Key Insights
- RootstockLabs verified the first Zero-Knowledge (ZK) Succinct Non-Interactive Argument of Knowledge (SNARK) on Bitcoin. RootstockLabs achieved this accomplishment with support from Fairgate Labs.
- The RootstockCollective DAO launched in Q3. It was bootstrapped with $10.0 million in funding from the Rootstock Collective Foundation and will last for the next 12 months. The DAO aims to foster an inclusive ecosystem for Bitcoin developers.
- RootstockLabs introduced RIF Flyover to the Powpeg. RIF Flyover enables a fast mode on the Powpeg that allows users to peg-in and peg-out in 20 minutes when using the Powpeg.
- New Accounts increased over 111.9% QoQ in Q3. Rootstock continued to show growth as new accounts increased on the network.
- Rootstock TVL ended with a 27.53% increase from its Q3 lows. Rootstock saw a low of $135.2 million in Q3 but ended the quarter with $172.4 million TVL.
Primer
Rootstock is a permissionless Bitcoin sidechain launched on mainnet in January 2018. It aims to bring smart contract functionality to the Bitcoin network. It’s native asset is (RBTC), which maintains a two-way peg to Bitcoin. RBTC is a bridged BTC version that is used for gas fees on Rootstock. It allows owners to interact with DeFi protocols and applications on the Rootstock network for minting, swaps, and more. RBTC uses a bridging system called Powpeg that connects Bitcoin and Rootstock.
To secure its network, Rootstock uses merged mining and DECOR+ (Deterministic Conflict Resolution) consensus, a Proof-of-Work (PoW) protocol that maintains the Bitcoin block format.
Rootstock has several additional components, such as the Rootstock Virtual Machine (RVM), which is a forked version of the Ethereum Virtual Machine (EVM) that allows for high compatibility with EVM. Rootstock also features Rootstock Infrastructure Framework (RIF), a comprehensive suite of blockchain-based infrastructure services such as RIF Token, RIF Wallet, RIF Flyover, RNS (RIF Name Service), and RIF Relay. RIF is also used as the governance token for the RootstockCollective DAO.
For a complete primer on Rootstock, refer to our Initiation of Coverage report.
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Key Metrics
Research Contents
State of Rootstock Q3 2024
Financial Analysis
Financial Overview
Rootstock’s native asset is BTC in the form of RBTC, a 1:1 representation of BTC that is locked on the Bitcoin network and minted on Rootstock. The platform generates revenue through transaction fees, which are divided as follows:
- 0.8% to the Powpeg Federation.
- 20% to RootstockLabs.
- 79.2% to block producers, which are miners and mining pools.
Rootstock had a strong Q3 with revenue increasing 13.4% QoQ, bouncing back from Q2 when it saw a slight decline. The increase in revenue could indicate Rootstock’s attempts to bring more opportunities and traffic to the sidechain. Over the quarter, Rootstock had multiple initiatives to jump-start traffic, such as the RootstockCollective DAO.
Network Analysis
Network Overview
New accounts on Rootstock rose 111.9% QoQ, and active accounts grew 61.0% QoQ, both reaching all-time highs in Q3 at 1,032 new daily accounts and 1,732 daily active accounts. Onchain initiatives like the Rootstock World Tour likely drove this growth.
In Q3, Rootstock maintained steady transaction activity, with 56.79% of days recording between 7,000 and 9,000 transactions, reflecting consistent network use.
The highest transaction count occurred on Aug. 5, 2024, reaching 13,820 transactions. This peak aligns with the launch of the Rootstock World Tour, a community-driven engagement campaign that ran till Sept. 30. This event significantly boosted daily transactions as users engaged with the Rootstock ecosystem.
Ecosystem Overview
Rootstock’s TVL declined QoQ, dropping from $193.0 million to $172.4 million, a 10.63% decrease. Rootstock’s DeFi TVL saw a significant dip mid-Q3 to a low of $135.2 million. Toward the quarter’s end, Rootstock experienced a 27.53% increase from the quarter’s low, ending the quarter at $172.4 million. Rootstock’s DeFi TVL in USD fluctuated due to Bitcoin’s price, while the BTC-denominated values remained stable. The BTC-denominated values averaged 2634.0 RBTC over the quarter and stayed within a 2311.7-2819.3 RBTC range.
As of Q3, USDT continued to increase its dominance on Rootstock capturing 44.6% of the total stablecoin value on the chain, up 8% from the previous quarter. USDT increased QoQ by 28.2% from $4.6 million to $5.9 million. The second largest stablecoin on Rootstock is DLLR, the stablecoin from the Sovryn protocol. DLLR market share has decreased QoQ from 32.7% to 23.29%. We have yet to see a stablecoin reach above 50% of the total market capitalization, but USDT continues to trend in that direction.
In Q3, Money On Chain maintained its position as the dominant protocol by TVL on Rootstock, with $80.1 million in TVL or 45.1% of the total market share, increasing 1.9% QoQ. The collective Sovryn services are the second largest on Rootstock with the protocols cumulatively being at $54.3 million declining 1.81% QoQ. Uniswap experienced consolidation in Q3 as it declined 4.35% from $18.4 million to $17.6 million in TVL QoQ.
Integrations
In Q3, Rootstock added several protocols that enhanced network functionality and improved user experience. These new protocols simplify the process for users to bridge assets on and off Rootstock, creating a more accessible entry point. The most notable additions are highlighted below.
Bridges and DeFi protocols:
- Gamma Strategies: A protocol for active liquidity management and market making strategies. By integrating with Rootstock, Gamma contributes to growing the Bitcoin DeFi economy.
- Balmy XYZ: Balmy launched its recurring investment service on Rootstock. The recurring investments let users automate buys of their favorite tokens. The tool aims to be a stress-free ticket to building a portfolio.
- Symbiosis, a cross-chain liquidity aggregation protocol, recently announced the integration of Rootstock, making it easier to obtain RBTC and other Rootstock ecosystem tokens. With this integration, developers can now create DeFi solutions on Symbiosis.
- Gas.zip: Gas.zip is a fast, one-stop gas refuel bridge designed to connect assets across multiple blockchains. This tool allows users to “refuel” or fund transactions on over 250 chains through a single, streamlined interface. Gas.zip operates on the LayerZero protocol for secure, cross-chain compatibility and dynamic routing, making it a versatile tool for crypto users seeking efficient gas management across diverse blockchain networks.
- Li.Fi: A bridge protocol that uses one API to swap, bridge, and zap across all major blockchains. Enable trading across all DEX aggregators, bridges, and intent-systems.
- Cryptomate: A peer-to-peer exchange that connects vendors and individuals looking to trade cryptocurrency. This integration with Rootstock will help any payment wallet, exchange, protocol, or financial institution to process and generate accounts in Rootstock to their users or business units, assign financial products like Debit/Credit Cards, and manage their financials in close or open loops with full end to end traceability and compliance.
- DZap: A decentralized exchange that simplifies DeFi swaps. Batch swaps or dollar cost average into various tokens using DZap. DZap offers dex aggregator features as well as bridging aggregation on its platform.
Wallets and others:
- Steer Protocol: A decentralized abstraction layer for protocols. Its modular infrastructure enables composable one-click apps on top of any Web3 protocol. Unlock your token utility through the creation of data-driven omni-chain apps powered by Protocol Validated Services.
- Wigwam: A self-custodial, open-source web extension wallet designed for secure, private crypto management. Wigwam prioritizes security and privacy, integrating seamlessly with hardware solutions like Ledger, making it a versatile choice for managing assets and interacting with applications in a secure environment.
- Car2Token: A decentralized platform that allows users to tokenize their vehicles, effectively using them as collateral for easy, secure loans without the need for a traditional bank. By tokenizing their car, owners can continue to drive while accessing liquidity from their assets. In addition to loan services, Car2Token also offers a way for investors to earn passive income by providing liquidity to the platform, receiving a share of interest payments in Car2Token’s native tokens. These tokens can be held for rewards or traded on exchanges, creating a unique investment opportunity within the automotive finance space.
- Lemon: Leading crypto wallet in Argentina. The Lemon App has the Lemon Card, a prepaid VISA that allows users to pay in both pesos and crypto, letting users pay for their utility bills and offering cashback in Bitcoin on purchases. Lemon includes Lemon Earn, which allows users to generate weekly interest on their crypto holdings. Additionally, they also have an exchange on their platform. Lemon enables users to withdraw Bitcoin directly from Rootstock through RBTC.
- Safle: A next-gen multichain, non-custodial wallet and self-sovereign identity protocol built to provide safe and secure on-chain user experiences. Safle uses an open-source PIN-based transaction signing method. Safle brings the Vault Rootstock Controller, an SDK to manage Rootstock chain-specific key management and transactional operations for the Wallet application.
Upgrades
Arrowhead Upgrades
Arrowhead 6.3.0 – The Arrowhead 6.3.0 upgrade for Rootstock, launched on July 4, 2024, focused on improving EVM compatibility and enhancing network performance, especially in JSON-RPC interfaces. Additionally, logback level enhancements were implemented, which further improved system efficiency.
Arrowhead 6.3.1 upgrade: Following a June 24 PowPeg outage, Rootstock promptly addressed the issue with the Arrowhead 6.3.1 upgrade. As part of the defined action plan, they made a patch release available to the general public. This new release has been published in their GitHub repository and contains consensus changes that were activated on the Rootstock mainnet at block 6,549,300.
Token Bridge implementation
Token Bridge: Implemented on Aug. 14, 2024. The Token Bridge app allows ERC-20 tokens to move safely and securely from Ethereum to Rootstock and vice versa.
Boltz Exchange and Flyover Protocol
Flyover protocol: Rootstock increased accessibility to users by leveraging integrations with Boltz Exchange and the RIF Flyover protocol. This upgrade with Boltz Exchange simplifies and speeds up non-custodial BTC mainchain, Liquid Bitcoin, and LN-BTC swaps on Rootstock, making transactions faster and more cost-effective.
The Flyover integration improved users’ experience when swapping RBTC for BTC, offering frictionless native BTC/RBTC transfers within Rootstock’s peg web decentralized app. The integration worked by introducing a liquidity provider () that advanced funds to the user while the Powpeg protocol settled their bridging transaction.
For example, if a user wants to convert BTC to RBTC, they can now send their BTC to the Powpeg address provided by the Flyover protocol. Then, the liquidity provider would advance the equivalent amount of RBTC to the user, and the user’s BTC would remain in the Flyover smart contract (Liquidity Bridge Contract – LBC) until Powpeg has validated the transfer.
Overall, this swap is much faster than the current Powpeg process, taking about 12 minutes versus the current Powpeg model which takes about 16 hours to convert BTC to RBTC and about 33 hours for RBTC back to BTC. The Flyover protocol is all being done without the liquidity provider ever having custody or access to users’ funds.
ZK SNARK verified via BitVMX
RootstockLabs verified the first ZK SNARK via BitVMX. In Q3, RootstockLabs, with the help of Fairgate Labs, reached a major milestone by verifying the first SNARK on the Bitcoin blockchain. A SNARK refers to a process for proving knowledge without revealing the information itself or requiring interaction between the prover and verifier. The SNARK was verified using a modified version of Robin Linus’s BitVM design, known as BitVMX, that the team developed independently.
The verification on Bitcoin’s mainnet represented a significant milestone for developing the Bitcoin blockchain. The demonstration could make the blockchain more compatible with faster, cheaper layer-2 networks, offering programmability similar to Ethereum and other networks.
Merged Mining
Merged mining is a process where a miner mines for two or more blockchains during the same session using the same computational resources. The rationale behind merged mining for Rootstock is that miners can secure both Bitcoin and Rootstock without any additional energy or time resources required.
Bitcoin Miners are incentivized to participate in securing the Rootstock sidechain because they receive a percentage of all transaction fees on Rootstock. Block production on Rootstock is permissionless, allowing anyone to participate in block building. If interested miners do not possess enough hashpower to competitively solo mine, they can join a mining pool that supports Rootstock merged mining.
Over Q3, Rootstock maintained a 54.58% percentage of Bitcoin’s hashing power, down from 61.8% in the previous quarter. While there has been a decline, the Bitcoin hashing power dedicated to Rootstock averages around 53-59% across most days, with a few days exceeding 60%. This stable hashing rate suggests a relatively consistent level of security backing Rootstock, which is crucial for network reliability and user confidence.
Qualitative Analysis
Rootstock Developer Portal
On Aug. 24, 2024, Rootstock’s core contributors launched a public roadmap to drive improvements across the network. Central to this initiative is the newly overhauled Rootstock Developer Portal. The new Developer Portal focuses on improved navigation, content efficiency, enhanced search, user-friendly modes, localization, and changelog pages.
Rootstock World Tour
The Rootstock World Tour invited users to explore the Rootstock ecosystem through interactive quests across 12 protocols, enhancing their crypto knowledge and earning rewards. Hosted on Galxe Quests, this tour ran from August 5 to Sept. 30, offering various tasks like acquiring RBTC, swapping tokens, minting NFTs, and staking on Rootstock’s network. Each completed quest rewarded users with Rootstock NFTs and Air miles points, while participants entered a raffle for a share of $3,000 in RBTC provided by each partner protocol of the world tour.
Lovell Network Proposal
The Lovell network upgrade proposal, introduced on Sept. 11, 2024, primarily includes advancements in security and Ethereum compatibility. The proposal introduces six critical Rootstock Improvement Proposals (RSKIP-419, RSKIP-427, RSKIP-428, RSKIP-438, RSKIP-445, RSKIP-446) focused on enhancing security, compatibility with Ethereum, and usability. These features plan to increase Ethereum compatibility and expand the range of decentralized applications that can seamlessly operate on Rootstock.
Additionally, the integration of the Lightning Network will simplify the peg-in and peg-out process, allowing for faster and more flexible Bitcoin transfers. With this new integration, users can select their preferred method for entering Rootstock. Finally, Rootstock plans on implementing a Bitcoin Native Assets Bridge, that allows Bitcoin assets (Runes/Taproot Assets) to freely flow between the Bitcoin mainchain and Rootstock.
A major component of the Lovell upgrade is RSKIP-419, also known as the Powpeg Spendability Validation Protocol. This protocol will enhance the security of Rootstock’s two-way bridge (Powpeg), which enables Bitcoin (BTC) to Rootstock Bitcoin (RBTC) transfers. With RSKIP-419, Rootstock will be able to validate spendable conditions in the Powpeg, strengthening user trust by ensuring locked BTC assets are securely managed and safeguarded.
Hackathon
From August 23-Sept. 13, RootstockLabs participated in the ETHOnline 2024 Hackathon to attract developers from the Ethereum ecosystem to build on Bitcoin through Rootstock’s platform. RootstockLabs provided a $10,000 bounty for projects. This involvement aimed to showcase Rootstock’s potential as a Bitcoin Layer 2 solution, leveraging Ethereum tools and knowledge for Bitcoin-based development.
Hackathon winners include:
OrdiSynth: OrdiSynth is a synthetic ordinals market that converts bridged Ordinals to an ERC-20 token standard aimed at increasing its interoperability. The users can use this synthetic ERC-20 token in money markets, staking, yield farming and DEXs. This synthetic also allows users to own a fraction of the token instead of the entire, leading to better capital efficiency.
Decentrix.ai: A platform utilizing multichain AI agents to streamline the development of onchain projects. The system includes an AI agent capable of generating and deploying smart contracts based on specified requirements.
Racinefi: RacineFi is a decentralized platform providing automated DeFi vaults designed to optimize returns. The platform manages liquidity across DEXs and yield farms, employing dynamic asset reallocation and automated reinvestment of rewards. By eliminating platform fees, RacineFi enables efficient investment growth while simplifying asset management for users.
Rootstock Collective DAO
On Sept. 12, 2024, The RootstockCollective was announced. The Rootstock Collective is a DAO launched on Rootstock to expand the ecosystem for Bitcoin builders. This DAO enables developers to build Ethereum-compatible Web3 applications using Bitcoin (in the form of RBTC). RootstockCollective will be introducing a decentralized grants program by year-end to support innovative projects, with additional incentives for DAO members and new protocols on Rootstock.
The DAO is bootstrapped by the Rootstock Collective foundation with $10.0 million over the next 12 months and with a TVL in the DAO sitting at $1.5 million in RIF tokens. RIF holders can stake RIF as “stRIF” to earn voting rights and gain access to perks like airdrops and exclusive events. The RIF integration aims to maximize accessibility and ensure the Rootstock community’s active participation in ecosystem governance, directly influencing initiatives such as RifOnChain and RIF Name Service (RNS).
The DAO launched on Sept. 19, 2024, with the first 100 early adopters receiving an NFT membership card with exclusive community perks. RootstockCollective emphasizes Rootstock’s commitment to Bitcoin’s role in the global financial system, advancing decentralized, Bitcoin-based development through Layer 2 scaling.
Union Bridge
On Sept. 27, 2024, Sergio Lerner of RootstockLabs announced the Union Bridge. A decentralized gateway for Bitcoin and Rootstock Integration. The new permissionless bridge, built on the innovative BitVMX dispute-resolution framework, introduces a solution to one of Bitcoin’s long-standing challenges: integrating Bitcoin’s robust security with the flexibility of smart contract functionality without compromising decentralization or requiring custodial control.
The Union Bridge is a trustless, cryptography-driven bridge between the Bitcoin and Rootstock blockchain that supports seamless BTC transfers. Unlike existing cross-chain solutions that often rely on custodial intermediaries or require collateralization in alternative tokens, Union Bridge leverages BitVMX’s dispute-resolution mechanism. This enables each BTC transfer to be verified independently and remain completely decentralized, with no need for third-party control.
Union Bridge enforces correct state transitions, ensuring that every BTC transaction between Bitcoin and Rootstock is fully verifiable. This new bridge will be able to minimize risk typically associated with cross-chain bridges but also ensures that Bitcoin users have full sovereignty over their assets when interacting with smart contracts on Rootstock.
Closing Summary
Q3 marked a period of developmental growth on Rootstock. With the first ZK SNARK to be verified on Bitcoin using BitVMX as well as the RootstockCollective DAO being created, Rootstock is putting in the necessary work to build out its ecosystem. While TVL did decline QoQ, ecosystem development remained positive. Developments such as the Flyover protocol are able to impact Rootstock positively, allowing users to bridge on and off much more quickly. Rootstock’s Q3 upgrades enhance its position as a leading Bitcoin sidechain, leveraging merged mining to onboard more users by improving accessibility and ecosystem integration.
