Key Insights
- Total accounts on the RSS3 VSL rose by 23% QoQ from 13,400 to 16,500, indicating continued network growth following the production mainnet upgrade.
- RSS3 market cap decreased by 34% QoQ to $92.2 million, influenced by a 32% price drop in $RSS3.
- The average number of nodes rewarded per epoch increased by 4% QoQ, indicating stable engagement among active nodes following the production mainnet upgrade.
- RSS3 integrated with NEAR and NFFL, reducing operational costs for network participants through lowering transaction fees by 73%.
- The production mainnet launched on August 29, introducing permissionless serving nodes, full tokenomics, and a Light Mode option to lower technical and financial barriers for new and smaller node operators.
Primer
RSS3 ($RSS3) is an Open Information (OI) layer that facilitates data aggregating, indexing, and structuring. It is built for developers at Web3/Open Web (OW) companies who work with data across various Open Data Platforms (ODPs).
On November 11, 2024, RSS3 merged into Open, an information and compute abstraction platform. Open includes RSS3, RSS3 Hub, and the Open Initiative.
By standardizing and structuring data, RSS3 allows developers to access, manage, and scale their data more effectively, reducing development friction and enhancing cross-platform compatibility. RSS3 services various OW companies, including blockchain explorers, search engines, AI agents, social media platforms, and more.
RSS3 is powered by the RSS3 Network, a decentralized network formed by two Sublayers: the Data Sublayer (DSL) and the Value Sublayer (VSL).
The DSL is responsible for indexing and structuring open information to ensure data interoperability for all companies. Two components form the DSL:
- RSS3 Nodes: responsible for indexing data, transforming, storing, and disseminating the data to the end user.
- RSS3 Protocol: outlines a unified set of data structures to organize OI in a uniform format (to ensure interoperability).
The VSL manages the value derived from OI activities executed across the RSS3 Network. It handles the settlement of all fee payments, rewards transactions, and staking. The VSL is an Ethereum L2 built with a customized OP Stack that uses NEAR as the data availability layer, making it capable of processing a large volume of microtransactions.
RSS3: Website / Twitter / Telegram
Key Metrics
Performance Analysis
In Q3 2024, the RSS3 market cap decreased by 34% QoQ from $140.5 million to $92.2 million. The circulating token supply of RSS3 remained at 675 million, unchanged QoQ. Therefore, the decrease in market cap was mainly influenced by a 32% price reduction of $RSS3 from $0.22 to $0.15.
On the demand side, developers at OW companies request data from the RSS3 Network. In return for a request fee, the developers receive structured open information. At the time of writing, all requests are free of charge, but there are plans to start charging request fees soon.
On the supply side, node operators run an RSS3 node to index, structure, store, and ultimately serve the requested data to the developer. Node operators then receive payment in $RSS3 from request fees and operation tax for the work.
Also, network participants can stake tokens into an RSS3 node’s staking pool (Ps) to increase the node’s chance of receiving data requests on the DSL. Network rewards are $RSS3 allocated by the RSS3 Network to incentivize network participants. Node stakers receive network rewards every epoch (~18 hours) in return for their stake.
DSL
In Q3 2024, the RSS3 DSL processed 12.4 million data requests, a 24% decrease QoQ from 16.2 million in Q2. Despite the decline, the steady flow of data requests reflects continued demand for RSS3’s services, showing that developers remain actively engaged in utilizing the DSL for indexing and serving open information.
Nodes and Pools
Each node on the DSL has a staking pool (Ps) and an operation pool (Po) associated with it on the VSL. A staking pool stores tokens staked by network participants to a Normal Node, increasing the node’s chance of receiving data requests and earning rewards.
The operation pool for each node stores tokens allocated to a node, holding $RSS3 in three ways:
- Node Operator Deposit: An initial deposit (minimum 10,000 $RSS3) is required to operate a node.
- Operation Tax: Collected as a % of the network rewards given to the node’s staking pool.
- Request Fees: Fees for processing DSL requests (currently free as of writing).
Since request fees are free, the operation pool size depends on the operator’s initial deposit and collected operation tax — the operation tax increases with a larger staking pool or a higher tax rate.
At the end of Q3, all nodes’ operation pools totaled $357,000, with Natural Selection Labs (NS Labs) holding 46% of the market share, approximately $165,000. NS Labs also had a dominant position in the staking pool, controlling 61% of all staked $RSS3 on the VSL and applying an 8% tax rate to its network rewards.
The top 10 nodes by staking pool size carry an average tax rate of 7%. In contrast, the average tax rate across all active production nodes was 10%.
The SEA node maintains the second-largest operation pool but the 12th-largest staking pool. SEA is an alpha node created during RSS3’s alpha launch on March 12. The SEA node is offline and no longer meets data indexing requirements. With a 0% tax rate, its high operation pool balance is likely due to a substantial initial deposit rather than ongoing tax revenue.
On the other hand, Sky9 Capital holds the second-largest staking pool yet has the 16th-largest operation pool. Sky9 Capital’s tax rate of 8% would typically generate operation pool income if the node were actively fulfilling data requests. The low balance in its operation pool indicates either a recent withdrawal of accumulated operation pool funds or inactivity in data indexing. The latter would suggest a fluctuating engagement level in network operations.
Meanwhile, other nodes within the RSS3 network maintain a proportional balance between their operation pool and staking pool sizes, similar to NS Labs. Kiln ranks third in both operation pool and staking pool size. Similarly, Pal’s Node holds the fifth position in the operation pool and fourth in the staking pool size.
By maintaining proportional pool size rankings between their staking and operation pools, these nodes represent a balanced engagement in the network through the fulfillment of data requests, closely aligning with the purpose of the RSS3 ecosystem.
The recent upgrade to the production mainnet also impacted the overall node distribution, with only 28 of 86 registered nodes currently operational. This sharp decline followed a mandatory upgrade requirement, with a deadline of September 20. Operators had to transition to the production stage before the deadline to continue receiving awards.
To create a more balanced distribution of node participation, RSS3 introduced Light Mode as part of the production mainnet launch. Designed to support smaller node operators, Light Mode aims to increase the diversity of active nodes by lowering technical and financial barriers to entry.
Light Mode’s goal is to create a more resilient network infrastructure. If more node operators are successfully attracted, data requests will be distributed across more nodes, reducing the load on a few dominant participants.
Staking
RSS3 staking has experienced steady growth over the past two quarters. Staked $RSS3 on the VSL increased by 71% QoQ from 78 million to 132 million. This rise in staked tokens is vital for sustaining the network’s expansion, as it supports a compounding cycle that benefits both node operators and stakers. As the volume of $RSS3 staked in a pool grows, node operators receive more tax rewards from these pools for their data indexing. This incentivizes them to take on additional data indexing work. This increase in indexing activity, in turn, boosts network rewards for stakers, effectively raising the APY on their investment and attracting further participation.
There were 620 active staking accounts on the RSS3 Network at the end of Q3. This was an 18% reduction from the 755 active staking accounts when tracking started on July 24. The largest account holds $2.6 million in $RSS3, with the top five accounts collectively staking 52% of all staked $RSS3.
The five largest staking accounts on RSS3 currently hold 52% of all staked $RSS3. These accounts are also staked across only two staking nodes, risking potential overexertion of these nodes’ resources.
RSS3 can encourage staking across multiple staking pools to reduce the risk of overloading a few nodes. A wider distribution of staking power supports a more robust array of nodes fulfilling data requests, thereby avoiding excessive strain on individual nodes and enhancing the network’s capacity to handle diverse data needs.
VSL
Accounts
The total accounts on the RSS3 VSL increased by 23% QoQ. Throughout Q2, there was a steady increase in new accounts joining the network. The new accounts sought to operate a node or stake funds to a node operator through their staking pool, likely influenced by new users trying out the alpha mainnet after its launch on March 12. The inflow of new accounts plateaued in mid-July but picked up again after the launch of the production mainnet on August 29.
Similar to the increase in new accounts, the amount of daily active accounts was initially high in Q2, averaging 1,073. However, this dropped significantly to an average of 281 in Q3, representing a 74% decrease QoQ.
From July 15 to August 28, daily active accounts averaged only 15, but this spiked at the end of Q3 to 211 after August 29. The launch of the production mainnet likely affected daily activity positively. This trend may indicate potential growth into Q4 for supply-side operators joining the network.
Rewards
Network rewards given to stakers and node operators dropped by 62% QoQ from $2.5 million to $0.9 million. This decrease was likely due to the reduced $RSS3 price and a reduced number of tokens rewarded in certain epochs after the launch of the production mainnet on August 29. Annualized inflation remained stable, decreasing by 4% QoQ to 64%, aligning with RSS3 tokenomics. Finally, the average number of active nodes per epoch saw a slight increase of 4% QoQ, rising from 58 to 61.
Operation rewards didn’t exist on RSS3 until the production mainnet became operational on August 29.
The annual amount of network rewards is targeted at 3% of the total $RSS3 supply (1 billion tokens), equivalent to 30 million $RSS3. These rewards are intended to be distributed evenly every epoch (18 hours), resulting in approximately 62,000 $RSS3 per epoch.
RSS3 aims to distribute 20% of network rewards as operation rewards to node operators and 80% as staking rewards to node stakers.
From August 29 to September 30, the breakdown of network rewards was 21% operation rewards and 79% staking rewards. This outcome indicates effective smart contract execution in the production mainnet, operating within 1% of the target ratio.
From August 29 to September 30, the total network rewards averaged 59,000 $RSS3, a 5% drop from the target distribution amount per epoch.
The average number of nodes rewarded per epoch increased by 4% QoQ from 58 to 61, indicating increased network participation in responding to requests on the DSL. This could result from an increased number of nodes seeing the financial benefits of node operation for RSS3.
The increase in the number of nodes rewarded positively correlates with RSS3’s capacity to respond to increased data requests on the DSL. As more nodes are rewarded, more computing power is allocated for indexing, transforming, storing, and serving Open Information to end users.
On September 20, there was a sharp decline in nodes rewarded per epoch. This drop was due to the mandatory upgrade required for node operators to continue participating in the network and receiving rewards. Operators had until epoch 256 (September 20) to complete the upgrade process to the production stage. Because a large number of nodes did not complete the upgrade in time, the number of nodes rewarded dropped from 64 to 23 after the deadline.
Transactions
The average daily transactions on the VSL were down 4% QoQ from 45,900 to 44,300. The VSL handles RSS3 network settlements and supports developers in building search engines, explorers, and activity feeds. This requires the VSL to execute high-frequency microtransactions to manage and distribute value from OI activities effectively.
Transaction fees refer to payments made to data indexers/nodes for their services, covered by the developer requesting the data. These fees differ from request fees, which are currently free.
The average sum of daily transaction fees on the VSL decreased 73% QoQ from $0.087 to $0.024. This decrease marks a positive trend for RSS3 participants, reflecting the cost to execute all the microtransactions involved with handling value from OI activities and applications. These results are likely due to RSS3’s partnership with NEAR Data Availability and Nuffle Labs NFFL (Nuffle Fast Finality Layer), which is discussed further in the Qualitative Analysis section.
All transaction fees in Q3 on the RSS3 VSL decreased by 71% QoQ to $2.23. This translated to an average transaction fee of $0.000004 per transaction on 44,000 daily transactions on the VSL. RSS3 aims to keep these fees low moving forward so that participants on the VSL (node operators, node stakers, and developers) have low operational costs.
Daily transaction fees spiked after the production mainnet went live, likely due to higher average transaction fees and increased daily transactions during this period.
Qualitative Analysis
Upgrades and Developments
On March 12, 2024, RSS3 launched its alpha mainnet, marking the protocol’s first operational version. This launch included the activation of the RSS3 VSL, which manages the value derived from OI activities executed across the RSS3 Network. Key features of the alpha mainnet included operational support for nodes and the ability for users to delegate $RSS3 to these nodes. Additionally, the VSL bridge was launched, further enhancing network functionality.
The next development phase of RSS3 was the launch of the beta mainnet on June 3. This iteration of RSS3 introduced public good nodes (formerly called beta nodes) as a key upgrade. On June 26, Google Cloud started operating a public good node on the RSS3 Network. All rewards generated by public good nodes are allocated to the public good pool. The public good pool funds are designed to improve the RSS3 Network or fund independent builders through the Open Information (OI) Grant. The OI grant supports projects leveraging open data and RSS3 services. The OI grant provides a baseline amount of 1,500 USDT to teams that complete an application and pass an interview process. In addition to the baseline funding, further grants may be awarded based on project performance. To date, grant recipients include Hackquest and Interface projects.
Unlike original alpha nodes, public good nodes are permissionless, require no $RSS3 deposit, and do not earn $RSS3 from request fees or network rewards. Users must entrust $RSS3 to a public good node, a form of delegation similar to staking in alpha nodes.
On July 24, an RSS3 Evolution Proposal (REP) was implemented. This REP called the chip mechanism upgrade (REP-26), was implemented to enhance the chip minting process for staking on the RSS3 Network. A chip is an NFT representing a network participant’s stake in a particular node. It is minted upon a user staking into a node and is redeemed for underlying staked tokens when users want to unstake from their associated node.
Before REP-26, a chip was generated for each unit of $RSS3 staked. The exact number of chips was based on the current chip price at the time of the transaction. This resulted in a high volume of chips being minted and transaction processing challenges.
With REP-26, only a single chip is minted per staking transaction. The value of the minted chip is based on the ratio of $RSS3 staked in the transaction to the total $RSS3 in the staking pool at that time. Below are some examples of the minting and redemption process for chips.
At Epoch 1
- Node A has a chip price of 500 $RSS3.
- Delegator X staked 10,000 $RSS3 and received 1 chip.
- The ratio of ‘$RSS3 staked:Node A chip price’ equals 10,000:500, which also equals 20:1
- Therefore, Delegator X’s chip can be redeemed at any time at 20x the Node A chip price.
At Epoch 2
- Node A’s chip price increased to 600 $RSS3 due to various reasons (Network Rewards distributed to its Staking Pool, new stakings, etc.).
- Delegator X decided to redeem their chip and received 600 * 20 = 12,000 $RSS3.
- Meanwhile, Delegator Y joined, staked 6,000 $RSS3, and received 1 chip, which carries a ratio of 10:1 (6,000:600).
At Epoch 3
- Node A’s chip price decreased to 500 $RSS3 for various reasons (chip redemption, slashing, etc.).
- Delegator Y decided to redeem their chip and received 500 * 10 = 5,000 $RSS3.
This upgrade was aimed at streamlining chip management and improving network performance. Existing chips remain valid as legacy versions until upgraded or redeemed, with no further minting under the previous system.
On August 29, RSS3 launched its production mainnet. As part of the upgrade, node operators were required to upgrade to continue participating in the network and earning rewards. Node operators had until epoch 256 (September 20) to complete this upgrade; those who did not comply ceased to receive rewards.
The production mainnet also introduced a new Light Mode option, which allows operators with limited resources — such as lower computing power, bandwidth, or storage capacity — to participate with reduced resource commitments. Light Mode targets new node operators, resource-constrained environments, or serverless deployments.
However, operating in Light Mode comes with two potential tradeoffs:
- Lower data request volume due to the reduced coverage of open data protocols and their limited range of querying ability compared to full nodes.
- Reduced network rewards since operation rewards are distributed based on data request volume. As part of the launch, the RSS3 DSL was upgraded to v1.0. It combines improved structuring performance with scalable coverage of Open Information. This upgrade’s target result was an increased number of node operators and reduced operational costs for RSS3 node operators.
Included in the announcement of the production mainnet launch was an update regarding another REP. REP-38, a mechanism to slash rewards of nodes with poor operational reliability, is still under development. The proposal was created on July 23 and is close to deployment.
Partnerships
On July 18, RSS3 joined the Nvidia Startup Inception Program. As a result, RSS3 can receive support from Nvidia’s team, which can potentially improve RSS3’s technological capacity for open AI infrastructure.
Kiln
On August 1, Kiln, an enterprise-grade infrastructure platform, joined RSS3 to provide RSS3 Network participation services to institutions. This partnership benefits RSS3 by opening new avenues for its target addressable market to use its product and profit from staking.
During Q3, RSS3 did a case study on its partnership NFFL (Nuffle Fast Finality Layer) product for RSS3’s VSL. NFFL complements NEAR Data Availability by providing rapid settlement finality across multiple chains. This innovative solution leverages EigenLayer’s restaked ETH to create a secure, fast finality layer for rollups.
According to the case study, integrating NFFL with RSS3’s VSL can achieve near-instant finality without waiting for the typical confirmation times of the underlying Layer-1 (L1). In other words, transactions on the VSL can be considered final and irreversible much faster, enhancing the user experience for time-sensitive applications like AI-driven games or real-time social interactions.
Follow
Follow is an information browser that enables users to aggregate content from various sources — across Web1, Web2, and Web3—such as Twitter/X, YouTube, websites, onchain activities, and email inboxes. Follow then aggregates this content in their single application without an algorithm prompting users with addictive content. The offering showed some product-market fit as the app gained traction in Q3, leveraging RSS3’s services.
Follow has been described as platformless media. The app provides twice-daily AI reports highlighting key information from users’ subscriptions and offers a personalized AI knowledge base built from those subscriptions.
At the end of Q3, Follow’s alpha launch was live for 20 days, and 5,800 users were onboarded. Follow averaged 5,400 daily active user accounts and 53,200 total onchain transactions in that span.
Community Events
In Q3, RSS3 emphasized its commitment to advancing open information infrastructure by engaging with the community through strategic events. During Korea Blockchain Week (KBW) 2024, RSS3 hosted an OpenHouse, bringing together projects and developers to discuss topics central to the open web, decentralized AI, and the future of the next-generation internet. Additionally, RSS3 participated in an AI OpenHouse at Token2049, where panel discussions featured notable participants such as Akash, Hyperbolic, NEAR, Monad, and Nillion, fostering collaboration and dialogue on Web3 innovations.
Roadmap
According to the Roadmap, RSS3 will focus on enhancing nodes’ ability to index data for more sophisticated applications over the coming months.
RSS3 plans to integrate an open algorithm module to enhance social feed transparency, enabling node operators to build and customize algorithms for Web3 social data. For search functionality, RSS3 will provide modularized search tools to manage and deliver targeted information across different datasets. Additionally, RSS3 is developing capabilities for nodes to deploy localized AI models, supporting AI-driven applications in a decentralized context.
In Q4, RSS3 will be merged into Open, beginning a new phase. Following the merge, RSS3 will partner with Arbitrum to deploy the Open Virtual Machine (OVM) on the Arbitrum blockchain.
Closing Summary
In Q3 2024, RSS3’s market cap declined by 34% QoQ to $92.2 million, alongside a 32% drop in token price. Despite these fluctuations, the RSS3 VSL processed 44,000 daily transactions. The diversity of active staking accounts remained strong, ending the quarter with 620 accounts, albeit a concentration of larger stakes in the top five accounts.
On August 29, the production mainnet was launched, introducing Light Mode to lower barriers for smaller node operators. The advancement also included a DSL upgrade to version 1.0, boosting indexing efficiency and reducing operational costs. Technical upgrades like REP-26 streamlined staking, while the upcoming REP-38 slashing mechanism aims to improve operational reliability. Additionally, RSS3 expanded its enterprise reach through partnerships with Nvidia’s Inception Program and Kiln, and its collaboration with NFFL further enhanced transaction finality on the VSL.
Looking forward, RSS3’s roadmap focuses on merging Open, supporting advanced applications like social feed algorithms, modularized search engines, and onchain AI models, and addressing growing Web3 data demands.
