and the distribution of digital products.
State of Nym Q2 2024
- Packets received increased 186% QoQ in Q2 2024, totaling almost 500,000 packets, reflecting increased network activity.
- Average rewards per packet decreased 65% QoQ in Q2 2024. Suggesting a lower reliance on rewards for mix nodes and the protocol moving toward sustainable revenue.
- Delegated NYM increased 3.7% QoQ at 197 million NYM. Contributing to network security, despite lower rewards.
- NymVPN launched in public beta, becoming the first commercial application to operate on Nym’s decentralized mixnet.
Nym (NYM) is an open-source, incentivized, and decentralized physical infrastructure (DePIN) protocol that protects privacy at the network level of any application, wallet, or digital service. As a mixnet, Nym protects against traffic pattern analysis and metadata surveillance. Nym exists as a tool to facilitate private end-to-end internet communication between any application, in addition Nym built a proprietary application on top of the Mixnet, NYMVPN. As such, it is not exclusive to blockchain-related activities. However, the Nym mixnet is closely linked to the NYM token, which runs on the Nyx Cosmos-based appchain to enable permissionless ‘bonding’ of new mix nodes to the Nym network and pay for mixnet services.
Nym addresses a frequently neglected component of the internet’s technology stack: the transport layer. True privacy is achieved from the bottom up, starting with the transport layer. Both conventional Web 2.0 applications like Telegram and blockchain-related applications such as wallets — and even entire networks — can benefit from Nym's modular network stack. Unlike other privacy solutions, Nym's mixnet employs a unique architectural approach that enhances anonymity proportionally with the growth in network participation. For a full primer on Nym, refer to our Initiation of Coverage report.
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Key Metrics
Performance AnalysisFinancial AnalysisThe NYM utility token serves the following functions for the Nym mixnet and the underlaying Appchain:
- Access to the mixnet.
- Paying the Appchain transaction fees.
- Pledging by mix node Operators as an initial reputation score to bond their node to the network.
- Rewarding Proof-of-Mixing to mix node Operators.
The token and the appchain blockchain serve the economic function for the NYM mixnet, the DePin protocol responsible for private communication.
NYM’s price declined by 46.2% QoQ in Q2, ending at $0.14 per token. This followed a 46% increase in Q4, which saw a yearly high of $0.26. The market cap also dropped 47% QoQ, closing at $101 million, down from its Q1 peak of $190 million.
NYM was originally distributed as both a native Cosmos ICS-20 token and an ERC-20 token, bridged to Ethereum via Gravity Bridge for Coinlist users. By the end of Q2, the ERC-20 NYM supply stood at 107 million, or 13.4% of the total 799 million circulating supply, down from 14.4% in the previous quarter. This indicates increased adoption into the native mixnet ecosystem.
Ethereum ERC-20 NYM can be bridged to native Cosmos NYM through centralized exchanges such as OKX and bridges such as Gravity Bridge.
In Q2, Nym Technologies released a NYM Swapper app that allows the exchange of NYM tokens between the native Cosmos-based appchain and Ethereum’s ERC-20 tokens via MetaMask and Keplr wallets. This tool simplifies the bridging process and allows users to easily stake tokens on Nym nodes for rewards and manage delegations across the two blockchain ecosystems.
Rewards
The protocol incentivizes Operators (who run Nym Nodes or Nyx validator nodes) and delegators with Nym rewards to bootstrap the network and incentivize security. Total rewards denominated in NYM decreased 5.7% QoQ, while rewards denominated in USD decreased 6% QoQ, due to NYM token’s price decrease. Over the past year reward distribution has steadily decreased from June 2023 high of 2.7 million Nym to June 2024 low of 2.3 million NYM. This decrease would be expected as the network moves towards commercial adoption and becomes self-sufficient at incentivizing Operators and Delegators, without the need for rewards.
In Q2, Operators were awarded ~5% overall fees, with Delegators receiving the other ~95%. This distribution was essentially unchanged from Q4. Delegators received over $1.3 million and Operators received over $56,000. Operators can set their own commission rate, which they are incentivized to keep low since Delegators can always restake elsewhere. To avoid Operator rewards to be set to zero, the community suggested a baseline Operator reward of 40 NYM when nodes join the network. Without lower limits to node rewards, sophisticated actors are likely to specialize and make the service more competitive, which prices out solo Operators and ultimately leads to centralization. This problem has been observed with other blockchain networks, such as Bitcoin mining.
Packets are chunks of network data (i.e., traffic) either coming from users or generated as cover traffic. The Nym mixnet guarantees privacy by taking advantage of the Sphinx packet format. This format makes all packets, even those from cover traffic, indistinguishable from each other.
The average rewards metric reflects the rewards paid per successfully received packet, representing the protocol’s incentive cost per message. In Q2, average rewards dropped 64.7% QoQ to $3.09, driven by increased packet volume, reduced distributed rewards, and a decrease in NYM's price. This trend suggests the network is becoming less reliant on rewards as traffic grows, with usage fees increasingly supporting the network independently, reducing the need for subsidies.
Network Analysis
In Q2, the total number of packets increased by 180%, reaching nearly 500,000. Since all packets are uniform in size, network traffic is measured by the total packet count. However, due to dynamic cover traffic, individual user activity remains untraceable from overall packet data.
In Q2, a series of stress tests were conducted to push heavy traffic through the network and identify error messages and their sources. The first test took place on March 20, 2024, and the third concluded on April 9, 2024. Despite involving over 340 nodes, there were no significant increases in packet volume or other metrics during the tests. Most growth occurred later in Q2. The absence of packet loss or node dropouts indicates the network remained stable and experienced no downtime during the tests.
Mix NodesThe Nym mixnet is supported by a decentralized and permissionless network of mixing nodes known as mix nodes. The network uses a client-server architecture and is not P2P, to enable end-users to use the network without necessarily running a node. The primary purpose of mix nodes is to route and mix traffic through the mixnet securely.
As of the end of Q2, there were 768 total nodes available. Of these, the network selects 240 nodes to be active in each hour (epoch), to optimize rewards distribution and system efficiency. The number of active nodes scales with demand, and the parameter can be adjusted through governance (though it was initially set by the Nymtech team). The selection of active nodes happens once per hour, so the topology is continuously changing, making it difficult for an adversary to construct a malicious path. The selection is fully decentralized and is based on a mix node's reputation (measured by its total stake in NYM tokens) and performance.
Total NYM delegated to mix nodes reached 197 million NYM ($33.5 million) at the end of Q2, up 3.7% QoQ. Delegated NYM increased despite a 10% decrease in average APY QoQ to 13.8%. NYM holders can delegate directly through the Nym explorer with familiar Cosmos tools like the Keplr browser/mobile wallet or the Nym native wallet.
Ecosystem AnalysisThe Nym mixnet is a privacy DePIN that can be leveraged directly through applications that act as wrappers for tailored UX or via protocols that enshrine Nym into their networking layer.
NymVPNNymVPN is a VPN service powered by the Nym mixnet, designed to offer users enhanced privacy and security. This VPN employs the Nym mixnet and provides options for users to balance speed and privacy. It also enables Mixnet ZK credentials payments in FIAT NYM, BTC and Monero, ensuring anonymity in transactions. The ZK credentials are decoupled from the payment, ensuring a total and complete privacy in accessing the mixnet. The Nym VPN app aims to meet the growing demand for privacy protection in the familiar form of a VPN while maintaining a surveillance-resistant business model.
The NymVPN’s general-purpose scope has the potential to onboard many more users than previous Nym integrations (i.e., NymConnect and specific B2B Nym integrations). To increase accessibility, it automatically converts payments across a wide variety of payment methods, including Bitcoin and fiat, to NYM tokens. The NymVPN payments will then fund the mix nodes in the same way transaction fees work in other networks.
Nym launched the free public beta of NymVPN, marking a significant milestone as the first commercial application to operate on Nym’s decentralized mixnet. NymVPN offers two distinct modes to cater to different user needs.
Fast Mode provides a balance between speed and privacy by routing traffic through two independent servers, ensuring efficient protection for activities like browsing, messaging, and streaming. The upcoming integration of WireGuard will enhance this mode further with a lightweight and secure VPN protocol.
Anonymous Mode routes traffic through five servers (mix nodes), utilizing advanced onion encryption and network noise techniques. This mode ensures that user activity is extremely difficult to trace, making it ideal for privacy-sensitive activities. Both modes are designed to protect users from metadata tracking and surveillance by leveraging the decentralized architecture of the Nym mixnet
Deprecating NymConnectNymConnect is the predecessor of NymVPM. It is a simple interface that enables users to privacy-enhance their apps by routing traffic from third-party applications through the Nym mixnet. As a beta application, NymConnect is currently used to stress test the mixnet and features.
NymConnect, as a beta product, added privacy where there was none. For example, without a mixnet or VPN, Telegram could be geographically censored by a government, as it was in Iraq. With NymConnect, Telegram users could not be geographically censored.
In June 2024, Nymtech announced that NymConnect would phase in advance of the NymVPN. This shift was driven by the need to provide enhanced privacy features, enable full stack privacy for all operating systems, not only apps supporting SOCKS5 TCP streams.
GovernanceIn Q2, NYM network Operators voted to extend reward distribution to entry and exit nodes. Prior to this vote rewards were only distributed to mix nodes. The NYM network functions in two different modes: a two-layer high-speed mode (entry node and exit node) and a privacy mixnet with five layers (entry node, 3 mix nodes and exit node). Polling showed preference for the following distribution:
Two-layer traffic
- 33% to entry gateway
- 67% exit gateway
Five-layer traffic
- 16% entry gateway
- 16% mix node 1, 16% mix node 2, 16% mix node 3
- 36% exit gateway
A vote passed on increasing the transaction limit from 7 to 12, thus allowing multisig wallets to transact with up to 12 members. This gives users the flexibility to increase their security when transacting to send packets on the NYM protocol.
CommunityLaunched in Q2, the Nym Delegations Program 2.0 incentivizes high-performing nodes and promotes network decentralization. Offering delegations from the Nym treasury, it enables new nodes to quickly join the active set while supporting geographically dispersed, well-managed nodes. The program allocates 32 million NYM for rewards, with 250,000 NYM available per node. Prioritization is based on factors like location, hardware, and community contribution. The Nym network now spans 88 countries, with entry and exit nodes operating across all continents except Antarctica.
A community treasury of NYM tokens was established called the Squad Wealth Fund. This fund supports Nym ecosystem growth by rewarding community contributors. The Squad Wealth Fund kicked off Season 0 with 475,000 NYM in Q1. In Q2 the fund earned 490,000 NYM from it’s delegation and increased by 250+ new participants.
Other recent community events and developments include:
- Nymtech joined the Liquid Federation. Liquid is a federated Bitcoin layer supported by 15 operators, and its wallet now works with Nym.
- ZCash, a payments-focused private L1, and Aztec, a private and programmable Ethereum rollup, both plan to integrate with Nym. The first milestone was reached with Nym HTTPS proxy successfully communicating with Zcash’s gRPC.
- NymVPN partnered with Optimism, allowing Optimism users to be among the first to test NymVPN.
- Nym team participated in a number of events at Kyiv Blockchain week, including demos on how to run a node, talks from co-founder Harry Halpin and a Nym meetup for the community.
- Community developed CRM system was improved to enable the NYM Delegations program.
- Community Calls with privacy focused projects like Midnight Network, Tuta, and alephium.
In Q2 2024, Nym continued its advancement as a leading DePIN network for private communication by achieving several critical milestones. Packets received increased by 186% QoQ, totaling nearly 500,000, reflecting significant growth in network activity. While NYM’s rewards decreased by 5.8% QoQ, average rewards per packet dropped 65%, suggesting a lower reliance on rewards for mix nodes and signaling the protocol’s shift toward more sustainable revenue models based on fees collected. Despite the decline in reward emissions, the network showed resilience as delegated NYM increased by 3.7%, reaching 197 million NYM. This continued community support highlights growing confidence in Nym’s infrastructure and long-term potential. Additionally, the protocol strengthened its partnerships, including integrations with projects like Zcash and Optimism, further expanding Nym’s ecosystem.
The launch of the NymVPN public beta is a major milestone. This release marks the first commercial application to operate on Nym’s decentralized mixnet, offering two modes: Fast Mode for speed and privacy, and Anonymous Mode for maximum privacy protection. NymVPN provides users with a familiar VPN experience while harnessing the robust privacy and security features of the Nym mixnet. As Nym progresses toward greater decentralization and enhanced privacy solutions, it remains committed to ensuring the security and scalability of its network.