The Evmos token model: 4 things you need to know
Yesterday saw the most awaited “re-launch” of the year: Hello (once again) Evmos! After the team spent the last two months working on solving the issues that prevented the Cosmos’ EVM from launching in the first place, they are now live.
ZKValidator is already running a validator on this network, and so we wanted to take some time to explain the innovative Evmos token model. If you want to learn about it first-hand from Federico Kunze, co-founder of Evmos, you can watch him talk at our latest IRL event Privacy Cosmos here.
First things first, what’s Evmos? 🤔
Evmos is an EVM compatible Cosmos SDK based chain that allows developers to build Solidity based DApps and use Ethereum tools. The goal is to bring the rich landscape of Eth based applications to be redeployed within the Cosmos ecosystem. This connects them with the rest of the ecosystem through the Inter Blockchain Communication Protocol (IBC) and makes use of the speed and security of the Tendermint Core consensus engine. To put it simply, Evmos is bringing Ethereum to Cosmos.
Now, let’s talk tokens.
Inflation, inflation everywhere🎈
There will not be a cap to the total amount of tokens that could be minted. Initially, Evmos will be highly inflationary, with over 300M EVMOS minted in the first year and a whopping 1 billion tokens minted in the first four years. So, yes, inflation will be massive during the first 365 days of activity.
The tokens will be issued following an exponential decay schedule, meaning that the inflation rate will be reduced each year, eventually making EVMOS deflationary. However, after the first four years, the community will be able to change the model.
Over the first four years the newly minted tokens will be distributed, at each block, in the following way:
- Staking Rewards: 40%
- Team Vesting: 25%
- Usage Incentives: 25%
- Community Pool: 10%
Evmos token utility and the broken system it is trying to fix. ⚒️
According to Federico Kunze, the incentivisation model across blockchain doesn’t align all stakeholders in the same direction, since not all actors are getting the right incentives.
A clear example of this claim was the switch to the Ethereum Improvement Proposal (EIP) 1559, which unleashed a controversy between developers and miners, who saw part of their rewards evaporated to lower gas fees and create a deflationary model by burning the base fee.
Under the Evmos model, validators and developers are rewarded for being part of the ecosystem. These rewards will be distributed as follows:
- Developers will get a cut of the gas fee generated by the app they deployed. In this case, it is 50% of the base fee.
- Validators will get the block reward, the tip and the other 50% of the base fee.
The hypothesis behind this model is that it will create an incentive alignment, for the first time, between the entities running the network and the developers.
Sustainability first 🌿
Another issue Evmos is trying to fix with its token model is the vision for sustainable growth. As we know, there is no growth without users. However, it is common in many ecosystems to throw one-off growth programs, compromising a high amount of money to boost the ecosystem’s growth.
These one-off programs may boost the network usage for a while but will not create a long term sustainable usage growth. Moreover, they are not community-owned, which concentrates all the power on the foundation to decide which project receives the funds.
Evmos’ usage incentive program is similar to a regular cashback program. Think of the cashback on your credit card for a second. You get a small rebate for spending money; this creates a sustainable growth cycle for the credit card company or the retail shop offering the cashback.
Under the Evmos token model, developers and community members could propose usage incentives to grow dApps. Users will get a portion of what they spent on gas back as a reward at every epoch.
Then, theoretically, this will enable the infinite growth loop shown in the graph below, where all actors win.
All the Gas power to the people ⛽
As the last point, we wanted to introduce the answer to a question Federico received from the audience at our event:
Wouldn’t this model disincentivise devs from optimising the gas fee since they get a cut of the base fee?
According to Federico, that could happen, but the solution to that issue resides in the hands of the community. Since the base fee on Evmos is configurable, in the case gas fees are skyrocketing, the community can lower them through a governance proposal.
Why delegate your stake to us? 🥩
ZKValidator is a mission-driven validator; we validate to serve a greater purpose. Specifically we support the development of privacy solutions in the blockchain space by investing, mentoring and partnering with privacy-focused projects. We’ve been active throughout the Cosmos ecosystem, including recently running the Privacy in Cosmos events series.
If you want to stake to us, click here.
