Executive Summary

Earlier this year, we published a research report on Aptos examining the network's design and potential impact on the blockchain ecosystem. Our analysis suggests that Aptos may have potential for growth in the coming years, based on its technical design, utilizing a modular architecture and parallel execution engine for scalability, acceleration of dApp development on Aptos, and progressive increase in network adoption.

Aptos is positioning itself as a contender in the layer-1 blockchain competition. Aptos is targeting a broad market, including financial institutions, consumer applications, and cloud services. The network's long-term impact on the broader adoption of blockchain technology and its role in the global economy remain to be seen, but based on the successful execution of the team since its inception in 2022, we believe Aptos is well-positioned to bring forth innovative consumer and financial applications that could significantly impact the global economy in the coming decades. 

Technical Innovations

Since May, Aptos has introduced a number of innovations that strengthen its core technology. As a delegated proof-of-stake blockchain with novel architecture designed for high performance and scalability, Aptos has three main components for consensus and transaction processing. They are: AptosBFT v4, a modified consensus protocol that incorporates reputation-based leader election and peer-to-peer validator communication; Quorum Store, which separates data dissemination from transaction ordering to enable horizontal scalability and improve workload efficiency; and Block-STM, an execution engine that enables parallel processing of transactions using optimistic concurrency control. 

Aptos continues to roll out technical innovations since its mainnet launch to improve scalability – and the developer experience– as indicated by the number of Aptos Improvement Proposals (AIPs) that were implemented since mainnet launch. To date, there have been nearly 100 AIPs implemented since mainnet, with more than 20 proposals added since May. These proposals cover a wide range of topics, such as Move language optimization, smart contract standard and verification methodology updating, API refinements for data processing, and more, demonstrating Aptos’ commitment to continuous improvement and focus on community-driven development.  

In July, the team introduced Aptos Connect, an advanced, self-custodial crypto wallet that introduces a novel way for users to access and manage their assets on Aptos. Importantly, Aptos Connect allows users to access their crypto using familiar social logins like Google, completely eliminating the need for complex private key management, which has historically been a barrier to entry. Further, if users happen to lose access to their social account, the wallet allows for web2-like recovery flows. From an enhanced security standpoint, Aptos Connect does not require installing browser extensions or mobile apps and utilizes ZK proofs for user validation, providing ultra-high levels of security without exposing private data. The wallet also enables compatibility across different devices without needing to transfer or import keys. Overall, Aptos Connect leverages the best features of web2 and web3 for a unified user experience, improving web3’s accessibility by leveraging familiar authentication methods, while simultaneously maintaining security and self-custody principles. 

With Aptos’ goal of achieving a throughput of up to 160,000 TPS and sub-second latency without sacrificing security or decentralization, its theoretically optimal Byzantine Fault Tolerance (BFT) consensus, known has Aptos BFTv4, continues to demonstrate its flexibility and robustness through rigorous testing. AptosBFTv4 has undergone four iterations of testing without revealing any significant flaws, which is a testament to its solid design and implementation. The consensus protocol is the fastest production-ready BFT protocol due to its optimized latency, pipelined architecture to ensure maximum resource utilization, parallelization, optimistic responsiveness, and rigorous correctness proofs.

At the crux of Aptos sits its native Move programming language. While a relatively new smart contract programming language with key differences when compared to more established languages like Solidity and Rust, Move supports 1) formal verification, allowing for developers to mathematically prove code accuracy, 2) Modularity, or reusable code organization, and 3) parallel execution, enabling the execution of multiple transactions simultaneously.

The Move programming language has gained significant traction, with a core feature being parallel execution. Similar to how pages in a book need to be in the right order for the story to make sense, validators must agree on the order of entries in the distributed ledger. Instead of checking that each entry is correct – akin to a group of people reading a book out loud together, with only one person allowed to read at once – Aptos developers created the Block-STM, or a super-efficient team of “readers” who can read different parts of the same story simultaneously. Further, each reader is so efficient that together, they can figure out how all the different parts of the story fit together, even if reading out of order.

What parallel execution does then, is allow the validators to process many entries at once without delays or waiting, and without making compromises on accuracy. As such, building on Aptos using Move is highly desirable for developers and projects, such as Econia Labs, the orderbook DEX that enables atomic settlement and permissionless market making.

With the goal of balancing flexibility for developers alongside Move programming language's security benefits, Aptos implemented dynamic dispatch. This programming paradigm was originally intended to support dynamic functions outlined in the AIP-73 proposal, a standard for fungible assets. These are a specific implementation in Aptos that allows a form of limited dynamic dispatch functionality, allowing developers to use custom logic for fungible asset deposits and withdrawals, such as enabling transfer allowlists, whereby tokens can only be transferred to designated addresses within a specified list and predicated transfers, where transfers can only happen when a certain condition has been met. However, the implementation of dynamic dispatch not only allows for more dynamic capabilities for handling fungible assets, it has much broader implications for general-purpose dynamic dispatch in smart contract development across a wider range of smart contract scenarios.

Further, Aptos continues to make improvements to Shoal++, a cutting edge, high throughput DAG-BFT (Directed Acrylic Graph - Byzantine Fault Tolerant) consensus mechanism that enhances the performance and speed of the Aptos blockchain. In particular, Shoal++ can reduce end-to-end consensus latency, including queuing, significantly: it only requires 4.5 steps to confirm a transaction, rather than the normal 10.5 in DAG-BFT systems. It accomplishes this by changing the rules for confirming transactions by reducing its Anchor Commit Latency, or the time it takes to commit an “anchor” proposal to the DAG structure (a designated node that serves as a consensus reference point). Simultaneously, it reduces queuing latency by running multiple DAG processes at once, and reduces anchoring latency by making every node a reference point for committing transactions. Shoal++ also utilizes a reputation-based system that allows for the individual nodes to commit faster when certain conditions are met and reduce the potential risk of having too many uncommitted nodes. Overall, Shoal++ represents a significant step forward in making blockchain technology more viable for widespread, commercial adoption and utility. With Shoal++’s improved scalability and speed, it is likely that growth in Aptos developers, projects, and users can continue to expand. Shoal++’s advancements could also serve as a foundation for consensus protocols more broadly.

Finally, the Aptos Command Line Interface (CLI), a comprehensive set of features for developers to build, test, and deploy decentralized applications on the Aptos blockchain, simplifies the developer experience and workflow by providing seamless tools for testing and debugging Move contracts, enabling simplified interactions with the network, executing transactions, managing account and keys, and initialize new Aptos projects. Recently, Aptos has introduced several key improvements to Aptos CLI’s security. It now includes support for key rotation to/from Ledger hardware wallets, improves the validity of checking key rotations, makes the installation process for macOS easier, and has improved the Move Prover Integration, amongst other technical improvements. 

Moving the Industry Forward

In our previous report, we detailed the benefits of Aptos’ native Move programming language. Move gives Aptos numerous advantages over other platforms due to its safety, efficiency, simplicity, upgradeability, and more. Aptos continues to make improvements to Move to ensure code correctness. Aptos released its specification test framework for Move in May. Specification testing allows developers to write tests that verify the correctness of Move code against their formal specifications (mathematical descriptions of how the code should behave). The features introduce beta versions of two open-source tools, “move-mutator” and “move-spec-test”, which use the Move Prover, a formal verification tool for developers to prove the correctness of their Move code. With Aptos’ Move Mutation Test Framework, developers can make small changes/test errors (mutations) to the code to see if the test catches the changes. The “move-spec-test” tool takes ideas from mutation testing to find specification blind spots. The combined approach of specification testing in the context of mutation testing improves the quality of code.

Aptos also announced the beta testing program for the new Move Compiler v2 on Aptos Compiler in June. Key features of v2 include performance improvements, more helpful error messages so that developers can easily debug their code, better compatibility with existing Move code, and improved compilation speed and error reporting to further enhance the developer experience. Aptos’ move mutation test framework on Move 2 helps improve the robustness and completeness of contract specifications to augment the formal verification process.

Over the past few months, Block-STM has garnered noteworthy adoption both within Aptos ecosystem projects and on other chains. Econia Labs (an orderbook DEX), and Tapos (a clicker game), both utilize Block-STM as part of their architecture. Tapos—which also leverages a Move feature called Aggregators for parallel execution of smart contracts— contributed to Aptos breaking a record on May 25 for the most daily transactions on any Layer 1, reaching 160 million at its peak, elucidating the scalability and efficiency of Aptos Block-STM’s parallel execution. Econia also benefited from utilizing the Block-STM’s parallel execution capabilities, which are particularly useful in high volume applications. The significance of these two projects for Block-STM are that they demonstrate real-world stress testing of its performance, validation of Aptos’ technical architecture choices, and demonstration of scalability.

Beyond the Aptos ecosystem, other notable chains utilize Block-STM technology. In particular, Polygon’s R&D has utilized parallelization using Block-STM for the Ethereum Virtual  Machine (EVM), which has been live on the Polygon PoS for more than four months and eanbles the chain’s ability to process over 15 million transactions a day without issues. Per Aptos Foundation’s announcement from January, further advancements in parallel EVM by other notables teams such as Monad, Sei, and Starknet are underway.  

Examples of where the Move ecosystem has buoyed the growing adoption of Aptos include two major developments in DeFi. First, Chainlink, a leading decentralized oracle network, chose Aptos for its first Move-based deployment, marking a significant milestone for both Aptos and the broader Move ecosystem. Second, Aave, the largest lending protocol in DeFi, recently passed a governance proposal to deploy an instance of Aave V3 on Aptos. Should this approval pass, it would represent Aave’s first non-EVM deployment. These developments have several key implications for Aptos and the Move ecosystem: not only do they validate Move technology and expand DeFi capabilities, but also demonstrate Aptos’ ability to bridge the gap between EVM-based and non-EVM blockchains, a milestone in expanding use cases and user bases.

Source: *https://aptos.dev/en/network/blockchain/move

The Future of Finance on Aptos

Beyond its cutting edge technical architecture that enables exceptional performance, scalability, and accessibility, Aptos is paving the way as a groundbreaking Layer 1 protocol that has achieved 99.99% uptime, 100x lower gas fees versus comparable L1s, and sub-second latency – enabling truly instantaneous transactions. In translation, this means that the platform demonstrates remarkable resilience under periods of high transaction volumes, making the network foolproof regardless of network congestion. 

Notably, Aptos can support up to 30,000 TPS in a mainnet-like environment, and a sustained TPS of 25,000. These milestones were achieved without increasing gas fees, making transactions more accessible for users, unlike other chains that allow fees to spike dramatically in periods of peak usage. These low and stable fees position Aptos as a highly appealing platform for high-volume applications such as gaming, consumer applications, and AI applications that require high volumes of transactions and heavy workloads. The predictable fees will also serve to encourage more developers to build on Aptos and potentially drive ecosystem growth.

Launched in April 2024, Aptos Ascend is a platform that aims to connect traditional financial services and institutions with an end-to-end financial suite. This platform is the result of a collaborative effort with Brevan Howard, Boston Consulting Group (BCG), Microsoft Azure, and SK Telecom, a partnership that leverages the group’s collective asset management experience, robust corporate networks, and compliance solutions to expand decentralized financial services to traditional institutional capital. As such, Aptos Ascend marks a significant step towards democratizing access to financial resources without sacrificing security, scalability and the innovation known to be the cornerstone of the blockchain and digital asset management industry. Key features of the platform include a suite of Digital Asset Controls, which leverage zero-knowledge proof cryptography, end-to-end network controls for the creation of fully permissioned blockchain networks with granular access management with features such as audit trails, and multi-signature requirements that are customizable to specific institutional needs. 

Further, beyond its technical stack, the platform’s comprehensive suite of features are ready-made for enterprise-grade financial operations and is designed to meet the stringent requirements of non-crypto financial institutions. These features include but are not limited to compliance tools such as KYC/AML capabilities that adhere to regulations, customization, and the technical reliability inherent in the backing by industry leaders such as those mentioned above. Overall, Aptos Ascend is uniquely positioned as a highly institutional-grade solution, designed to meet the exceptionally complex needs of asset managers, banks, and other traditional financial institutions who seek to leverage blockchain technology securely and efficiently in an ironclad compliant environment.

Further demonstrating Aptos’ commitment to be the go-to blockchain for institutional adoption, an integration with Ondo Finance, announced in February of 2024, sets the stage for a series of innovative financial products that leverage the strengths of both organizations. The primary aim of the partnership is to integrate RWAs and integrate Ondo’s tokenized US Treasuries product, USDY, on Aptos. As the chart below indicates, Ondo’s USDY supply on Aptos has eclipsed $15m as of writing (note that USDY are not offered or sold in the United States). We anticipate seeing more innovative solutions that enhance yield solutions, new staking and re-staking processes, and more stemming from this strategic partnership.

Additionally, the integration of USDY into Thala Labs on Aptos enables users to trade USDY against other assets within ThalaAMM, Thala’s DEX. The addition of USDY to Thala’s AMM pools enhances liquidity options for users so that traders can seamlessly swap between USDY and other assets, improving market depth and efficiency. The integration of USDY on Thala improves yield-generating opportunities for users, and the team shared that more than $10 million USDY had been deposited as collateral for the MOD stablecoin as of July 31, 2024. The USDY integration on Thala utilizes Pyth’s USDY/USD price feed for real-time pricing. The integration of Mountain Protocol’s USDM stablecoin into Aptos further expands the available stablecoin offerings, increasing collateral diversification for Thala’s MOD stablecoin on the network and represents a step forward in bringing tokenized assets to Aptos. 

The Aptos Ecosystem Accelerates

Deposits on Aptos have grown steadily over the past year, and have shown relative strength to the overall market, and to competitive high-performance L1s like Sui and Sei. TVL on Aptos has risen 263% year-to-date, from $116M at the start of the year, to over $425M today. 

Additionally, aggregate DEX volumes on Aptos rose consistently, eclipsing $1B per month. ThalaSwap, Cellana, LiquidSwap, and Econia account for a majority of this volume.

When comparing Aptos to close competitors, it is evident that Sui DEXs have settled larger volumes. While Sui was settling multiples higher in aggregate DEX volume at the beginning of the year, this has fallen substantially, while Aptos volumes have risen steadily. Aptos and Sui ecosystems are now neck and neck in terms of both DEX volume and TVL, while SEI trails behind. 

Aptos ecosystem projects are beginning to flourish, with a number of key projects emerging across money markets, liquid staking, DEXs, and leveraged trading. Notably, Aries markets demonstrates as the preeminent money market on the chain, with $428M in deposits and $254M in assets borrowed against that. In competition to Aries Markets, Echelon Markets has shown strong growth since its launch in March. Over $120M in assets are supplied to Echelon, with $87M borrowed against that. Amnis, a liquid staking protocol for APT, has amassed nearly 20M APT backing their amAPT liquid staking token. Deposits on all of these Aptos projects have risen steadily.

Thala offers a suite of products covering a decentralized exchange with ThalaSwap, an APT LST with Thala’s thAPT, and a collateralized-debt-position (CDP) backed stablecoin with ThalaCDP’s Move Dollar, MOD. All three of these product verticals have shown strong growth over the past year. 

Thala’s LST, thAPT, is the second largest LST on Aptos, with over $70M in deposits. ThalaSwap demonstrates to be the second largest DEX on the chain, with $44M in liquidity provided and over $1.6B in cumulative spot volume settled. Volumes on ThalaSwap have risen consistently month over month.

Thala protocol offers collateralized borrowing of the Move Dollar (MOD), an Aptos-native stablecoin. MOD is collateralized by a basket of liquid staking derivatives, liquidity pool tokens, deposit receipt tokens, and real world assets. Users mint MOD as a loan against their deposited collateral. MOD is globally-redeemable, whereby users can always burn 1 unit of MOD to receive $1 of the underlying assets, less a redemption fee. This arbitrage mechanism helps maintain the peg, and gives MOD holders assurance that they can always redeem their stablecoin for $1 of value, even if the token is beneath its peg. Thala only charges a 0.25% fee on MOD loan originations, but may charge an interest rate in the future. 

Users can deposit MOD in the Thala Stability Pool (TSP), a standing pool of MOD liquidity used to cover debts in the event of a liquidation. The TSP serves as a native yield venue for the MOD stablecoin. In a liquidation, MOD is burnt from the pool to cancel the outstanding debt on a vault, and the vault’s collateral is paid out to TSP liquidity providers. As such, TSP LPs receive a vault’s collateral position at a discount to the market price, earning a return on this spread. Currently, $9.6M MOD has been minted into circulation, with $40M in asset deposits backing it.

Merkle Trade offers a decentralized exchange for trading crypto, foreign exchange, and commodities markets on leverage. The platform offers 150x leverage on crypto markets and 1,000x leverage on forex pairs. On Merkle, a passive market maker (Merkle LP) takes the other side of every trade. This liquidity pool earns fees generated by traders and the collateral from losing trades. The Merkle LP takes losses when assets must be paid out for winning trades. LayerZero’s zUSDC is the only accepted collateral on the platform, and all trades are quoted and settled in USDC. As such, users are trading synthetic assets referenced in USDC, with Pyth oracles providing price feed data. The protocol has settled close to 2M trades, accounting for over $12B in cumulative notional derivatives volume on only $7M in TVL.

Cellana Finance has grown to settle the most cumulative spot volume out of any DEX on Aptos. Cellana implements a ve(3,3) model for sustainable liquidity and incentives. Liquidity providers earn CELL token emissions, the governance token of the DEX. CELL can be locked as veCELL, conferring governance to direct the level of CELL emissions across various liquidity pools. Trading fees generated on the DEX flow to veCELL token holders. This incentive mechanism has demonstrable success in creating a liquidity flywheel, as discussed in this report on Aerodrome, the largest DEX on Base that also incorporated a ve(3,3) model.

At large, the Aptos ecosystem now presents a promising ecosystem of core onchain financial primitives. This includes Aries and Echelon for lending and borrowing, Econia for a high-performance limit order book, ThalaSwap and Cellana for AMM-based DEXs, Merkle Trade for perpetual futures, Thala’s Move Dollar for an onchain collateralized stablecoin, and Tether, Ondo, and Mountain protocol for fiat-backed and treasury-backed stablecoins through USDT, USDY, and USDM. The leading core financial applications on Aptos have all demonstrated notable growth in volumes and deposits over the past year, outpacing the growth on many other competitive high performance layer-1s.

Consumer Applications on Aptos

The Aptos ecosystem has given rise to a number of promising consumer applications. KYD Labs, an onchain ticketing platform for artists and venues powered by Aptos, has onboarded over 50K users and processed over 1M in cumulative ticket sales. The platform enables automatic payouts to artists, royalties on ticket resales to creators. Recently, KYD Labs entered into a multi-year agreement with the New York City music venue Le Poisson Rouge to settle all of its ticketing onchain. Le Poisson Rouge hosts several hundred thousand attendees every year, representing a promising funnel of new users to be onboarded to Aptos in a highly abstracted manner. 

Additionally, Aptos proves to be a compelling platform for web3 gaming advancements. Supervillain Labs integrated Aptos accounts for inventory management of in-game items. Leveraging Aptos’ Keyless Accounts, users can log in with a web2 experience using their existing Google account or Apple ID, and an account on Aptos is created on their behalf. Supervillain Labs’ Wanted game, launched July 30th, has already exceeded 100,000 downloads. Be it ticketing, events, or gaming, Aptos’ low fees, fast finality, improved user-experience, and leading account-abstraction technology have supported the growth of a number promising consumer applications that are currently not possible on many other layer-1s.

Risks 

For all Aptos’ impressive milestones, one must carefully consider the risks associated with participating in Aptos. Key risks for Aptos include technical, execution/adoption, regulatory, and market risks. When compared to longer-standing networks, Aptos, by sheer time in existence, may be less battle tested, with potentially smaller and less robust ecosystems of resources available for developers. Such can also be said of the relatively new Move programming language. Further, despite Aptos’ technical advancements, there is no guarantee of widespread adoption by developers, users, or institutions. 

While the trends look promising, only continued execution by the team and more time will increase institutional trust of Aptos. Further, competition from other high-performance blockchains, such as Sui and Sei, potentially detract from Aptos’ future growth. Notably, Sui is a significant Move-based competitor. The shared technical foundation between the Aptos and Sui teams may exacerbate the already-high levels of competition for skilled Move developers and cause talent wars between the platforms.

Lastly, the integration of RWAs and tokenized securities, such as USDY, may face future regulatory scrutiny and/or challenges. The ever-evolving financial regulations may be potential headwinds for the adoption of Aptos Ascend and its institutional partners and users. As always, the overall market conditions for crypto that are impacted by numerous economic, political, and social factors play a critical part in Aptos’ future success.

Conclusion

Evidenced by growing volumes, deposits, and transactional activity over the past year, Aptos presents a promising venue for the emergence and adoption of consumer and financial applications. With high transactional throughput, low fees, and sub second latency, Aptos’ highly performant monolithic architecture can offer concurrent support and settlement for numerous high volume use cases. As the chain and its ecosystem remain quite early in its development and adoption lifecycle, this can present hurdles. Largely, a lack of tooling, less stress tested infrastructure, fewer assets, and difficult block explorers can present frictions. Aptos ecosystem applications, money markets and DEXs in particular, struggle with a low supply of non-native assets, and low utilization of the native asset when compared to stablecoins. Onboarding more assets, be it bridged BTC, ETH, or SOL, or RWA’s like USDT, USDY, or USDM, should broaden the utility of trading, lending, and borrowing on the chain. Despite these hurdles, the acceleration in key network metrics over the past year suggests legitimate traction and promising growth ahead. 

Disclosure: This research report has been funded by the Aptos Foundation. By providing this disclosure, we aim to ensure that the research reported in this document is conducted with objectivity and transparency. Blockworks Research makes the following disclosures: 1) Research Funding: The research reported in this document has been funded by the Aptos Foundation. The sponsor may have input on the content of the report, but Blockworks Research maintains editorial control over the final report to retain data accuracy and objectivity. All published reports by Blockworks Research are reviewed by internal independent parties to prevent bias. 2) Researchers submit financial conflict of interest (FCOI) disclosures on a monthly basis that are reviewed by appropriate internal parties. Readers are advised to conduct their own independent research and seek the advice of a qualified financial advisor before making any investment decisions.