Cryptomeria Capital’s Vision of Covalent Network: Solving Long-Term Data Availability Challenges
In Brief
Cryptomeria Capital’s report on Covalent Network highlights its achievements, architecture, and future plans, highlighting its Ethereum Wayback Machine as a key player in addressing long-term data availability challenges.
Cryptomeria Capital has released a new report on Covalent Network. The report provides an in-depth analysis of the project’s achievements, architecture, and future plans. According to the research, Covalent Network has positioned itself as a key player in addressing Long-Term Data Availability challenges for the on-chain economy.
The project’s flagship product, the Ethereum Wayback Machine, makes historical on-chain data available in a verifiable and decentralized manner. Covalent supports over 225 blockchains and over 3000 paid API customers and crypto enterprises.
You can download this report right here.
Financial Performance and Growth
In 2023, Covalent’s first year of official business operations, the company brought in $600,000 from its demand-side structured data services, according to Cryptomeria Capital. The company’s ambitious target for 2024 is to double this revenue. The research also notes that Covalent has demonstrated growth and adoption by acquiring 300 million active wallets through the use of its data services.
Covalent’s Network Architecture Outlined in the Report
The Covalent Network’s architecture comprises key components such as Block Specimen Producers and Block Result Producers. Block Specimen Producers integrate with blockchain clients like Geth and Erigon to consume blocks, generate Block Specimens, and submit them to a storage layer. These producers then submit proof transactions to a Proof Chain contract, earning rewards in CXT (Covalent’s token) if validated.
Block Result Producers process the Block Specimens created by Block Specimen Producers. They re-execute Block Specimens using Covalent’s stateless-tracer worker to produce trace specimens, which are then published to the ProofChain contract along with content hashes. Like Block Specimen Producers, they earn CXT rewards for their contributions.
The Importance of Long-Term Data Availability
With Ethereum’s adoption of rollups and protocol improvements like Proto-Danksharding (EIP-4844) and state expiry (EIP-4444), the responsibility of providing historical data has shifted outside the Ethereum core protocol. This change underscores the importance of solutions like the Ethereum Wayback Machine.
The EWM ensures that historical Ethereum data remains accessible, verifiable, enriched, structured, and queryable. It uses a decentralized store (currently IPFS) to store long-term data artifacts sorted by blocks. The protocol involves various actors, such as delegators, validators, Block Specimen producers, and Block Result producers.
The report also discusses the utility of Long-Term Data Availability in various applications, including taxation, auditing, AI, and machine learning models, and regulatory compliance. For instance, in the context of taxation, comprehensive historical data allows for accurate tracking of transactions, ensuring precise and verifiable tax calculations. For auditing, accessing complete historical records is essential for verifying the integrity and accuracy of financial statements.
Covalent’s Ecosystem and Products
The GoldRush API, offered through the brand GoldRush.Dev, provides developers with tools for easy web3 development using structured on-chain data. The API spans over 225 chains, including Ethereum and Bitcoin, allowing integration of real-time and historical blockchain data into applications.
Covalent offers several add-ons, including the Transactions API, Wallet API, NFT API, Blockchain API, Cross-Chain Activity API, Security API, and GoldRush Kit. The GoldRush Kit is an open-source, modular block explorer kit designed to address gaps in existing blockchain exploration tools.
CXT Token, Staking Mechanism, and Buyback Program
Recently, Covalent moved its staking contract back to Ethereum from Moonbeam in order to enhance functionality and add new use cases. With the current surge in AI and modular solutions that need access to massive amounts of data, this shift is especially relevant.
New CXT delegation rules have been introduced, and there are plans to introduce a new role for light nodes. These mechanisms aim to increase network participation and enhance the token’s value. The maximum CXT delegation limit has been raised by increasing the multiplier from 27X to 34X, leading to 98.5% of the delegation room being filled within a week.
Cryptomeria Capital’s report also discusses Covalent’s buyback program, initiated in January 2024. The program uses revenue generated from the GoldRush API services to buy back CXT tokens, which are then distributed to network Operators.
This strategy aims to boost Operators’ income and ensure the persistent utility of the CXT token. The first buybacks managed to acquire over $100,000 worth of CXT from the open market in Q1 2024, with expectations of reaching $180,000 worth of CXT by the end of Q2 2024.
Future Development Plans for Covalent
Covalent’s future plans include expanding support to more chains, decentralizing various components, and integrating the Block Specimen Producers fork into clients like Nethermind and Besu. The network also plans to introduce query fees generated by Query Node Operators, which will feed back into data artifact production, enabling a semi-compute and storage-based revenue distribution.
According to this report, Covalent is methodically enhancing its token mechanisms and aiming to involve the community more. Positive signals for Covalent’s future include the financial indicators and strategic actions, such as moving the Staking Contract to the Ethereum mainnet and increasing the possible incentives for network contributors.
The report suggests that Covalent may make substantial progress by 2024, creating new and exciting business opportunities in areas like AI, DePIN, and modular solutions. In the near future, the ongoing development of services that can facilitate the lives of several new projects will likely result in attractive integrations.
Disclaimer
In line with the Trust Project guidelines, please note that the information provided on this page is not intended to be and should not be interpreted as legal, tax, investment, financial, or any other form of advice. It is important to only invest what you can afford to lose and to seek independent financial advice if you have any doubts. For further information, we suggest referring to the terms and conditions as well as the help and support pages provided by the issuer or advertiser. MetaversePost is committed to accurate, unbiased reporting, but market conditions are subject to change without notice.
About The Author
Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
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Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
