IOTA 2022: Year of the Ecosystem

A Year in Review, a Year in Preview

TL;DR:
2022 was the year that the IOTA Foundation opened up to the ecosystem. An explosion of projects began building on Shimmer, and decentralized governance became a reality for the IOTA community. Meanwhile, the Foundation continued to deliver major infrastructure, security, and digital identity projects. Buckle up for our mammoth end-of-year review – and a look forward to next year.

2022 was a challenging year for the blockchain industry. It was crypto’s Year of the Bear: amidst the losses, scams, and hacks, prices dropped so low that the crypto market was described as a “shambles” with about $2 trillion of value in market cap wiped from the cryptocurrency market since the heights of November 2021.

But if one lesson emerges from the industry’s low points this year, it’s that the original promise of crypto – the financial and digital empowerment of people through decentralization – is more important than ever. After all, the original drive to circumvent centralized entities stands in opposition to centralized exchanges like FTX.

For the IOTA Foundation, this means that our vision has never been more relevant than in 2022: to empower people, to connect people, and to give people digital autonomy through decentralized technology.

So, while the IOTA Foundation kept pushing the envelope on lots of fronts, including Research and Development, education, and industrial adoption projects, it also fast-forwarded the process of enabling people outside the Foundation to build on IOTA. As our co-founder, Dominik Schiener, wrote in June, “Decentralizing IOTA is not just about the technology, it’s also about its governance and the entities that drive it forward.”

And that’s what happened this year. Alongside the centralized work of the IOTA Foundation in pushing forward the protocol and adoption, we also set about decentralizing its governance and technology.

Inside the Foundation: Research, development, and adoption in 2022

As shown by our lighthouse project dashboard launched in May, the transparency, immutability, and secure data transfers enabled by IOTA were a bedrock this year for many collaborative projects – some new, some ongoing for several years. These included mobility (e.g. Gaia-X ROMS), data governance as a Service (e.g. GOVS), developing smart meters (e-g. SUSEE project), and e-commerce (e.g. ENSURESEC, a two-year project that came to a successful conclusion in May).

Successful progress on the European Commission’s European Blockchain Services Infrastructure (EBSI) bookended 2022, with IOTA being accepted into Phase 2A at the start of the year and into Phase 2B (“Final Solution Development and Field Testing”) in December of 2022. Key to our success in Phase 2A was our work on digital product passports (DPP) for the circular economy, applied to consumer electronics and electric vehicle batteries, an EU-wide intellectual property rights management in the creative industry. In Phase 2B, we intend to: complete field testing of the IOTA Stardust solution, including smart contracts and tokenization; extend and field test the DPP and Internet of Things use cases; and test interoperability with EBSI 1.0.

Watch our video recap of the year - a community effort led by IOTAShops

An outstanding success story involving IOTA tech was EnergieKnip. At the start of this year, BlockchainLab Drenthe created a local currency for use in Emmen, the Netherlands, to transact data about energy-saving measures in local homes and reward homeowners for their data. With  8,800 participating households, 300,000 EUR distributed and 50,000 transactions, EnergieKnipp has convinced other dutch municipalities to look at local currencies as well. The IOTA Foundation is also supporting BlockchainLab Drenthe in spreading EnergieKnip in the form of regional vouchers in Germany.

The collaboration between IOTA Foundation and TradeMark East Africa continued to bear fruit and will be extended into 2023 to move the Trade and Logistics Information Pipeline (TLIP, given its own website in June) into production in Kenya. A  consortium of more than 45 organizations is involved in testing TLIP in multiple trade lanes. Meanwhile, in partnership with the UK’s Institute of Export & International Trade, we are working with the UK government as part of testing their 2025 border strategy.

Our Research and Development department also continued to deliver vital work on the protocol, with

• Great progress on the IOTA 2.0 DevNet, adding critical features such as snapshotting and syncing and making the codebase more stable and robust.
• Publications including work on the Tangle 2.0 Leaderless Nakamoto Consensus published in IEEE Access, the Robustness of the Tangle 2.0 Consensus published here, and Reality-based UTXO Ledger available here,
• Updated research into the energy consumption of a Coordinator-less IOTA 2.0 prototype, proving once again that it is among the very lowest energy consumers in the space.
• Research presented at conferences like IEEE Coins in Barcelona, the International Symposium on Cluster, Cloud and Internet Computing in Taormina, and EAI International Conference on Performance Evaluation Methodologies and Tools (VALUETOOLS 2022), held online.

Development of Digital Identity and Security also hit milestones in 2022. In April, we released IOTA Identity v5, with improvements in ease of use, security, consistency, and code quality. November saw Stronghold 1.0 stable release; Stronghold is a secure software library written in Rust to manage sensitive data. And following a Request for Proposals in March, we were already able to announce in June that we are working with web3 infrastructure provider walt.id on a privacy-preserving, SSI-based Login With IOTA system that allows traditional Web2 and decentralized Web3 apps to easily onboard users.  

Our commitment to research and development didn’t only look inwards: in February, we awarded a grant to Imperial College London for its research into the circular economy and in March we gave a grant to the University of Zurich Blockchain Center to support its research into the consensus model used in the IOTA protocol.

Firefly

Finally, the team behind Firefly, IOTA’s official wallet, had an extraordinary year. In 2022, we shipped our first iteration of Firefly Mobile. Support for the IOTA Governance Framework was also added, so users could view current proposals and cast their votes. This is an MVP, and we’ll be working on improving it in the new year.

The other big release was the Firefly Shimmer wallet. The wallet supported the Shimmer launch with the ability to claim SMR tokens in the app. The set of features includes native tokens, microtransactions, expiration times, and claiming async transactions. It was, needless to say, a big work package and the stats speak for themselves: 400 pull requests, 481 closed issues, 71,000 additions, 64,000 deletions, and 1545 files changed.

Regulation and education: Spreading the word

We also took a more active position in the regulation of the blockchain space in 2022. As an active member of the International Association of Trusted Blockchain Applications (INATBA), the European Blockchain Association, and Blockchain Bundesverband, the IOTA Foundation has contributed to multiple working groups, papers, and presentations. We contributed to INATBA’s Unified Definition of Social Impact for the Blockchain Sector and Social Impact Model for Small and Medium-size Blockchain Projects. We also contributed to INATBA’s recommendations about the Markets in Crypto-Assets Regulation presented to the European Commission. We’re proud to say that most of the recommendations made by INATBA were incorporated in the final version.

On the heels of our open letter in April to the European Commission, European Parliament, and Council of the European Union in response to the Transfer of Funds Regulation, we launched our “Let’s Talk About Regulation” sessions and its Spanish-language edition, “Hablemos Sobre Regulación”, both held on Discord. This series will continue into 2023, as will a series of closed discussions between policymakers and community members on how regulation of digital assets should evolve in the EU, especially in the areas of DeFi and NFTs.

2022 was also another busy year to spread the word about IOTA at international conferences: events featuring IOTA Foundation representatives either on stage or online included GS1 Global Forum, Mobile World Conference Barcelona, DMEXCO, European Identity, and Cloud Conference, TMRW Conference Barcelona, Greentech Festival, Scylla Summit, COP27, The Nine Environment For Europe Ministerial Conference, Blockchain For Europe Summit, Cardano Summit, INATBA Digital Week, and GIZ Community of Practice: Blockchain for Climate Action.

As part of our move to empower the community to be true ecosystem stakeholders, 2022 also saw an explosion in the number of content creators outside the IOTA Foundation that took on the challenge of educating and entertaining the community. Joining the likes of well-established, unofficial sources were (to name just a few):

• The Moonaco podcast, which hosts interviews with key players in the IOTA ecosystem and beyond.
• IOTA Content Creator DAO, which is devoted to content creators with a specialty in all things IOTA.
• And video creators delivering regular doses of IOTA news and opinions, like Spec Weekly, IOTApoet, and Probably Nothing

Governance: From us to you

The move toward fully decentralized governance of IOTA is also well underway. The vision to bring decentralized autonomous organizations to the ecosystem and have no single entity wielding control over the protocol took a major step forward in February with the formation of the DAO Pioneers. The Community Governance Group from which the DAO Pioneers idea evolved also developed the voting methods that led to the first on -Tangle governance vote.

In May, decentralized governance was taken up a notch with the creation of the IOTA Governance Forum (repurposed from the Iota.cafe research forum), where developers and engineers can discuss protocol improvements, mathematicians and computer scientists can contribute ideas for future protocol implementations, and anyone can share ideas, suggestions for improvement, and new strategies.

One of the most important proposals taken in the Governance Forum was voted on in August: the creation and funding of a treasury DAO for the ecosystem around Shimmer, IOTA’s new feeless staging network that is a scalable multi-chain network in its own right. Other votes included the establishment and selection of members to the Shimmer Community Treasury Committee and to establish the Shimmer Growth Committee.

Technology: The Shimmer revolution

Shimmer officially launched in September. Shimmer advances IOTA’s ledger with a tokenization framework, enabling anyone to tokenize anything and everything (from NFTs to real-world assets, stablecoins to fan tokens, and more) natively on Layer 1 without fees.

The launch followed the fair token distribution in December 2021 (at of time of writing, 64% of the SMR tokens have been claimed so far), the release of the Shimmer Beta Network in July, the publication in September of a test version of a public smart contract chain connected to the beta network allowing testing integrations for release, as well as the launch of the Shimmer wiki in September.

Shimmer is a milestone in the evolution of IOTA. Our goal is for the entire stack of IOTA – from core software, developer tooling, and Layer 2 solutions to frameworks, solutions, and products – to be built and maintained by an ecosystem of independent teams and organizations. As an innovation ground that first receives the latest features, Shimmer is integral to this vision.

Bitforex, with Bitfinex as the leading launch partner, has listed SMR trading pairs and, alongside them, the first two community-based exchanges are listed with Soonaverse and IOTABee.

In contrast to the crypto landscape over the past few years, marked by unsustainable yield and token launches for early whitelisted pre-sale investors, Shimmer is community-first. 100% of Shimmer tokens were airdropped to the community over three months starting in June 2022; the community’s vote to allocate 20% of these tokens to set up an Ecosystem Fund means that Shimmer is not under the sole control of the IOTA community but also its own DAO treasury and a Swiss-based Tangle Ecosystem Association, which can help fund ecosystem projects and grow the Shimmer network.

Furthermore, Shimmer’s evangelical role on all things DeFi could be seen in its free DeFi education series with web3 consulting service Bankless Consulting, irreverent Flippin’ Burgers Twitter Spaces, and the video tutorials with Kumar Anirudha, one of our Developer Advocates.

Year in preview: a multi-chain future

Shimmer supports the decentralized, multi-chain smart contract future for IOTA. By making it possible for new token economies and dApps to be built by anyone and be listed on and traded on decentralized exchanges, our overall strategy is more closely aligned with the market.

Shimmer’s tokenization framework sets the stage for ShimmerEVM, which completes Shimmer by adding Ethereum Virtual Machine (EVM) compatible smart contracts to the mix. This means anyone can deploy and interact with smart contracts on a separate blockchain anchoring into Shimmer. Once the ShimmerEVM chain is launched, Shimmer will be feature-complete and have some of the lowest fees for smart contract execution on the market.

There is already a flourishing and lively ecosystem around Shimmer with currently over 70 projects getting ready to launch and offer real token utility to SMR and IOTA token holders. Each one of them – and the many more to come – embody Shimmer as a community-led network, whose permissionless innovations and improvements drive the adoption of IOTA in 2023. These projects are supported by the Touchpoint Open Builders Program, which was launched in March to connect and support builders, experts, and investors in the ecosystem to build, launch and scale their projects.

Apart from properly testing and scaling the first EVM chain on Shimmer, in 2023 we will be focussing heavily on the Developer Experience, providing more builder support. Furthermore, we will be integrating the new tokenization framework and EVM chain capability into the IOTA network.

The Firefly team is currently working on support for NFTs, a comprehensive voting system for Shimmer Governance, supporting Layer 1 to Layer 2 asset transfers, and the Shimmer mobile wallet. Ultimately, Shimmer and IOTA wallets will be merged into one application on both desktop and mobile. In 2023, we’ll develop core L2 support once the extended L1 feature set is complete. This will involve enabling L2 assets to be managed in Firefly, sent, and unwrapped to L1, and connecting and interacting with external dApps in the browser via a dApp catalog.  

Finally, our efforts to fully decentralize IOTA will become more tangible. With the research on decentralization having been concluded his year, 2023 will be marked by a focus on the development and integration of the Coordinator-free consensus – first on Shimmer – before integrating it into the IOTA network. With many of the powerful gatekeepers in the market like FTX, Alameda, 3AC, and DCG having proven feet of clay, IOTA is committed to realizing the true vision of distributed ledgers.

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