POKT & XT AMA REVIEW
Host: XT.COM
Guest: Michael O’Rourke — Co-Founder & CEO
Pocket Network & Kevin O’Brien — Managing Director, RockTree Capital
At 11th January, 12:00 (UTC), XT.COM did another live streaming!
XT.com : Hi, everyone! Welcome to the XT AMA Channel. XT is honored to invite POKT today. Let me give a brief introduction to XT first.
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Today, our guest is . Let’s talk to him to learn about POKT.
Hello, thank you for joining us for the XT and POKT AMA!
XT.com: Pocket Network is a distributed API infrastructure built for Web3 applications. Could you give us a detailed description of the project and its development firstly?
Kevin O’Brien: Pocket Network is a decentralized blockchain API built for Web3 apps, relaying data to and from any blockchain through a network of thousands of nodes. If you are familiar with Infura or Alchemy, you can think of Pocket Network as a decentralized multi-chain alternative.
We launched our mainnet on July 28th, 2020 so the protocol has been operational for a little over a year and a half.
XT.com: And please tell us a little about RockTree and your model?
Kevin O’Brien: RockTree Capital, well we’re a merchant bank and fund based in China, and internationally too focused on blockchain projects and mobile e-commerce companies, with offices in Beijing, Shanghai, New York and Toronto. We invest into top-tier blockchain projects and for special gems like Pocket Network we also help incubate their growth. We’ve been completely blown away by the diligence, innovation, team and on-chain metrics from Michael and Pocket. They have started an exponential phase of growth and it’s really impressive to see it become a reality.
XT.com: Most Web3 projects are focused on the application layer, such as Uniswap and MakerDAO. So why did you choose the Web3 middle tier track to focus on infrastructure? Can you tell us about the background of the project, your original intention and goal?
Kevin O’Brien: In 2016, I met our co-founders while working at a startup. We were building a smart contract application in 2017 when we noticed the big impact of the only network provider at the time Infura. It served a crucial need for developers who need access to Ethereum while also representing a huge single point of failure, which played out eventually in NOV 2020.
Shortly after that, we published a whitepaper then an economic paper. In 2019, we launched Minimal Viable Pocket. Once we sunsetted that, we launched our incentivized testnet in FEB 2020. After a couple of months of incentivized testnet, we officially launched the Pocket Network mainnet in late July 2020.
Also, prior to Pocket Network, there was zero incentive to run full-nodes, which was leading to node centralization across blockchain networks. Now, the Pocket Network protocol and POKT token are generating value for node runners on all our supported blockchain networks, like Harmony, xDAI, and Ethereum to name a few.
XT.com: Pocket Network’s native token is POKT. Can you tell us more details about its economic model and usage scenarios?
Michael O’Rourke: Pocket Network uses a native cryptocurrency (POKT) to create a permissionless, two-sided market between node providers who run full nodes and developers that want to query data from a blockchain for their application/service.
Pocket Network requires both developers and nodes to stake its native utility token, POKT, to participate in the network. Due to the unique incentives on each side of the market, staking differs between the parties.
Developers, requiring reliable infrastructure and relay amounts for their applications, stake POKT a single time for a guaranteed amount of relays per session for the life of the stake. The amount of POKT required to be staked is directly proportional to the number of relays required. Currently, one POKT allows for 13.3684211 relays each session (a session is 60 minutes long) but the number of relays per session allowed can be adjusted for price fluctuations of the POKT token through governance mechanisms.
Node Providers also stake POKT but do so on a per-node basis. The minimum stake required to run a single node is 15,000 POKT with a small buffer in case of slashing. Unlike most traditional block rewards, Pocket Network’s is dynamic; POKT rewards are directly proportional to the number of relays and transaction fees in a given block. 0.01 POKT is minted for every relay served and validated. 89% goes to service nodes that did the work in those sessions, 10% goes to the Pocket DAO, and 1% goes to the block producers elected to validate blocks.
XT.com: RockTree Capital: Congratulations to Pocket Network on its $10m closing of its strategic private sale co-led by RockTree Capital, what was it that attracted you to Pocket Network and made you guys invest? Also we’ve heard RockTree being called a Decacorn hunter. What is that too?
Michael O’Rourke: A lot of projects their vision in crypto is to hit 1 billion in market cap fully diluted, but we specialize in this area and really spend a lot time getting to know our projects, the founders the extended team, really seeing their level of Emotional Quotient which needs to be high for us to be able to work with them closely and invest — of course excellent technology, economics, scalability, timing on market-fit are super important too, but having high EQ is paramount and Michael and his team have been a pleasure to work with it. So Decacorn hunter refers to our constant search internationally and also being grassroots around the world to find companies like Pocket Network that can grow beyond 10 Billion market cap and above, and Pocket Network has demonstrated all the characteristics for what we know is needed to attain this Decacorn status. We’ve seen these patterns before with some of our other projects and the on-chain metrics of Pocket which have been incredible speak for themselves.
Lastly, it’s not just that we see Pocket as an absolute gem but it’s also rapidly becoming a core piece of infrastructure for running Web3 and the demand from other applications and chains wanting to work with them is really impressive to see too.
XT.com: Some Web 3.0 applications, possibly using the traffic to achieve their revenue, charge a fee to obtain revenue. What is Pocket Network’s revenue model? Can you please tell us about the current revenue situation?
Michael O’Rourke: POKT is purchased and staked by both sides of the marketplace: application developers and node providers.
To reiterate 0.01 POKT is minted for every relay served and validated from applications. It is automatically distributed by the protocol to 3 parties:
● 89% to the service nodes
● 10% to the Pocket DAO treasury
● 1% to the block producers (i.e. validator nodes)
The protocol revenue has been growing exponentially as the relay growth has also grown exponentially.
Here are some of the latest metrics over the last couple of months:
● AUG | 563,452,837 relays → 5,634,528.37 POKT → $1,355,290.82 → 315.70%
● SEP | 906,418,268 relays → 9,064,182.68 POKT → $3,009,646.82 → 222.07%
● OCT | 1,761,414,010 relays → 17,614,140.1 POKT → $9,162,335.35 → 304.43%
● NOV | 3,761,085,065 relays → 37,610,850.65 POKT → $30,411,879.24 → 331.92%
● DEC | 5,783,384,872 relays → 57,833,848.72 POKT → $56,881,264.53 → 187.04%
Protocol revenue has grown on average 244.72% month over month since JUL 2021.
It’s also very cool to see other services build (and monetize) on top of the Pocket Network protocol and within the ecosystem.
XT.com: RockTree: What does this type of performance mean as investors in Web3? Where do you think Pocket and other projects fit into the current landscape?
Kevin O’Brien: This obviously does not happen by itself so it is testament to the company and protocol that Michael has built as a leader. It means that we are now acutely in a period of real economic valuations for projects, there will always be speculation and its necessary for all industries though now real crypto projects are being built, with real customers, real on-chain metrics and revenue growth — and its real time, you get to see exactly how a company is performing through transparent metrics which means that you can value them better but it also means that when a solution like Pocket Network comes along that begins to show traction, the potential scale is borderless and massive so you need to be able to act fast and catch the timing of it or else as investors you will be too late. So with Pocket we studied all the parameters and understood where this to go to and its happening.
Pocket fits into a very special category too because its pure innovation while also having’ utility permanence’, meaning its service and position in the market will always be needed and especially as the wider crypto market grows and in general the need for Pocket’s cloud computing and abundant bandwidth will only ever increase with time — so it is robust and becoming more and more antifragile everyday.
So for Web3 there will be always be new trends that come and go as different light bulbs are switched on illuminating where Web3 applications can find fit, but projects like Pocket which deliver a faster, cheaper, better solution than Web2 centralized counterparts, they are on the right side of history and macro forces and trends and this also applies to other Web3 projects that look at the current world and already understand there is better way to to do this and actually go ahead and build that. The great conversion of Web2 offerings into Web3 behemoths is certainly upon us.
XT.com: As blockchain networks grow, the trend towards node centralization is inevitable, but it is highly susceptible to single points of failure. What measures has Pocket Network taken to avoid node centralization?
Kevin O’Brien: That may be the case for some blockchain networks, but that is not the case with Pocket Network as the tokenomics encourage node operators to horizontally scale their nodes in order to capture more opportunities to randomly get chosen to participate in work sessions to serve applications and earn POKT (for that work). It’s full-node incentivization at work!
People are already running nodes across different setups from at-home bare metal servers to local data centers to multi-regional cloud providers. This minimizes single points of failure and the possibility of the network going down due to some unforeseen black swan event, like an AWS outage in one of the US regions.
We’re also seeing nodes distribute globally as new epicenters of application traffic emerge in different regions. These node runners race to deploy nodes to these locations in order to reduce the latency between apps and nodes.
XT.com: It has been four years since the inception of Pocket Network. Can you tell us about the achievements of the project so far，such as number of nodes and other on-chain data?
Michael O’Rourke: Node growth has been quite dramatic. Pocket Network grew from 589 nodes at the beginning of the year to over 19,490+ nodes today. That represents a 33.25x growth!
I expect nodes to continue to trace the relay growth as it’s a node operators’ best interest to horizontally scale their node operations (i.e more nodes) in order to capture more opportunities to serve applications in sessions since every node has the same chance of getting chosen no matter the size of the stake.
Relay (& protocol revenue) growth was addressed earlier.
XT.com: I know that POKT actually keeps increasing with the number of nodes verified. Does this cause serious inflation? What measures have you taken to address these issues?
Michael O’Rourke: The growth in nodes does not cause inflation.
POKT is minted in direct proportion to relays (API requests) driven through the network and served by nodes. 0.01 POKT is minted for every relay served and validated by nodes. This validates the POKT economic flywheel:
→ Better Service Attracts Apps → More App Usage Generates More Node Revenue → More Node Revenue Attracts More Nodes → More Nodes Boosts Redundancy → Better Service Attracts Apps →
This growth in relays has driven growth in protocol revenue.
As highlighted earlier, to reiterate, protocol revenue has grown on average 244.72% month over month since July 2021.
Since Pocket Network is still in its growth phase and only serving a couple hundred million relays per day, inflation isn’t really an issue at the moment, especially when the TAM across blockchain networks would be trillions (to quadrillions) of relays per day at this current stage of the entire crypto-industry.
Some community members are discussing how to cap inflation in the latest proposal PUP-11: WAGMI Inflation.
XT.com: In addition to Pocket Network, there are a number of decentralized solutions on the market today, such as Biconomy. What are the differences and advantages of Pocket Network compared to these competitors? (Compare in terms of efficiency, cost, etc.)
Michael O’Rourke: For starters, these other “decentralized solutions” are not considered competitors. Instead, consider them as complementary parts of the decentralized web3 developer stack. Each of these application-specific middleware protocols or “infrastructure legos” address a different layer of this stack: the Graph protocol is at the indexing layer, Arweave is at the storage layer, Akash is at the cloud layer, Livepeer is at the Video Transcoding layer, and Pocket is at the RPC layer.
To demonstrate this middleware composability, we encouraged developers to build projects that integrate both the Graph and Pocket during the ETHonline hackathons. For example, ERCgraph uses Pocket Network to get ERC20 data then the Graph to fetch Uniswap, Balancer, and Sushiswap pool information. More recently in ETHonline 2021: BlockHook, Proxy Poster, and Li.Finance Bridge Aggregator Analytics.
It’d be more appropriate to compare these decentralized solutions against their centralized counterparts. In this case, let’s refocus to conversation back to Pocket Network.
In the old paradigm, developers would go to Infura for network bandwidth. For example, for 1M requests per day Infura charges 225 USD (+250 USD for archival) per month to developers.
With Pocket Network there are no more monthly sunk costs (i.e. subscription IaaS fees). Instead, developers stake POKT once up-front on behalf of their application(s) for the equivalent network bandwidth that is accessible and consumable for the lifetime of that stake. At the moment, the relay per POKT ratio is 13.37 relays per POKT so it’d be an initial one-time (and recoupable) cost of 3116 POKT for the same 1M requests per day that Infura provides.
The longer an application stays staked and uses Pocket Network, the closer their costs approach zero. This economic concept is called near-zero marginal costs. After some time, the service basically becomes free.
It’s important to highlight that the developers can always unstake, then resell POKT on a secondary market to recoup their initial costs. Also, the Pocket DAO can push and pull economic levers such as the relay to POKT application rate at different stages of growth/maturity. This helps keep the decentralized RPC service (as a protocol) affordable to developers; and competitive against centralized RPC providers. For example, at launch, the relay to POKT application stake rate was 25k POKT for 1M requests per day then it was updated to 8k POKT for 1M requests per day and now 3.1k POKT for 1M requests per day.
By leveraging the tokenomics of these different middleware protocols, developers can actually expect to see massive savings without sacrificing the benefits that come naturally with decentralization.
12. RockTree: RockTree as ‘Decacorn Hunters’ have also invested into and helped grow projects like GRT and dYdX, now Pocket is being called by some as ‘the AWS of Web3” — firstly can you explain a little what that means and secondly what is common amongst these giants of crypto that you have identified?
Michael O’Rourke: Amazon Web Services (AWS) are obviously a massive global infrastructure and team with approx. 40,000 employees, Pocket on the other hand has approx. 35 employees and is a decentralized version of this albeit at a smaller scale but who have figured out the human incentivize layer meaning the marketplace environment and community or crowd however you want to call it are the ones who help solve the build out and rapid scaling of infrastructure over time. So teams can stay small relative to Web2 versions and the protocol itself and supporters become part of the infrastructure solution. This powerful insight in Pockets case where middle-men are being replaced by middle-ware gives dramatically different growth trajectories in a positive way as the heavy workforce and infrastructure costs are abstracted away and lean teams, with efficient technology can scale exponentially and we’re seeing that with Pocket who are absolutely crushing it with revenues of $29m in November, and now $56m just in December and on an annualized already puts them in the Top 5 blockchains in the world …ever… think about that. So with dYdx and others you mentioned they have that same quality of decentralization at its core and offer the tools and functionality for a community and marketplace to flourish, but it needs to be done correctly and all these projects have been able to execute on it in a high level way.
13. The market is still dominated by centralized infrastructure solutions, and some Web3 applications will still choose to build on the Amazon cloud. Which solution do you think will eventually become mainstream in the long run and why?
Michael O’Rourke: Over the long run, middleware protocols will replace these legacy middlemen rent-seekers.
In the old paradigm, middlemen companies extract value from users. In the new paradigm, users (developers/applications in our case) extract value from middleware protocols.
The old paradigm won’t be able to compete with the cost-effectiveness and other emergent benefits of middleware protocols like Pocket Network.
14. can you tell us about your partners?
Kevin O’Brien: I’d be more than happy to tell you about some of our most recent partners.
We partnered with Harmony to migrate over and handle a portion of their public RPC traffic. Since the Harmony ecosystem has been one of the largest drivers of traffic. You can see it for yourself on our community-built network explorer POKTscan →
https://www.poktscan.com/public/dashboard
We’ve also partnered with another blockchain Fuse to support their network. Both protocols’ DAOs executed a token swap to cover the cost of the network bandwidth. The FUSE network continues to be another top driver of traffic.
There has also been partnerships with DFDAO and Rocket Pool which have brought significant traffic to xDAI and Ethereum networks respectively. Also, Time Leap, EarniFi, Ferrum, Flowewrpatch, Wall Street Ninja, and DxDAO to name a few more .EthersJS and MyCrypto has been riding with us for a long time!
XT.com: What are your next new steps or plans in terms of marketing and technology? Can you please tell us about the project roadmap?
Kevin O’Brien:
● #redPOKT envelope rewards sweepSTAKE
● More blockchains supported
● More partnerships with / adoption by applications and protocols
● POKT token and farming app
● POKT <> wPOKT token bridges
● Pocket Portal improvements
● Pocket 0.8.0 protocol upgrade
● Pocket 1.0 specification
Our team ships. Stay tuned for more!
Thank you for your support!
XT.COM Team
December 28, 2021
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