The Evmos Token Model
A model for incentivizing alignment across all actors
The EVM is coming to Cosmos, and along with it is bringing battle-tested smart contracts, a brand new native token, and a glimpse into how the L1 networks of the future can evolve to distribute value more equitably across the stack rather than trying to capture it.
The Rektdrop introduction was an expression of how much DeFi and NFT dApps have changed the game on Ethereum. Gas is painful and prevents value from accruing to deserving parties. But if dApps drive the excitement, why don’t developers and users own more of the network tokens they produced all the value for? Can the devs do something?
The incentive systems and the token distribution model for EVMOS outlined in this article are the first step towards building an L1 that aligns — rather than alienates — stakeholders. Our vision for the network starts with the tokenomics and the devs doing something.
The EVMOS Token
Ethereum’s token is described in the whitepaper as the following:
“Ether” is the main internal crypto-fuel of Ethereum, and is used to pay transaction fees
This idea of fuel is compelling from the angle of handling blockspace scarcity. But we felt it could be expanded on with Evmos, specifically when it comes to driving greater involvement through balanced economics.
Wait, where’s the imbalance?
An L1 typically has three actors: Developers, Users, and Block proposers (Validators or Miners). Each have an important role to play in driving and maintaining value for any network, though many L1s have historically fallen short of accruing sustainable value equally across these actors. Typically block proposers accumulate the most shares of the network while users and developers — the most active participants — are left with less.
Evmos expects to rectify this imbalance and offer an alternative from the rent-seeking behavior seen of the past in fat protocols. Its network-level incentives will reward active users and redistribute transaction gas fees fairly among deployers of important applications and providers of critical network infrastructure.
We’ve seen other chains in the Cosmos ecosystem demonstrate how a protocol can do more to create a more balanced, self-sustaining economic machine.
EVMOS is not just a fee and staking token. It will be the first token on an EVM that drives governance outcomes for the EVM. But it also serves as a vehicle to determine future economic outcomes that align the three main actors (Developers, Users, and Validators).
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. The network is targeting the vast majority of tokens to be owned and controlled by everyone other than the team. Here’s what we expect it will be used for:
- Paying developers and network operators for their services via built-in shared fee revenue model (the dApp Store)
- Voting on protocol upgrades
- Registering tokens on the ERC20 module for EVM-IBC integration with ERC20s
- Allotting usage incentives for applications on Evmos
- Enabling precompiles for useful, high priority functionality
There will be no sale for premined Evmos tokens.
Token Release Schedule
Evmos will have an initial supply of 200 million tokens at genesis, split between the Rektdrop participants, the community pool and a strategic reserve.
Evmos is highly inflationary at the beginning, with over 300 million tokens being issued during the first year. Under the initial token model, the new tokens will be issued under an exponential decay schedule, where the inflation is decreased every year (365 daily epochs). The target will be to issue 1 billion Evmos tokens in 4 years.
We call this The Half Life.
This makes the long term of the network technically deflationary but we see Evmos as a token with an uncapped supply. We encourage the community to opt for an alternative inflation model after year 4. For example the community can propose a linear or constant model if the rewards are deemed too low.
Newly released tokens will be distributed in the following way, on a per-block basis:
- Staking Rewards: 40%
- Team Vesting: 25%
- Usage Incentives: 25%
- Community Pool: 10%
25% of the block emission is going toward a pool dedicated to incentivizing users.
Deferred Gas Rebates
Initially, the usage incentives pool on Evmos will sponsor gas payments for end users. The only constraint is that these incentives have to be less than the fees.
In order to incentivize smart contract usage on Evmos, the community will be able to register an incentive to a given smart contract via governance to leverage a portion of the Usage Incentives pool for a set amount of time. The distribution of these rewards will happen each epoch (1 week by default), so they are accumulated, deferred rebates of the fees paid. The intention for this is to distribute rewards to users of the contract such that it acts as a gas subsidy.
This is effectively a way for the network to decide which dApps get gas subsidies for their users, and token holders are best equipped to drive network usage toward these dApps. Think Quality-of-Service (QoS) protocols but it’s a governance controlled variant for blockspace, not internet service guarantees.
In the near future, the plan is to focus on usage incentives that would drive TVL (Total Value Locked), as it is the means for incentivizing surplus behavior in several places.
The idea would be to allocate Evmos tokens from the usage incentives pool to a contract where you would lock up your DEX LP positions, money market IOUs or other liquidity IOUs. (i.e. a UNIv2 LP position, an AAVE aToken/Compound cToken or Connext liquidity.) These are usually represented as ERC20 tokens.
The contract will be governance controlled so that token holders can decide what applications on the Evmos chain would be eligible for usage incentives farming.
This is effectively is a liquidity mining program that is linked to the base layer, but governance controlled. (think decentralized Avalanche Rush)
In 4 years, this will total 200 million Evmos tokens. The size of this pool is large because users are the backbone of any crypto project. For example, we could see the Usage Incentives being larger if governance decides that network would benefit from more user growth.
Evmos has fees that are priced based on network usage. Gas pricing is based on EIP1559. But instead of burning the base fee we redistribute and put that capital to work.
The dApp Store
In Evmos, fees are no longer just burned money or funds that only increase the network ownership shares of network operators. Evmos now splits fees as rewards between developers and network operators for their services via a built-in, shared fee revenue model. We call this revenue model/fee distribution The dApp Store.
It is essentially an app store model, where typically some revenue of app sales goes to app store operator and most of it goes to the developer. The difference here is that the network is an ongoing, active service where the network operator rents out much of the infrastructure needed to run a decentralized application.
It rewards developers based on the value and impact of their dApp, rather than their ability to spin up a new governance token and leverage connections to capital (retail or institutional). Those building on Evmos get a real stake in the growth and governance of the protocol itself.
This fee distribution will be implemented as a 50/50 split between contract deployers and validators at genesis and can be tuned by governance. To prevent spam, contracts that are eligible have to go through governance. Note that this works in tandem with the usage incentives geared toward gas subsidies.
Transaction fees on Cosmos chains are normally aggregated with the token distribution tokens and then distributed to validators and block proposers. Fees are not in the block distribution because they are variable depending on the activity in the network and subject to a gas price market.
IBC Relayer Fee Rebates
Relayers are a thankless job because they are merely a burn on a validator’s balance sheet. In Evmos, IBC transactions, specifically the UpdateClient and IBC Transfers are going to be rebated at least 50%.
Note that this is in parallel to the work from ICS-29 on relayer incentivization. The goal of this isn’t to serve as a direct replacement for the standard, instead it’s a way of thanking relayers for their ongoing services, as they are the only reason IBC can go from chain to chain. This altruistic behavior of relayers is exactly why the Cosmos ecosystem is building the most decentralized, well-run set of chains out there that we’re proud to call neighbors.
Validators and delegators are crucial to ensuring security of the Evmos blockchain and help with block proposing and verification. These roles could expand to provide oracles, secure bridges, provide rollup services to Celestia or other Evmos child chains, making them critical participants.
At genesis there will be 150 active validators which will be dependent on the amount delegated to each validator. The number of possible validators is subject to governance and can be adjusted.
40% of newly released tokens will go towards rewarding the active validators and their delegators proportionally based on the amount of Evmos tokens staked. Validators charge a commission rate to their delegators on staking rewards earned. Each validator may choose their own commission rate, but there is a network-wide mandated minimum commission rate of 5%.
In 2021, many apes made massive fortunes moving around their liquidity rapidly, but many people also got rekt in the process. We created the Rektdrop to reward active users of the Cosmos and Ethereum communities and stimulate the ecosystem.
By rewarding users for multiple categories rather than a single qualifier we believe this distribution will maximize fairness, avoid sybils and to select an initial set of token holders that would help the network thrive.
Rektdrop will comprise 80 million Evmos at genesis. The snapshot date for all Rektdrop criteria was November 25th, 2021 at 19:00 UTC.
We will be introducing a web portal so that you can see how many Evmos tokens you are eligible for. This same portal will also be used to claim your rewards by completing a set of actions once the Evmos mainnet goes live in the coming weeks. There will be separate announcement on the Rektdrop claims process that explains the work we did to extract data, tune parameters, the breakdown of the categories as well as how to claim the Rektdrop.
At genesis, there will be an allocation of 100 million Evmos set aside in a strategic reserve. This strategic reserve will be controlled by a multisig DAO owned by the foundation, initially composed of members from the development team and Cosmos community. It will be expanded in the future and will be transparent about its decision making.
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. This could include providing relayer services, building out explorers, maintaining open source tooling and deploying dashboards that show overall market growth on the network. The Evmos contributors value the idea of offering more to active participants in the network to funnel growth for everyone, including passive token holders. It will also be used to align strategic partners for the Evmos project through fundraising. Any fundraising through the DAO will be subject to vesting periods.
The DAO will ensure to not overstake to maintain decentralization of the network. The strategic reserve will not be used to market sell or control the network. The community will own more in the end since the reserve will be used up toward the public good. We’re hoping the token release schedule will result in more active players on the network other than the foundation.
The dream of Evmos was made possible by the Cosmos community pool. We wanted to make sure to have an active Evmos community pool so that others could push their dreams as well.
The community pool will be initially seeded with 20 million Evmos tokens and will continue to be funded by 10% of newly released tokens.
The pools funds are controlled by governance and should be accessed early. The expectation is that it will be used for bootstrapping important tooling, infrastructure, educational content and other resources. We also think that the community pool could be used for retroactive public goods funding (link to Optimism). Our software is also built on the tools of others such as Go-Ethereum, the Cosmos SDK, and Osmosis so requests for other builders is strongly encouraged!
In order to build a set of world class teams, 25% of the tokens per epoch are going to be issued to developers of the Evmos protocol. These 200 million Evmos tokens are subject to a cliff and are vesting. These will not be transferrable nor stakeable until they are released.
Token holders can determine whether or not they want to have the current dev team involved in the network and choose to reclaim any unreleased tokens from the dev team through governance and redirect them. We really want to work with the community to the see decentralization through and are committed to its long term success.
Genesis is only the first step toward a more balanced L1 ecosystem. Evmos is expected to evolve with its community’s needs; the iteration that launches on day one may not look the same as the Evmos six months, a year, or a decade from now.
This is true for the token model as well. While the first green-field deployments begin to take root, new features will be thought up to serve their needs and foster value creation. Incentives will be refined over time to ensure that all actors benefit sustainably well into the future. The community is able to steer the token models towards alternatives, all while the network is live.
Evmos is planned to go live in a few weeks. The airdrop will be claimable shortly after. Stay tuned, and follow along to get the latest details leading up to launch.
Your fellow incentive-aligned Cosmonauts at Evmos ☄️
💻 Developer Documentation: https://evmos.dev/
👾 Official Discord: https://discord.gg/trje9XuAmy
🐙 GitHub: https://github.com/tharsis/evmos
🕊 Twitter: https://twitter.com/EvmosOrg
📯 Telegram: @EvmosOrg
📄 Medium: https://evmos.blog/
🖥 Evmos Website: https://evmos.org
🌋 Tharsis Jobs Board: https://thars.is