Q3 2023 Progress Report

The previous quarter saw major developments at the IOTA Foundation, with the launch of ShimmerEVM at the end of September drawing on the Shimmer, Firefly Wallet, and Developer Experience and teams. Another milestone: the introduction to IOTA 2.0, our upcoming protocol update, and the culmination of years of work. But apart from these two mega-projects, plenty of new ground was broken across other disciplines, from Research to Regulatory Affairs, Engineering, and Developer Experience.

Shimmer Updates

Shimmer EVM Launch

The main focus in the last quarter has been on getting IOTA Smart Contracts (ISC)/ShimmerEVM ready for public use on the Shimmer network. After the re-launch of the public testnet, multiple extensive testing sessions took place and we worked together with the various stakeholders to address all major wishes and concerns before the chain was launched for deployment on September 28th. After a short bootstrapping phase, ShimmerEVM is now available to use for everyone. In the next quarter, our focus will be on improving user experience and working towards improved multi-chain support in a future version.

Shimmer Governance and Vote

In the last quarter, the IOTA and Shimmer Community Governance teams enhanced their governance processes. Notably, they introduced an updated specification for the Shimmer Community Grant Committee, presented as a new governance proposal. This proposal incorporated insights from the initial months of operating the Shimmer Community Grant Committee and is currently undergoing a community vote. Another achievement was the establishment of the Marshall Island DAO LLC entity for the Shimmer Community Grant Committee. This entity is now fully registered and has consequently transitioned out of its initial setup within the Tangle Ecosystem Association.

Assembly Updates

As announced on September 15th, the Assembly project and token will be discontinued in favor of IOTA Chains and L1 smart contracts.

While technically feasible, Assembly’s envisioned architecture would introduce too much delay in our technical roadmap while introducing an inferior solution compared to recent advancements. Among these are zkRollups, which inherit the security of the L1 through cryptographic proofs, thus no longer requiring complex mechanisms to guarantee economic security through a native token.

Instead of further developing and releasing the Assembly project and token, we will therefore focus our efforts on IOTA Chains, our generalized smart contract framework for anchoring Layer 2 (L2) blockchains on IOTA, and developing L1 smart contracts. IOTA holders that staked for Assembly tokens will get an IOTA token airdrop. You can read more about the decision to stop the development of Assembly in this blog post.

IOTA Updates

Most notably, the IOTA Foundation recently advanced to a state of confidence about all aspects of the IOTA 2.0 protocol, culminating the efforts of the past years to upgrade to a fully decentralized, parallelized, open, and fair protocol. Three academic papers, describing the core architecture of IOTA 2.0, outlining the Ledger, Networking, and Congestion Control Algorithm have been published and peer-reviewed (read more on it in our recent blog post).

Meanwhile, public information and documentation on all aspects of the IOTA 2.0 protocol have been prepared for public scrutiny. We recently started publishing a series of articles and videos that will last for about six to eight weeks due to the sheer amount of information. Once all aspects are published, all details of how the IOTA 2.0 protocol works will be publicly available and properly documented.

Alongside the public introduction of the IOTA 2.0 protocol, the IOTA Core development, representing the future IOTA 2.0 node software, is progressing very well, as can be witnessed on its public Kanban board.

Research

Responsible for advancing the IOTA protocol, the Core Node Research team has discussed and settled questions about the dynamic liveness threshold, validators issuing on multiple chains (the nothing-at-stake problem) to maximize the likelihood of receiving rewards, and implications of the maximum committable age for slot commitments and acceptance. Some user interactions around transaction building and mana allocation are being discussed to minimize user friction around these hard-to-grasp concepts.

Responsible for the design of the fundamental modules in IOTA 2.0, the Protocol Research team has mostly worked on documentation and on supporting the implementation of the IOTA 2.0 software through the definition of a parameter dependency graph, improved user experience, more secure consensus, and penalties for malicious behavior, among others. We present more about this below.

Additionally, the team held “Beyond the Chain: First Workshop on DAG-based Distributed Ledgers” this July. The workshop received good attendance and interest and talks from various European Universities (UZH, Imperial, Aalborg University, Porto University, Salamanca University, and more), and the team is already planning the next event.

The Smart Contract Research Team has been focusing on how to make the best use of Move's object model on top of the IOTA 2.0 protocol. Specifically, the team has been working on designing models for ownership and access control of objects. Additionally, it has analyzed approaches to determinism in smart contract execution.

Ledger Research

Continuing to focus on our data and application layers, Ledger Research has seen several developments in various components of the IOTA ledger, including:

The Finalization Research Working Group, responsible for developing the IOTA 2.0 protocol’s consensus mechanism, has focused on improving the consistency in block acceptance, including, and most importantly, the dynamic liveness threshold guiding the tip selection algorithm.

The Group’s paper Reality-based UTXO Ledger was accepted in the Association for Computing Machinery’s (ACM) peer-reviewed journal Distributed Ledger Technologies: Research and Practice (DLT). It describes the theoretical foundations of the ledger model in IOTA 2.0, i.e. how transactions optimistically update the ledger and how one can keep track of the dependencies of the possible conflicts. The Group’s paper Fairness Notions in DAG-based DLTs was accepted by the 5th Conference on Blockchain Research & Applications for Innovative Networks and Services (BRAINS 2023): It discusses different dimensions of fairness and conducts a comparative analysis to examine how they relate to different components of DAG-based DLTs.

The Congestion Control Working Group, responsible for designing the access scheme for the protocol, has focused on facilitating user experience with the newly created Usability Task Force (see below). Additionally, the group has designed and implemented dedicated validation block throughput (to solve the problem described here). Finally, the team was honored that their paper Managing Write Access Without Token Fees in Leaderless DAG-Based Ledgers was awarded the Best Paper Award at the 6th International Congress on Blockchain and Applications (BLOCKCHAIN Congress 2023) at the University of Salamanca (Spain).

The Incentives Working Group, responsible for developing the new incentives mechanism and research subjects related to game theory and tokenomics, supported the implementation of the incentives mechanism in the IOTA core node. Additionally, an interactive Mana Calculator is being developed so users can simulate different scenarios of Mana generation, as well as delegation and staking rewards. The Mana calculator will be published during the IOTA 2.0 protocol introduction series, which we just started.

In the last quarter, the IOTA Smart Contract (ISC) Consensus Working Group, responsible for formally describing and refining the ISC consensus and related algorithms, redesigned the recovery algorithm, while also implementing and deploying it to the Shimmer Testnet. Currently, the Group is working on the documentation of the involved algorithms.

The Zero-Knowledge (ZK) Working Group, which is responsible for investigating ZK techniques and solutions for scalability and privacy-related use cases, has been studying existing ZK proof generation platforms for a possible ZK integration with our L1 smart contract platform. The team focused on answering the question: what makes a smart contract platform zk-friendly? For this purpose, some open-source ZK solutions such as RiscZero and zkSync have been analyzed. The team also initiated a PoC on ZK integration with the standard Move virtual machine.

The Applied Cryptography Working Group, which oversees the implementation and utilization of cryptographic algorithms, played an active role in the release of an enhanced Stronghold version 2.0. Additionally, the Group bolstered the security of associated projects like iota-sdk and the Firefly wallet. Furthermore, the group has commenced the planning of a quantum-readiness roadmap, aligning with the recommendations set forth by CISA, NSA, and NIST.

IOTA Task Forces

IOTA’s various task forces have also made significant improvements during the recent quarter, specifically:

The Accounts Taskforce, responsible for designing the mechanisms of Mana and staking for IOTA 2.0 continued to iron out the details of the Tangle Improvement Proposals (TIPs) for the IOTA 2.0 ledger that specify the workings of Mana, staking, and delegation as well as their interplay with accounts. The taskforce's attention has shifted from specifying to implementing the TIPs and some members of the Accounts Taskforce became part of the newly established Usability Taskforce.

The Usability Taskforce, responsible for ensuring a high-quality user experience and usability of the IOTA 2.0 protocol as well as the Firefly wallet, was launched. Based on user stories, the task force made decisions about which usability aspects to focus on first. As users need accounts to issue blocks in IOTA 2.0, simplifying account creation is one of the highest priorities. The task force decided on an implicit account creation mechanism that allows users to create an account when they are onboarded into a network and this mechanism is currently being specified and implemented. The task force continues to discuss other aspects of usability, such as account creation for users with existing funds, among other items.

The newly-created Parameter Task Force is responsible for translating mathematical model parameters to high-level (TangleSim) parameters and refines them for both high and low-level (iota-core) models. They analyze proposal performance, security, and robustness based on TangleSim parameters. After iota-core is online, they will continue to optimize parameters for better protocol performance while maintaining security.

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.

IOTA Engineering

IOTA Core Team: The node software implementing all the critical aspects of IOTA 2.0 with its initial PoA has been completed (except for the implicit account creation mechanism for making Accounts the first-class citizen in our new protocol going forward). Developed features include potential mana calculation and decay, block scheduler around Reference Mana Cost (RMC), validators’ performance tracking and reward calculations, UTXO and Account ledger storage pruning, adaptive RMC, validators’ tip selection, INX plugins, and more. The team will soon split into hardening the PoA feature set and implementing the dPoS committee selection, rewards tracking, and rotation.

Tooling: The takeover of the Firefly codebase and release processes together with the migration of the wallet to iota-sdk is complete. The preparation of Firefly for the Stardust upgrade was successfully concluded on October 4th. The Explorer migration to iota-sdk is still in progress but close to the finish line. There has also been good progress for a Tangle Visualizer 2.0, with the layout and mechanisms laid down and the current focus on developing an external tool that will be used to “record” the Tangle stream data in order to be able to feed pre-recorded data to the Visualizer, thus enabling it to replay specific scenarios visually.

IOTA Software Development Kit (SDK): The very first stable version (1.0) of the SDK was released at the end of July. Since then, the team has largely shifted its focus to updating the SDK to 2.0 by implementing the new TIPs and rethinking the usability of the wallet in the context of the newly introduced concepts. In parallel, the team carried out performance and usability improvements on 1.0 before recently releasing a 1.1 version: you can find it for Rust , Nodejs ,  Wasm , Python, and CLI.

Identity: The team aligned the JWT implementation with established standards for encoding Credentials and Presentations, culminating in the release of the 1.0 Release Candidate (on Rust and JavaScript). Furthermore, it founded the Identity Working Group, comprised of prominent community contributors and aimed at decentralizing the library's maintenance and development efforts.

Firefly Wallet

Both Firefly IOTA and Firefly Shimmer have received updates, including several bug fixes and a security enhancement through a Stronghold upgrade.

In Firefly IOTA, work is underway to ensure compatibility with the upcoming Stardust upgrade of the IOTA network and the IOTA airdrop to reward stakers who participated in the Assembly staking events. In Firefly Shimmer, preparations have been made for the ShimmerEVM launch, enabling Layer 1 to Layer 2 transactions.

Additionally, it's important to note that the mobile version of Firefly has been deprecated. This decision was made to focus on maintaining wallet libraries for external entities and a desktop wallet implementation that guarantees access to all core functionality developed by the IOTA Foundation.

Developer Experience

The Developer Experience team lent its support to the release of the IOTA SDK by reorganizing the examples within the repository and incorporating the most pertinent code snippets from these examples into the how-to guide on the Wiki. This enhancement facilitates a quicker onboarding process for developers looking to begin their journey with IOTA and Shimmer using the IOTA SDK.

In preparation for the ShimmerEVM Mainnet launch, the team overhauled the documentation, categorizing it into separate sections for EVM and Wasm, thereby improving its accessibility. Moreover, the team followed the Diataxis framework to ensure a more systematic organization and edited the content to make it more easily understandable.

For the impending IOTA 2.0 release, the Developer Experience team has focused on enhancing and refining the communication materials, with additional input from the Research Team, significantly contributing to the development of the Wiki. You can see the changes here.

Community and Ecosystem

IOTA Governance: Preparations are underway so that the IOTA Community Treasury Tokens will become available to the IOTA Community once the IOTA EVM chain goes live. A governance system will be built to provide the needed technical solutions. Additionally, we are preparing the process of collaboratively designing the framework for the new IOTA Ecosystem Fund with input from the IOTA Community and Ecosystem. If you want to participate in this process, please join our Governance meeting every Thursday at 4 p.m. CET on the IOTA Discord platform.

Touchpoint: In the lead-up to the ShimmerEVM Mainnet launch, Touchpoint has positioned itself as a pillar of the ecosystem, expanding to over 50 teams and 100 builders. Achievements include: uniting core community members into task-focused groups and addressing challenges from ecosystem marketing to community initiatives like bug bounty programs. Teams have had the opportunity to sharpen their pitch skills through community feedback sessions, preparing them for investor interactions. This quarter, the scope of Touchpoint events was broadened, hosting a range of activities from project demos to service providers introducing their verticals to the community. Lastly, from Oracles to Bridges and Exchanges, the team has focused on partnering with the top teams in crypto, ensuring our ecosystem has a robust infrastructure and foundation.

If your project is interested in joining the Touchpoint program, you can apply here.

Regulatory Affairs

In Q3 2023, the IOTA Foundation’s Regulatory Affairs team closely monitored global regulatory developments. Notably, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) continued their enforcement actions against crypto companies. Meanwhile, Europe's Markets in Crypto-Assets regulation (MiCA) brought much-needed clarity to EU-based crypto companies regarding licensing, investor protection, and market transparency rules.

During this period, the Regulatory Affairs team continued to work closely with regulators to promote appropriate, new regulatory frameworks for the crypto-asset industry and to align regulatory approaches across jurisdictions. For example, the team participated in the consultation by the International Organization of Securities Commissions (IOSCO) on Policy Recommendations for Crypto and Digital Asset Markets and prepared a response to the AMF Discussion Paper on Decentralised Finance published by the French financial market regulator Autorité des Marchés Financiers (AMF). The responses are expected to be published later this year.

Additionally, a significant part of the team’s efforts in Q3 was dedicated to establishing stronger connections in the Middle East and preparing for the registration of a new Distributed Ledger Technology (DLT) Foundation in the United Arab Emirates (UAE). The team collaborated closely with local authorities to become one of the pioneering DLT foundations in the market.

Social Impact and Sustainability

The BC100+ initiative reached many milestones in the third quarter of 2023. Following its manifesto launch in June at bc100plus.org, the website now showcases its signatory members and is a repository for all related reports. Applications to BC100+ have continued to be reviewed, with 18 signatory members added. Notable additions approved by the Steering Committee, led by the IOTA Foundation's Mariana de la Roche, include the Ethereum Climate Platform. Finally, a  report summarizing BC100+'s activities from March to August 2023 can be found here.

The European Blockchain Association (EBA) launched an Environmental, Social & Corporate Governance (ESG) and Sustainability Working Group. Among its founding members are Mariana de la Roche, Marc Buckley, founder of ALOHAS Regenerative Foundation, UN Advisor, and Sustainable Development Goals (SDG) Advocate, Kuan-Ning Tseng, founder of Fund The Planet, among others.

The IOTA Foundation has continued its leadership role in the INATBA Social Impact and Sustainability Working Group. The most recent success of the Group involved the monthly Podcast for Social Impact and Financial Inclusion. Work continues on a Latin American report exploring the remarkable endeavors shaping the landscape of sustainability, conservation, and social impact in the region.  

Notable publications from the team in Q3 include papers on the Impact of Distributed Ledger Technology on Supply Chain Sustainability and a Definition of DeFi paper. Furthermore, as education is a key objective of Social Impact, the team is working on three additional papers. In collaboration with the INATBA Education Working Group, EUBOF, and Blockchain Bundesverband, Mariana de la Roche, and Åsa Dahlborn published a paper to clarify blockchain misconceptions, which will also be included in a guide for newcomers to blockchain. This is essential for global adoption, informed decision-making, and building trust among users, businesses, and policymakers. Also in collaboration with INATBA, this time the Privacy Working Group, a paper on Smart Contract Definitions is in the works. Finally, a paper on Staking as a Service has been published in collaboration with the EBA.

Events attended in Q3 (with accessible content and interviews) include BlockChance 23 (keynote and panel discussion), Celebrating Five Years of PositiveBlockchain, Blockchain in Use, Blockchain for the UN Charter Values closed roundtable, Blockchain for Financial Inclusion and Impact Investing (IDBW) and a Blockchain for UN charter panel at the Blockchain for Europe Summit.

Coordicide

As stated earlier in this post, the core components of the IOTA 2.0 protocol have been detailed in three academic papers and successfully peer-reviewed. Alongside it, the full documentation of the IOTA 2.0 protocol has been prepared and is currently being released to the public. Meanwhile, the IOTA Core development is progressing without any noteworthy delays. Following the implementation of the core protocol in the IOTA Core node software, a private test network will be set up, followed by a public test network, which will introduce the fully decentralized IOTA 2.0 protocol to the public for the first time.

Coming Up

As noted above, the introductory campaign to the upcoming IOTA 2.0 has already begun, with a series of blog posts, Wiki articles, and videos that explore the protocol in depth: this will continue to be a major – but far from only – focus in Q4. But you don’t have to wait for the next quarterly update to see what we’re working on: join our community on Discord or follow us on X/Twitter for the latest news and discussions.