+EVmos?

The upcoming Launch of Evmos

Mar 1

For the past year or so it has been +EV to immediately bridge to new chains, experiment with the dApps they have to offer and invest in their tokens. In this light, and with the upcoming launch of Evmos (2nd March), I can’t help but wonder where I am in the information pipeline - is this now a really over-crowded trade or am I just in an echo chamber on Twitter dot com? (either way i’m aping)

With the Rektdrop, Evmos is distributing its native token EVMOS to pretty much everyone who has used DeFi and as such I expect a Looksrare-esque hype and attention on the token. As Cobie says:

“Attention is the only scarce resource in crypto”.

But what even is an Evmos anyway??

Overview

Evmos leverages the Cosmos SDK Proof-of-Stake functionality and the Ethereum Virtual Machine (EVM) compatibility and fast-finality from Tendermint Core’s BFT consensus. Meaning it is built using the Cosmos SDK, which runs on top of the Tendermint Core consensus engine.

This allows for running Ethereum as a Cosmos application-specific blockchain. Developers can have all the desired features of Ethereum, while benefiting from Tendermint’s fast PoS implementation.

Evmos, being built on top of the Cosmos SDK means it will be able to exchange value and communicate with the rest of the Cosmos Ecosystem through the Inter Blockchain Communication Protocol (IBC).

Fundamentals

The Cosmos hub is a blockchain built on Tendermint Core, using Cosmos SDK. It utilises a hub-and-spoke model, meaning blockchains can plug directly into the hub but retain their own PoS validators and token, if they chose to. For example, Terra and Juno have plugged into the Cosmos hub and with the IBC protocol they are able to communicate with each other. However, Ethereum currently cannot communicate with the Cosmos hub and users must bridge assets from Ethereum to Cosmos if they wish to interact with the Cosmos ecosystem.

Evmos is the first IBC enabled and EVM compatible layer 1 blockchain. This will allow all new and existing EVM dApps to integrate and communicate with the Cosmos ecosystem, allowing for almost infinite possibilities of new interactions. For example, Aave v3 on Evmos could have markets for ETH, ATOM and JUNO.

CEVmos

On the 16th of December 2021, Celestia and Evmos announced a partnership to build an optimal settlement layer for EVM rollups using Evmos. Cevmos will be a modular tech stack for EVM dApps, utilizing rollups (optimistic Rollup or Zero-knowledge roll up) for Execution, Evmos for settlement and Celestia for Data availability. If you want to learn more about Celestia and my investment thesis click here:

Celestia Investment Thesis

Due Diligence

Token Utility

The EVMOS token accrues value as it is used for staking, which in turn secures the Proof-of-Stake chain. The token is also used to vote in governance proposals to help direct Evmos along its roadmap. Token holders are responsible for steering the DAO and dictating the fate of all on-chain assets that travel through the Evmos port-of-entry to Cosmos. Moreover, the EVMOS token provides the utility of fee distribution and as a means of gas for running smart contracts on the EVM.

Finally, with the partnership with Celestia and the advent of Cevmos, the Cevmos chain will utilise Evmos security by using EVMOS stakers. Similar to how blockchains connected to the Cosmos hub (such as Juno) use ATOM stakers for security instead of their own validators. This should accrue more value to the EVMOS token.

Tokenomics

The initial token supply of EVMOS is 200 million.

100 million tokens will be airdropped to ATOM and OSMO stakers in the cosmos ecosystem and to Ethereum ecosystem users based on their gas expenditure on certain dApps. This airdrop is called “Rektdrop” and there are almost 2 million addresses that will receive it! Making it one of the largest, if not the largest and most widespread airdrops ever.
20 million EVMOS will go into a community pool (DAO treasury) controlled by a multi-signature wallet and will be used to fund initiatives and support development.
80 million EVMOS will go into a strategic reserve . It will be used to fund initiatives through grants and support validators through delegation who are highly active in the network, beyond just running an institutionally backed node

Here is a list of actions / dApps / hacks that make you eligible for the airdrop:

Evmos has high inflation levels at the beginning, with over 300 million tokens being issued in the first year. New tokens will be issued under an exponential decay schedule with the inflation level decreasing every year. The target is to issue 1 billion Evmos tokens in 4 years.

The supply schedule is therefore disinflationary and EVMOS is a token with an uncapped supply. The team are encouraging the community to vote for an alternative inflation model after year 4.

Newly released tokens will be distributed on a per-block basis as shown:

Staking rewards: 40%
Team Vesting: 25%
Usage Incentives: 25% - of the Block emission is dedicated to a pool to incentivise users.
Community Pool: 10%

The initial usage incentives will be gas rebates for end users. In order to incentivise smart contract usage on Evmos, the community will be able to register an incentive to a given smart contract via governance. This effectively results in a gas subsidy and is a great way for the network to decide which dApps get subsidised for their users.

Fee gas pricing is based on EIP-1559 but instead of burning the base fee, Evmos uses the “dApp store” model and puts this capital to work. 50% of this fee distribution will go to deployers of smart contracts and 50% will go to the Validators at the genesis of the project. This can be changed later.

This creates an incentive for developers as they are further rewarded for the value their dApp provides the ecosystem. they also get a real stake in the growth and governance of the protocol, aligning incentives well.

Team

Evmos is being built by Tharsis, a company ”developing EVM and interoperability solutions on the Cosmos Network”. The team has deep roots in the Cosmos ecosystem, and have also worked on Bitcoin, Ethereum, Cryptography and distributed systems for 5 years. Here are a few projects they have worked on:

The Core team:

Federico Kunze Küllmer, the CEO and Co-founder, graduated from Berkeley in 2017 and has over 8 years professional software engineering experience. Federico previously helped develop the Cosmos IBC at Tendermint, later working at Kava Labs and then co-founding the Sommelier Protocol, a DeFi liquidity provider protocol that enabled LP’s to have stop–loss positions to protect themselves from impermanent loss.
Akash Khosla Graduated from Berkeley in 2015 and has over 6 years of professional programming experience. He was the Co-founder of Blockchain at Berkeley. Akash previously worked at Anchorage where he built systems that secured billions of dollars of digital assets. He is the Co-founder of Evmos.
Daniel Burckhardt is the Head of Product at Evmos. He has experience as a Software engineer, Mechanical engineer and building products and lead agile teams. Most recently he built Industrial 3D Printing B2B Software that has raised more than €20M in funding.
Austin Chandra is a Full Stack Engineer, just recently graduating from Berkeley. He has experience working at Visa, Robinhood and Apple.

Investment Thesis

The Cosmos ecosystem

The Cosmos ecosystem has flourished with TVL increasing by over 168,900% from just $10 million in November of 2020 to over $16.9 billion now. Evmos is uniquely positioned to attract users from both the Ethereum network and the Cosmos hub.

The growth of the Cosmos ecosystem and the siloed liquidity within it represent a large opportunity for Evmos to connect to the hub and inherit users and liquidity almost instantaneously.

Furthermore, I believe there is a narrative forming around the Cosmos ecosystem, as new application-specific blockchains are launched and market participants have become increasingly aware of its existence.

Ethereum

Evmos being EVM compatible and Cosmos compatible is extremely bullish. This cycle we have seen EVM chains commanding a lot of users and with that, TVL. Since October of 2020, EVM TVL has grown from $4.15 billion to over $178.6 billion and Ethereum has lost almost 25% in dominance to these alternate EVM chains.

Ethereum is still the largest network by far and controls approximately 59.15% of all Total value locked. Evmos is uniquely positioned to be the chain that interlinks the Cosmos and Ethereum networks. As such, users, dApps, developers and liquidity will almost instantly inhabit the Evmos chain.

The network effect potential of Evmos, benefiting from growth in both the cosmos ecosystem and Ethereum ecosystem is extremely large.

Celestia Catalyst

Celestia is partnering with Evmos to build a settlement layer for EVM rollups called Cevmos. The settlement chain will be implemented as a Celestia rollup using Optimint instead of the Tendermint Core consensus engine that is used on existing Cosmos chains.

As such, the settlement chain won’t compete for gas with non-rollup transactions, resulting in lower fees & more scale. The Cevmos chain will be connected via IBC to Evmos, utilising the EVMOS token for security & gas. The use of EVMOS for security and gas is extremely bullish as the token can accrue value from transactions on Cevmos. I believe the launch of Cevmos will be a bullish catalyst for the Evmos token.

Comparable Analysis and Competitors

Since Evmos is integrated with both the Ethereum Network and Cosmos network it will compete for liquidity and users across a few verticals. In the Ethereum network it will compete with the Avalanche Network, Fantom, Harmony and various Layer 2’s. In the Cosmos ecosystem, Evmos will complete with Juno, Terra and the Secret Network. In the Application-specific blockchain space we have Cosmos, Polkadot and soon to be Avalanche with their subnet’s launch. Evmos is uniquely positioned to compete in all of these verticals and so capturing even a small market share from each will compound to form a large network.

EVM

Fantom
Avalanche
Harmony

Cosmos

Juno
Osmosis
Secret Network
Terra

Application-specific Chains

Cosmos
Avalanche (subnets)
Polkadot

Evmos competes in 3 distinct verticals due to its unique interoperability. However, I believe none of these projects are in direct competition with Evmos (currently) as it is the only EVM compatible Cosmos chain.

Risks

High fully Diluted Value (FDV) – Evmos is a highly converted project and as such I believe it has the potential to launch with a high FDV, meaning there is less potential for upside.
Airdrop dump - since nearly 2 million wallets will receive the airdrop and the supply is highly inflationary initially, it is possible we see high short term sell pressure
Execution risk – like all projects, Evmos faces execution risk. Even more so because interoperability between cosmos and Ethereum is an extremely complex task. Furthermore, the Tharsis team is relatively small and inexperienced.
Competition – Evmos, being part of the Cosmos, Ethereum and app-specific blockchain verticals, has lots of competition. I don’t think any of these chains are in direct competition with Evmos but chains will still compete for users and liquidity.
Exploit risk – Being a Cross-chain protocol possesses inherent risks. During 51% attacks, assets moving cross-chain could be lost or stolen. In fact, just the other day Wormhole, an Interoperability protocol powering the seamless transfer of value and information across 7 high value chains, was exploited for 120,000 ETH ($375 million).

Shoutout to @0xRainandCoffee for this Evmos article and to the AnalystDAO for their thread.

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