$EVMOS Valuation

Published in

Coinmonks

5 min readMar 2, 2022

So Evmos network is launching in a few days, though $EVMOS token rektdrop would still take some time. Before their tokens begin trading, let’s have a fun exercise and figure out how much they would be valued at launch.

Evmos is a network that integrates EVM and COSMOS, hence the name “EV” “MOS,” it brings the true interoperability between the two biggest blockchain platforms. Currently if you want to use $UST on Uniswap, you have to bridge your $UST to the Ethereum network first. But with the advent of Evmos, you can simply visit the Evmos network and one-click your way through the same procedure, as it is compatible with both ecosystems.

So how should we value $EVMOS? Let’s look at the tokenomics first.

The $EVMOS token supply is capped at 1B, the initial supply at 200M, and has an inflationary monetary policy over 4 years.’

The token is used for fees, votes, registering ERC20 tokens, deciding on incentive emissions, etc.; although $EVMOS has some distinctive properties from other L1 solutions such as incentive emission votes and dAPP stores, it is still a L1 token and should be valued accordingly.

I will implement two fundamental valuation models: the PoS Model by Viswanath et al., and the Network Model by Alabi.

The Network Model

The Network Model has a straightforward implication — a blockchain network has more value if there are more people in the network.

The Network Model, V(N) = value of the network, N = number of daily active addresses, other variables are just parameters

I used the model in my past analysis, so if you wish to read more about the model, please refer to the links.

Since $EVMOS is not released yet, I cannot fit the parameters for the market capitalization (MC) and the active addresses (N); instead, I will find the parameters for the Cosmos ecosystem, or $ATOM, and use the model as a proxy to value $EVMOS.

black = $ATOM price (actual), blue = model price

Using 20-day moving average to calculate parameters, and we get the graph above. The parameters are:

C = -0.0590
lambda = 0.0033
m = 3.0975,

and now we only need the estimate for the daily active users on the Evmos chain, and we can have the MC value.

We usually estimated the daily active users with the netoid function, but again we have no historical data for $EVMOS. Before making any assumptions, let’s look at the daily active users for each L1&L2 chain.

Cosmos Atom = 27K
Terra = 30K
Ethereum = 190K
Fantom = 14K
Avalanche = 21K
Polygon = 68K
Optimism = 1K
Arbitrium = 3K
(source = nansen.ai)

I have included L2 chains because I thought deploying Ethereum contracts on other chains were inherently similar to L2. Maybe not, but we need some starting point.

I decided on the active addresses on the Evmos ecosystem within 6 months of launch as 3K — it would drain demands from both EVM chains and COSMOS chains, and EVM chains include not only $ETH but also $FTM, $AVAX, ...; therefore I believe the traffic at the Evmos network would certainly exceed $ETH L2 solutions, but let’s be conservative and go with Arbitrium’s 3K.

Apply the model for 3K active addresses (or plug N = 3K in), divide by the total supply of 1B, we have

1 $EVMOS = $2.20

as our starting value.

If $EVMOS can catch 20K active users (~ $AVAX), it could grow to

1 $EVMOS = $15.66

he PoS Model

Model parameters

Pt : token value (in USD)
Yt : total tx (measured in USD)
k : consumer holdings, inverse of velocity
c : tax rate
gs : inflationary staking reward rate
rf : risk-free rate
gyQ : transaction growth (risk-neutral tx growth rate)

The PoS Model has much more parameters, but they are much easier to compute the parameters. For these variables, we do not have to use the historical data and statistical tools to fit them, we can simply arithmetically calculate them.

40% of newly minted tokens go to the stakers, and if we assume that 50% of the tokens are staked, the staking reward rate per annum should be

gs = 200M * 40% / (1B * 50%) = 16%.

Of course, the formula above is atrociously wrong as 1) $EVMOS has a supply cap, 2) inflationary staking rewards decrease over time, 3) did not take into account the circulating supply at the genesis, etc., but the errors are intentional to keep the model simplified.

For other variables, we have somewhat arbitrary numbers:

1/k = 1/4 = $ETH velocity
c = 0.002% = $LUNA tax rate
gs = 16%
rf = 17.8% = Anchor deposit rate
gyQ = 2% = chosen at random

The most important variable here is the Yt, or the transaction volume measured in USD. I mean, it’s nearly impossible to estmiate the tx volume for a network that hasn’t even launched yet, so we have to resort to poor proxies at best.

Below is the $UST volume bridge to the Ethereum network.

The bridged volume hiked two times in November and in January, thanks to $MIM though for different reasons, and have been decreasing since then. Lately the volume is $40M-ish, and let’s assume that about 30% of the $UST volume is transacted through the Evmos network.

Then we have the total tx

Yt = $15M, and we have all the parameters.

We have

1 $EVMOS = $2.76

Of course, $UST bridge is not the only integration that will happen on $EVMOS, so if we have $100M daily transaction volume for $EVMOS, then

1 $EVMOS = $18.41

To sum up, the model price for $EVMOS is

1 $EVMOS = $2.20 ~ $2.76 in the short term

1 $EVMOS = $15.66 ~ $18.41 in the medium term.

The models have been tainted with lots and lots of ungrounded assumptions, so please take the numbers with a grain of salt.

Anyway the EVM-IBC integration is what we truly wanted for the true interoperability and the true blockchain of blockchains, I am really looking forward to see the EVMOS ecosystem play the game.

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$EVMOS Valuation

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Written by HODL_GAP