Q4 2023 Progress Report

Latest Developments by the IOTA Foundation, Community and Ecosystem

The last quarter of 2023 was a busy one for the IOTA Foundation and the IOTA and Shimmer ecosystems, with major advancements such as the IOTA 2.0 introduction campaign, the launch of the first DLT foundation to be established under the regulatory authorities in the United Arab Emirates, several exchange listings, the launch of Shimmer EVM, and, of course, improvements to the IOTA core technology. We’ve summarized the advancements made by teams across the Foundation, starting with our researchers and engineers.

Core Protocol Research

The Core Protocol Research, responsible for the design of the fundamental modules in IOTA 2.0, collaborated with the iota-core Development Team to fine-tune protocol parameters and enhance usability. Details of the team’s contribution are provided in the following paragraphs, describing the advances of each protocol-related working group and task force:

Responsible for developing the IOTA 2.0 protocol’s consensus mechanism, the Finalization Research Working Group proposed various improvements to align the IOTA Core implementation with theoretical concepts. After finalizing the consensus protocol, the team began formalizing the consensus problem in a broader model to facilitate smart contract support.

Responsible for designing the protocol’s access scheme, the Congestion Control Working Group played a crucial role in supporting its implementation in IOTA Core. Notably, it refined the scheduler, fine-tuned the Reference Mana Cost parameters for enhanced usability, and optimized validation block rules by incorporating a secondary buffer. Furthermore, the group is in the process of formalizing the proposed hybrid congestion control, which combines subscription models with posted price.

The Incentives Working Group is responsible for developing the new incentive mechanism and research subjects related to game theory and tokenomics. In Q4, it focused on finalizing the Tokenomics Whitepaper release. At the same time, it completed and launched the interactive Mana Calculator, enabling users to simulate scenarios involving Mana generation, delegation dynamics, and staking rewards. As part of the IOTA 2.0 Introduction series, several deliverables were published related to Incentives and Mana. Furthermore, collaborative efforts contributed to the completion of Mana and rewards-related TIPS and the seamless integration of the incentives mechanism into the IOTA core node.

The Tangle Dynamics Research Working Group merged temporarily with the Parameter Taskforce this quarter; the progress of this joint team can be found below.

The Parameters Taskforce is responsible for translating mathematical model parameters into high-level (TangleSim) parameters and refining them for both high and low-level (iota-core) models. Initially, the task force proposed a comprehensive parameter list for iota-core with default ranges based on experiments conducted with TangleSim, incorporating the acceptance/confirmation mechanism. Following this, a data metric plugin for iota-core was implemented to collect data directly. Currently, the task force is engaged in experiments exploring consensus-related aspects, such as validation blocks for various input parameter values.

Ledger Research

Q4 saw significant progress by the Working Groups that make up the Ledger Research Team, whose main focus is on data and application layers.

The Smart Contract Research Working Group, tasked with researching programmability support on the L1 has analyzed Smart Contract platforms to assess the user demand for shared state access. The group is currently in the process of preparing an internal report that will summarize its research efforts around L1 smart contracts. Additionally, it is actively identifying the requirements from the IOTA 2.0 consensus for integration with L1 smart contracts.

The IOTA Smart Contracts (ISC) Consensus Group, responsible for formally describing and refining the ISC consensus and related algorithms, mainly focused this quarter on preparing to adapt ISC to the IOTA 2.0 protocol upgrade. Other areas of focus included investigating aspects of mempool management as well as challenging the chain recovery algorithm to ensure its robustness.

Responsible for investigating Zero Knowledge (ZK) techniques and solutions for scalability and privacy-related use cases, the ZK Working Group initiated a proof-of-concept integration of RISC Zero and Move VM. It explored Move ZKVM and is assessing the feasibility of ZKVM and IOTA DLT integration. Furthermore, it is continuing research on zk-STARK constructions and privacy-oriented solutions.

The EBSI Taskforce, responsible for assisting the IOTA Foundation’s participation in the EU Blockchain Pre-Commercial Procurement in research-related matters, is still progressing with its work on Phase 2B as outlined in the tender.

Engineering

This quarter saw the implementation of outcomes from the Accounts and Usability taskforces by the IOTA Core Team. Notably, the IOTA Core Team introduced the implicit account mechanism, offering a frictionless and permissionless entry point to the network. This will serve as the default method for users to become block issuers upon entering the IOTA ecosystem from a wallet. Furthermore, all Tangle Improvement Proposals (TIPs) from the Accounts Taskforce are now public on the GitHub TIPs repository. The team’s current focus is on rigorously testing and hardening all aspects related to Accounts, Staking, Delegation, and Mana rewards.

This quarter, the IOTA Smart Contracts/Wasp Team dedicated the majority of its time to enhancing Wasp's support for IOTA 2.0, ensuring swift compatibility upon its release. Additionally, it focused on enhancing stability and EVM compatibility. Time was allocated to explore the competitive landscape for insights applicable to Wasp. The team continued its efforts to enhance the developer experience regarding native assets on L2 and cross-chain transfers.

Since the launch of ShimmerEVM at the end of the previous quarter, the Smart Contracts Team has diligently monitored and enhanced the network, ensuring a seamless user experience. The platform has seen significant success, with over 1.4 million transactions and $5 million in total value locked. The team's efforts primarily involved implementing smaller updates, including bug fixes and performance/compatibility improvements. It collaborated with launching projects and the broader community, leveraging valuable feedback to elevate ShimmerEVM to the next level.

During the last quarter, the Tooling Team actively contributed to the Firefly Mainnet upgrade and monitored the progress of Firefly iota-core. Simultaneously, it made strides in advancing the new Explorer Visualizer and Explorer IOTA 2.0 support. As the quarter concluded, resources were substantially augmented to refine the existing state of the Explorer. The team intensified efforts to achieve goals with the Visualizer and Nova support.

Progress on the IOTA Software Development Kit (SDK) this quarter primarily centered on internal refactoring and implementing TIPs related to IOTA 2.0. Notably, the introduction of key concepts such as accounts and implicit accounts has taken place, with ongoing progress in mana-related features. These changes are being applied to both the Rust core and associated bindings and CLI.

The most notable update from the Identity Team this quarter was the release of the 1.0 version of IOTA Identity, providing a stable implementation of DIDs on Stardust ledgers on the Shimmer and IOTA networks. Additionally, the explorer was updated to display identities and associated verified domains in the Alias address page, allowing exploration of the relationship between on-chain assets and identities. In preparation for the next version, a general implementation for selectively disclosable JWT credentials was released, which will be integrated into the IOTA Identity library throughout Q1 2024.

Firefly Wallet

This quarter, significant strides were made in the progress of the Firefly Wallet, highlighted by the notable release of Firefly IOTA 2.0.0. This release incorporated support for the Mainnet Stardust upgrade, integrating features from Firefly Shimmer to Firefly IOTA— encompassing native tokens, NFTs, governance, and developer tools. A key addition was the vesting view, providing users with insights into IOTA Airdrop rewards and vesting schedules.

Throughout the quarter, consistent updates were applied to both Firefly IOTA and Shimmer, with a focus on refining existing features, addressing bugs, and introducing minor feature enhancements.

Simultaneously, substantial efforts were devoted to advancing IOTA 2.0 on the public testnet. This included a comprehensive refactor of the wallet architecture to accommodate the new account-centric SDK, coupled with the initiation of implicit account creation.

Developer Experience

During the last quarter of 2023, the Developer Experience Team assisted in publishing the IOTA 2.0 introduction campaign in the IOTA Wiki. It also aligned the style and format for the Identity documentation with the rest of the Wiki, following the Diataxis framework. The ISC EVM documentation received a makeover, and after some investigation, a new content plan was created that will follow a user story and common use cases in EVM/Solidity that should be ready for publication in Q1 2024.

Community and Ecosystem

As 2023 comes to a close, a significant internal development has been the consolidation of all ecosystem-related teams and responsibilities into a unified Ecosystem Department. This integration encompasses Community Management, Touchpoint, and the Growth Taskforce, creating a cohesive department dedicated to driving the growth of both the Shimmer and IOTA ecosystems. The role of Head of Ecosystem has been assumed by Susanne Krone, who, along with her team, will shape this department with a distinct emphasis on Web3 adoption and growth. The goal is to cultivate a vibrant ecosystem of builders leveraging IOTA's technology. Here are updates on various projects now under the responsibility of this team.

IOTA & Shimmer Governance: In October, the IOTA and Shimmer Community voted on an updated specification for the Community Grant Committee. The successful vote enabled several modifications to the grant program. It also allocated 10 million IOTA tokens from the IOTA Community Treasury to the Grant Committee to expand its activities to the IOTA ecosystem. To apply for a grant, please visit the Tangle Treasury website.

The Community Governance Group is continuously working on integrating an EVM-based governance system to secure the Community Treasuries. Tally has, therefore, integrated the Shimmer EVM, and tests in a beta-tester group are ongoing. If you are interested in participating, join the Discord community.

Shimmer (EVM) Ecosystem: Q4 saw impressive growth in the ShimmerEVM ecosystem. Throughout the three months, the community keenly awaited this milestone to be developed. Now that ShimmerEVM is operational, the community’s enthusiasm has been showcased in this short period by the impressive 7500 active accounts reached, over 1.5 million completed transactions, and over 2600 smart contracts deployed on the chain.

Already in the first month, the Shimmer EVM made it into the Top 5 growing EVM chains tracked by DefiLlama, with TVL reaching a peak of $6.4 million in December. This growth was spurred by several ecosystem teams launching their project tokens on decentralized exchanges, fueling a healthy and vibrant DeFi community eager to explore new opportunities.
ShimmerEVM has rapidly integrated with a range of Web3 infrastructures. The most recent highlight involved integrating the Layer Zero Bridge, which directly connects Shimmer EVM to Ethereum, Arbitrum, Optimism, Base, Avalanche, Binance Chain, and Fantom. This is a huge milestone for the ecosystem. Further integrations include Web3 essentials like Fireblocks, Gnosis Safe, Bloom Wallet, Mathwallet, DeFiLlama, Tide, Snapshot, Tally, GeckoTerminal, Guild.xyz, and BlockMonitor.

Touchpoint: The Touchpoint Program has seen a further inflow of new builders and growing activity. With the EVM going live, it has served as the primary point for builders to get direct access to our Smart Contract Team, and the Touchpoint Teams have been deeply involved in battle-testing and improving the EVM. Touchpoint is being restructured and integrated into the new Ecosystem Department to enable more seamless and effective builder support and integration management. If your project is interested in joining the Touchpoint Program, apply here.

Regulatory Affairs

In Q4, the IOTA Ecosystem DLT Foundation completed its registration in the Abu Dhabi Global Market (ADGM). The IOTA Ecosystem DLT Foundation is the first DLT foundation to be registered under the UAE’s new regulatory regime for DLT foundations. This is an important step towards real-world adoption and regulatory compliance. The DLT Foundation is supported by approximately $160 million in IOTA tokens and is dedicated to expanding the IOTA ecosystem in the Middle East, Africa, and Asia. You can learn more about the IOTA Ecosystem DLT Foundation's strategy in this blog post.

In Q4, the Social Impact and Sustainability team accomplished several key initiatives, including hosting the first community calls with BC100+ initiative signatories and publishing the inaugural newsletter on BC100+. Additionally, the team participated in sustainability events such as COP28 and Decentralized Impact Berlin. As contributors to the INATBA Social Impact & Sustainability Working Group, the team collaborated with working group members to release the report titled "Blockchain for Sustainable Impact: Unveiling Latin America’s Innovations”.

Coordicide

As outlined in this blog post in September, the Coordinator was replaced by a Validator Committee of nodes run by several entities. This chosen committee is a temporary measure until the launch of IOTA 2.0, where committee formation will be permissionless and based on token stake, therefore enabling full coordicide and decentralization.

As previously announced, IOTA 2.0 will first be made available as a testnet this year, before being launched on the Shimmer mainnet and then IOTA mainnet.

Coming Up

As well as the launch of IOTA 2.0, future projects include the introduction of L2 EVM-compatible smart contracts to the IOTA Mainnet, the launch of the IOTA 2.0 testnet and its integration with Shimmer and then the IOTA mainnet, and the integration of smart contracts directly into IOTA's base layer (L1). For more up-to-date insights into the work of our various teams and working groups, join our community on Discord or follow us on X/Twitter for the latest news and discussions.