Our Investment in Archway — the Arch to Cosmos
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Today, we are excited to announce that Hashed has co-led the $21M strategic funding round investment in Archway, the Arch to Cosmos.
Archway is a general-purpose blockchain platform that allows developers to easily deploy smart contracts to the Cosmos ecosystem without the mandate to spin off a separate app chain. It natively supports all Cosmos building blocks and infrastructure such as CosmosSDK, CosmWasm, and IBC.
The Cosmos ecosystem has grown rapidly over the years as the decentralized network of app-chains. It encompasses vibrant ecosystems such as Terra, Osmosis, Secret, etc., and the successful launch of IBC last year further enhanced the interoperability among them. Although the flexibility and modularity of the Cosmos SDK-based app chain structure have enabled such thriving ecosystems, it has also led to a significant burden to the developers as they have to maintain the infrastructure to varying degrees to successfully support the proprietary features.
Archway intends to mitigate this burden by introducing a general-purpose blockchain that natively supports all of the crucial building blocks of Cosmos. Developers can now enjoy all the flexibility and interoperability of the Cosmos ecosystem without the burden to maintain the whole infrastructure stack. Archway also introduces a novel protocol revenue distribution system to further incentivize developers to build the next generation dApps with innovative designs. Let me go over this in more detail along with our investment theses, which are:
- An attractive twist of protocol revenue distribution that could tackle the fat protocol thesis in favor of creativity
- A well established team capable of fostering a developer ecosystem on top of the attractive building blocks of Cosmos
- Great synergies with the existing Hashed portfolios and the growing company building efforts
Protocol revenue distribution
As briefly touched upon above, Archway seeks to tackle the Fat Protocol Thesis by distributing the accrued fees and inflationary rewards to the actual dApps that brought usage and ultimately the developers behind them.
For layer 1 ecosystems, there is a tendency where the economic value generated by dApps (i.e. transaction fees) trickle down predominantly to the protocol, giving other layers only marginal profits to play around with. Consequently, there have been very few dApps that have established meaningful revenue models to effectively capture the network value to their native tokens.
We believe such marginal profit share was one of the major causes behind the general dependency on emission-based incentive structures that are susceptible to death spiral scenarios in bear markets. Many well-established projects have recently gone through exciting token model revamps acknowledging the shortfalls, but such upgrades are not applicable to many newer projects with less liquidity and usage.
In order to resolve this, Archway has natively integrated developer rewards consisting of gas fee rebates and inflationary rewards that will be shared with network validators, while also optionally allowing smart contract fees to be directed according to the developers’ discretion.
By providing more sustainable sources of income, developers will be able to explore different business models while distributing more value to the users. Some examples the Archway team foresaw were user gas fee subsidies, governance rewards for bootstrapping early communities, reducing the necessity to dilute the governance token to institutional investors, etc.
We are confident that more creative and effective models will be brought forth once developers start actively building on top of Archway. The team has already launched the incentivized Torii testnet for such experiments.
Well established competent team
The Archway team has spun off from Tendermint Core which has been renowned for its development capabilities. Other members also bring experiences from leading protocols such as AAVE, Polkadot, Maker, Metamask, etc.
As active maintainers of Cosmos SDK, the team is well-positioned to foster a developer-friendly environment advancing the existing building blocks of Cosmos, namely Cosmos SDK, CosmWasm, IBC, etc. The fact that the team consists of many senior developers is in itself a crucial competitive edge in this context.
Moreover, Griffin, Cofounder and CEO, has experience leading essential Ethereum infrastructure projects such as Truffle, Infura, etc. at ConsenSys, which will also greatly contribute to the team’s capabilities to build essential developers infrastructure for Archway builders.
Synergies with our portfolio and company building efforts
Hashed has ample experience in fostering layer 1 ecosystems, namely Terra, where we have connected great founders, bridged established projects, and even directly built on top of the platform.
Our dApp portfolios have been thirsty for more traction, and having early access to an ecosystem with great potential is a win-win situation for both the projects wanting bootstrapping support from the ecosystem and the early ecosystems that need more adoption. The fact that Archway, as a part of the Cosmos ecosystem, has many vectors to use UST also advances this synergy.
The same applies to our company-building efforts. The UNOPND team has already grown to more than 100 people building Web3 games, metaverse, DAO tools, etc. on top of our portfolios. We are excited to see these efforts converge to support the Archway ecosystem.
Looking Forward
As Web3 gains more traction, the industry must find new avenues of innovation to maintain the momentum. We believe Archway, with its team and protocol design, is well-positioned to provide fertile ground for new experiments.
Hashed will be closely supporting Archway along this journey.
