discouraging short-term speculative behavior. This change encourages stakers to commit to the network for longer periods, thereby enhancing overall security. Additionally, the staking process has been simplified by removing the requirement for users to vote for 21 block producers or designate a proxy, making it more accessible. Block producers will also receive increased incentives from network-generated fees, complementing their traditional block rewards, which encourages their active participation in maintaining the network’s security and scalability. To date, over 150 million EOS has been staked, accounting for 7.14% of the total locked supply, with over 100 million EOS staked in just four months since the new staking program’s launch.
Network Analysis
During Q2’24, both daily active addresses (DAAs) and daily transactions on the EOS network experienced QoQ growth. Daily transactions rose from 1.2 million to 1.6 million, reflecting a 33.33% increase. The number of daily active addresses also grew from 29,000 to 30,600, marking a 5.52% increase. Unique active addresses reached 309,421, representing a 10.01% increase QoQ. However, engagement levels indicated that many addresses exhibited low activity; specifically, 35.10%, 18.34%, and 9.55% of addresses were active for 1, 2, and 3 days, respectively, accounting for nearly 63% of total addresses. Notably, 35.10% of addresses were only active for one day, reflecting a 25.36% increase QoQ. Furthermore, 86.43% of wallets were active for 10 days or fewer during Q2’24.
Conversely, the average daily transactions on the EOS EVM saw a dramatic decline from 32,000 to 1,046, a staggering 96.73% drop QoQ. The spike in transactions during Q4’23 and Q1’24 was mainly driven by inscriptions, but EOS is now reverting to pre-inscription levels, aligning closer to the daily transaction average of around 1,000 observed in Q3’23.
Upgrades and Technical Developments
On the technical side, EOS is preparing for several significant upgrades aimed at improving performance and scalability. A major milestone was the launch of the Antelope Spring Beta 1.0 on the Jungle testnet on May 25, 2024, which sets the stage for the anticipated Savanna Consensus mechanism. Scheduled for implementation on July 31, 2024, this upgrade is expected to enhance transaction finality and overall network efficiency, potentially improving EOS’s performance by over 100 times. These advancements are crucial for maintaining EOS’s competitiveness in the rapidly evolving blockchain landscape, where high throughput and scalability are increasingly essential.
Additionally, the network has made improvements to its RAM system with the launch of WRAM on April 17, 2024, which enhances transferability and utility by operating on both on-chain and off-chain. Furthermore, 350 million EOS has been allocated to develop the RAM market, aimed at optimizing network functionality and expanding potential use cases.
Ecosystem Analysis
The virtual property game Upland has maintained its position as the leading EOS contract group by daily active addresses, averaging 24,110 in Q2’24, which is a 9.59% increase from the previous quarter. The EOS System Contract, responsible for managing delegation and resource management functions, secured the second position with an average of 6,870 daily active addresses, reflecting a 137.93% increase from an average of 2,900.
The EOS network is also extending its capabilities through new features and initiatives. A key development is the exSat Network, a Bitcoin scaling solution built on EOS, which emphasizes the network’s efforts to broaden its functionality within the blockchain ecosystem. The exSat Network is poised to utilize over 106 GB of EOS RAM, further enhancing the significance of RAM within the EOS ecosystem. The exSat mainnet went live on October 23, boasting 53% of the BTC hash rate and 4,100 BTC staked to the network.
DeFi
The total value locked (TVL) in EOS’s native DeFi ecosystem grew by 20.55% QoQ, increasing from $39.9 million to $48.1 million, signaling heightened user activity and capital allocation within the EOS DeFi landscape. However, the TVL for EOS EVM saw a decline, dropping 32.00% QoQ from $2.5 million to $1.7 million, indicating reduced activity or liquidity in this segment of the network. Defibox continues to dominate the EOS Native TVL, thanks to its swapping and lending services, while PayCash, a decentralized exchange and fiat on-ramp platform that bridges cryptocurrencies and traditional currencies, has solidified its position in second place with a significant portion of the EOS Native TVL.
On June 24, 2024, Tether, the issuer of the world’s largest stablecoin USDT, announced it would cease minting USDT on the EOS blockchain. This decision is impactful, as USDT has served as a cornerstone of the crypto market, providing stability and enabling a variety of DeFi activities across multiple blockchains. Stablecoins like USDT are essential for liquidity pools, lending platforms, and decentralized exchanges, so the withdrawal of USDT support could significantly affect EOS’s DeFi landscape.
While EOS’s native stablecoin market cap remained stable at $75.5 million, continuing its trend QoQ, this figure is solely derived from USDT. As Tether begins the redemption process, this figure is expected to change in upcoming quarters, potentially reshaping the stablecoin landscape within the EOS network. Tether’s decision to halt USDT minting on EOS is part of a broader strategy aimed at optimizing its ecosystem and resources. Although EOS comprises only a small fraction of USDT’s total supply—approximately $17 million, which is less than 0.1% of its overall $113 billion supply across 16 blockchains—this move underscores Tether’s focus on larger networks like Tron and Ethereum, which account for $59 billion and $52 billion of USDT supply respectively.
This shift follows a trend, as Tether has previously ceased USDT support on other blockchains, including Kusama, Bitcoin Cash’s Simple Ledger Protocol (SLP), and the Omni Layer Protocol. Nevertheless, Tether continues to explore new networks, such as The Open Network (TON). Its broader strategy also involves the introduction of additional stablecoins, such as CNHT (Chinese Yuan), EURT (Euro), and XAUT (gold-backed), to diversify its financial products across global markets.
Tether’s decision to stop minting USDT on EOS presents challenges for the network, particularly within its DeFi ecosystem. However, Tether will continue to honor existing USDT on EOS and facilitate redemptions, ensuring current holders are not adversely affected. USDT plays a pivotal role in liquidity and user engagement, and the absence of native support may hinder EOS’s ability to sustain its current DeFi activity. This development highlights the shifting dynamics of blockchain ecosystems and underscores the competitive challenges smaller networks like EOS face in securing support from major industry players.
Development
The ecosystem development, evaluated through the number of unique contracts called and new contracts launched, experienced a slight decline in Q1. The total number of unique contracts called remained steady at 840 QoQ, while the number of new contracts fell by 21.95% QoQ, decreasing from 41 to 32.
Closing Summary
In Q2 2024, EOS encountered several noteworthy developments that have influenced its path within the blockchain ecosystem. The most significant change was the transition to a fixed token supply model, capping the total supply at 2.1 billion EOS tokens. This shift represents a departure from the previous inflationary model, introducing long-term predictability for token holders. The new tokenomics features, including staking rewards and vesting schedules, aim to cultivate stability and sustainable growth within the network.
In the DeFi sector, EOS experienced a 20.55% increase in Native DeFi TVL, with platforms such as Defibox and PayCash leading the charge. Nonetheless, challenges persist, particularly with Tether’s announcement to stop minting USDT on EOS, which may impact liquidity and user engagement within the DeFi ecosystem. Despite these hurdles, EOS continues to enhance its infrastructure, with initiatives like the exSat Network and ongoing middleware development aimed at boosting the network’s utility and adoption.
