Covalent Investment Thesis

Covalent is a real-time data provider of blockchain transaction data to corporations, investors, consulting firms, and dApps that can use the data to study decentralized applications. Covalent solves a critical problem and is developed by passionate builders.

1. Introduction 

Data is exploding. 

Every company needs to solve the data problem to make business decisions. For three years in a row, the role of a data scientist has been named the number one job in the US by Glassdoor. According to a report by the US Bureau of Labour Statistics, the rise of data science needs will create roughly 11.5 million job openings by 2026. The World Economic Forum predicts that by 2022, data scientists and analysts will become the number one emerging role in the world.

Data science experts are needed in virtually every job sector, not just technology. In fact, five of the world’s biggest tech companies — Google, Amazon, Apple, Microsoft, and Facebook — contributing to over 52% of the world’s market capitalization globally, are the biggest employers of data scientists and engineers.

Solving the data puzzle will be even more critical for the new ‘The Internet of Value’ being built using the blockchain and the distributed ledger technology (DLT). Digital asset markets run 24×7, are highly volatile, and often involve interacting with multiple exchanges, blockchains, and protocols. This creates a mesh of really complex and fragmented data, which will grow exponentially in the coming years.

Fast forward to 2025, when Ethereum 2.0 (all 64 shards), layer-2 scalability solution like Polygon, Loopring, optimistic roll-ups, etc, layer-1 solutions like Elrond, Casper, Near, Solana, Polkadot, Harmony, Avalanche, and many more are all shipped and running and interoperable, there will be monstrous data to be handled and processed, which presents an acute need to have structured data capturing and analysis frameworks. 

2. What is Covalent?

Covalent is a real-time data provider of blockchain transaction data to corporations, investors, consulting firms, and dApps that can use the data to study decentralized applications. 

Covalent solves a critical problem and is developed by passionate builders. Both the problem statement and team capabilities play a major role in Covalent’s success because:

  • In the crypto: infrastructure layer, exchanges, asset guardians, and data projects are prominent solutions that experience user traffic in both bull and bear markets. Covalent is solving a perennial problem faced by builders on the blockchain. 
  • For any fundamental technology, it is natural to have periods of both bust and boom, and thus, we seek out teams that can survive in the bear market and flourish in the bull runs.  

Why we backed Covalent

Woodstock had been in touch with Covalent for over a year before we came on-board as investors. We were excited by the problem statement and witnessed the evolution of the product while it was being built by an exceptionally talented team. Here is a snippet of our thesis from 2020, behind backing Covalent:

  • Experienced team: Ganesh is an experienced entrepreneur, physicist, and data scientist and has been dabbling with data storage and management for more than a decade. He is well complemented by co-founder, Levi, who is shipping Covalent tech at a surprisingly fast rate. 
  • Market fit: As we see a flurry of layer-1 blockchains coming to life and Ethereum’s data getting more and more complex with the rise of DeFi, solving the data problem presents a massive opportunity for a protocol-agnostic data analysis and management layer in the blockchain architecture. 
  • Traction: Covalent already has strong traction in their category, with more use cases and partnerships in place than most of the layer-1 blockchains, with some of their partnerships still under wraps.
  • Competition: Covalent’s closest competitor The Graph is currently listed at a fully diluted network valuation of over US$ 8bn, as of 1-Jun-21. Covalent provides richer data than The Graph and is currently indexing more blockchains than The Graph.

Progress since our Investment

The capital from fundraising was put to great use and the team built relentlessly through the bear market. Our thesis was validated as the ecosystem embraced Covalent as the go-to solution for blockchain data indexing and querying. Here is a brief of how the project has progressed:

  • Team: Covalent’s team has grown to 25+ with experienced leaders across product, enterprise sales, developer relations, product/token marketing, research, and finance.
  • Market fit: The product has scaled 100x to 7+ blockchains and 100+ use-cases. Blockchains that are live today: Ethereum, BSC, Polygon, Avalanche, Near, Elrond, etc.
  • Traction: Top-tier projects like 0x, Zerion, ChainGuardians, Balancer, Shyft, TerraVirtua, and 100+ projects relying on Covalent
  • Competition: A lot more investment activity in the data layer and The Graph has ballooned to a US$ 8 billion network valuation. Covalent has a defensible moat.

As Covalent progressively decentralizes the various roles in the network, we will continue to support the project in a variety of ways, for example, Woodstock’s validator node will be an early validator. 

3. Blockchain Data Analytics Landscape

Blockchain applications and protocols are becoming interconnected. Value transfer across multiple exchanges, wallets, trades, financial products (loans, staking, etc) is happening faster than ever before. The amount of activities happening is on a meteoric rise. And it doesn’t seem to be pausing anytime soon.

Data Sources: Bitcoin blockchain data size, Ethereum blockchain data size and DeFi total users

The amount of data sitting behind all these activities is vaster than these activities themselves. This data is extremely valuable. From governments to financial institutions, investors, bankers, hedge funds, dApps, even the smallest player in the industry, are all eager for this data analysis solution. After all, rich data leads to better decision-making.

A lot of data is publicly available to everyone, thanks to the Public Decentralized Ledger Technology (DLTs) networks and protocols, whereas some are constrained behind permissioned systems. So, data in itself is not useful until it has three qualities, namely: 

a. Insightful b. Indexed c. Real-time.

What does data indexing mean?

Indexing means arranging the data in a structured format, cleaning values, making it computable so that operations on these data, and capturing insights become faster. 

Why do we need data indexing?

Indexing is a mechanism that reduces the time required to find a particular piece of information in a larger dataset. 

For example, instead of going through the whole book page by page to find a concept we’re looking for, we can find it much quicker in the index, which is sorted alphabetically and it contains a reference to the actual page in a book.

Books are indexed to provide information quickly

Data indexers, help developers decrease the search time. Instead of scanning the whole database table multiple times to provide data to an SQL query – indexes dramatically speed up queries by providing quick access to relevant rows in a table. 

Another example of data indexer

World’s most famous indexer

Well, in all fairness, Google does much more than indexing. 

  • It crawls Web 2.0 to find new pages
  • After a page is discovered, Google ‘indexes’ the page, that is, it tries to understand what the page is about by analyzing the content. This information is then stored in the Google index
  • Now, when a user types a query, Google tries to find the most relevant answer from its index

Indexing is a crucial part of making Google work and it enables the search engine to provide world class data to users all over the world.

What is the importance of indexing in blockchains?

Blockchains contain data. In order to find a particular piece of data, such as who owns the Dragon CryptoKitty one can:

  • Trust centralized data sources
  • Start from Block 1 and trace the ownership of the CryptoKitty till date
  • Use a query on an indexer to find the current owner, in seconds

Clearly, querying indexed data is the most efficient way to search for data that resides in blockchains. An API is the most common way to ask for data. 

API stands for Application Programming Interface. In non-technical terms, APIs are just standards/means by which anyone or any platform can make data accessible to some people or to everybody. 

Knowledge resource for APIs: Postman

Is blockchain indexing a one-time activity?

No, indexing is ideally an ongoing process and should be happening in sync with activities taking place on the blockchain in order to become reliable and real-time. Once data is indexed, further processes become much smoother and simpler.

Current Landscape

The Graph is an API solution when plugged into a dApp keeps feeding on the data generated on these platforms and indexes it back to the dApp Team. But there is so much more than the data generated on these dApps. 

Large volumes of transactions happening on Exchanges/OTCs are powered by institutional investors. Drawing insights to capture the best opportunities to invest/trade needs a network of data from multiple avenues to act together. DeFi activities involving loans, staking to earn rewards are taxable events. It involves P&L calculation and computation of returns at different times. Naturally, such financial activities attract the attention of regulatory bodies as they like to keep an eye on KYC/AML, etc. Especially with the ratification of FATF guidelines by the majority of the countries, it’s even more critical. 

The Digital Asset Data and Infrastructure firms are segmented into four primary verticals: 

a. Infrastructure providers, b. On-chain analytics providers, c. Market data providers, and d. Others. On-chain and markets data firms make up nearly two-thirds of the data owing to the broad reach of their customer base having a wider client base with retail consumers, financial institutions, and engineering teams.

Source: Woodstock Research

More than half of the firms in the above infographics were launched in either 2017 or 2018 which also coincided with the bull market of 2017. During that period a flurry of institutional firms entered the DLT space, a group that included the International Continental Exchange (ICE), CME Group, and Fidelity. 

The Ideal solution should be seamlessly: 

  • Real-time
  • Catering to a diverse set of use-cases 
  • Multi-chain
  • Dealing with specific granular data

4. Challenges users are facing

With the ever-growing market and complexity of digital assets, both investors and dApp developers face a few major challenges :

  • Understanding the intrinsic value and potential of digital asset investments
  • Difficulty in capturing a consolidated view of these investments
  • Time and labor-intensive data querying
  • Difficulty in drawing insights from the huge amounts of data
  • Problem with blockchain node software
    • Expensive – historical data takes huge storage & special hardware requirements
    • Slow – can query only a single object (block, transaction, etc.) at a time
    • Incomplete data – data inside the contract state are not visible outside
  • Quality of data
    • Data is segregated and often leads to false signals
  • Taxes and Compliance
    • All digital assets are treated as property in North America
    • Every transaction and swap is a taxable event
    • Prices to fiat currencies are volatile and it is a hassle to compute returns and taxes
    • Interest rates calculations

In a nutshell, blockchain data is vast and fragmented across multiple sources. Significant infrastructure and time resources are required, even to capture insights on one log of events when there exist millions of really complex activities. There is no guarantee if the insights are accurate even if the right resources are utilized. Computing returns and taxes from blockchain data is even more complicated pertaining to multiple events, owners, transfers, and volatility of these assets.

5. How does Covalent come to the rescue?

Covalent has built a data indexer and query engine that extracts data from blockchain platforms.

1. Data-Rich Solution
  • Covalent indexes the entire blockchain, thus, providing an exhaustive dataset
  • Information on 30,000+ price feeds, 7+ blockchains, and 25B+ rows of data
  • Complex protocol data like protocol fees, staking rewards, interest rates
  • Specialized in granular per wallet data analytics that enables complex logging of wallet balances, transactions, positions, P&L, liabilities, of each blockchain wallet
2. Covalent Software Development Kit (SDK)
  • It gives developers access to easily readable structured data from the blockchain
  • Overcomes the challenges due to existing blockchain node software
  • Instrumental in the development of over 20 DeFi protocols
  • Benchmark – 5 lines of code to pull out any piece of data
3. Taxes and Compliance
  • Zero-error tolerance in calculating tax liabilities for Inst. Investors (especially NA)
  • Simplified tracking of returns and taxes in complex DeFi transactions
  • Historical taxation of staking rewards at the time of distribution
  • Specialized taxation for accrued interest on protocols at the end of each FY

Covalent has indexed 7 different blockchains which is an effort between 6 months to 1-year time frame. Now that the indexed data is available, executing operations is much simpler. While aggregators and wallets are B2C solutions, analytics companies like Covalent are solving the B2B needs. Developers especially love Covalent because it’s just one character change to move between blockchains like Polygon to Binance Smart Chain.

6. Covalent Platform

Covalent is an ongoing indexed state of blockchain data with real-time updates with a latency of 30 seconds. This availability of data opens up a plethora of use cases and dashboards of insights of deep activities happening inside the blockchain. 

Covalent APIs
Source: Covalent Website

Covalent provides a unified API to all assets secured by a blockchain network. There are three classes of endpoints: 

Class AClass B
Endpoints that return enriched blockchain data applicable to all blockchain networksEndpoints that for a specific protocol on a blockchain
Examples:
Get token balances for address, get historical portfolio value over time, get transactions, get ERC20 token transfers
Examples:
Get Aave v2 address balances, get Aave address balances, get Balancer exchange address balances, get Compound address activity 

Class C will be a community driven market where users can create their own API endpoints for their projects and list them on the marketplace for others to consume.

As a part of their Proof-of-Education series, Covalent has released the Data Alchemist Cookbook which enables users to transform blockchain data into real value with no-code.

DeFi Focus

There are several DeFi applications relying on Covalent data feeds from multiple avenues like exchanges, liquidity pools, wallets, etc. That data is unstructured. The raw data is passed through the privacy and enrichment layer making it structured and generic to DeFi. It is then available through APIs for DeFi builders.

Source: Covalent Whitepaper

Alpha Alarm

Alpha Alarm provides daily DeFi visuals for all major blockchain networks.

This project showcases the power and simplicity of the Covalent APIs, coupled with deep analyses across multiple blockchains. 

Sample Analysis

In early March, Alpha Alarm focused on DEXs. The beauty of their analysis lies in the fact that the powerful insights were presented in a visual format for easy consumption by the masses.

Source: Alpha Alarm

A common complaint of the deFi community is that Uniswap gas fees are expensive. However, using Covalent APIs, the Alpha Alarm team was able to discover that on an average, gas fees are only about 0.5% of transaction volumes. 

Partnerships

Here is a glimpse of how Covalent’s APIs are adding value to projects:

  1. 0x uses Covalent to provide users with a list of assets present in their wallet 
  2. NFTX is able to build a user-friend gallery of the assets within their vaults using Covalent
  3. Zerion provides users with cross-chain Binance Smart Chain and Polygon data through Covalent’s APIs
  4. Balancer provides analytics for Balancer fundraising pools to users via Covalent
  5. Chain Guardians have used Covalent to power NFT dashboards on their platform which has features like displaying dynamic ROI for NFTs
  6. Shyft is working on KYC enabled liquidity pools and is using Covalent’s APIs to power the product
  7. Activate (by Consensys), will be entirely powered on Covalent for the network launches of the likes of Ethereum 2.0, SKALE Network.

Over 100 projects are building on Covalent

Future Offerings

Covalent plans to include indexing private data and private off-chain data

  • Currently, crypto loans are over-collateralized to cover the risk of defaulting on the loan. Since Covalent can build a repository of wallet addresses and their track record, they can build credit scores to enable under-collateralized loans bringing in more volume to DeFi.
  • Covalent believes in a multi-chain future with multiple protocols living across multiple blockchains. Each blockchain will require an indexing solution, and each project looking to live across multiple chains will require access to clean data. As the market continues to develop Covalent will continue to support more blockchains.

7. Ecosystem and Competition

Covalent positions itself quite differently in the market. While indexing is close to 30% of the work, the way one queries data and transforms data for specific use-cases is the major value addition. Covalent is not comparable in terms of its diverse market offering vs the niche solutions, most of the ecosystem is providing.

Competition Analysis

Covalent vs The Graph

The Graph decentralizes the query and API layer of Web3 for dApps. Developers build and deploy subgraphs, which describe how to ingest and index data from Web3 data sources for end-users who can however query this data to gain insights.

  • The Graph only serves dApps
    • Covalent offers its services to a suite of protocols and use-cases
  • The Graph is focused on 4 blockchains
    • Covalent currently has indexed 7 different blockchains
  • The Graph needs a subgraph to be set up which requires multiple days of dev effort
    • Covalent’s time to market is about 5-minutes with a no-code solution
  • The Graph requires a separate subgraph to be set up for each blockchain on which a project deploys. 
    • Covalent requires the developer to change the chain ID, and all of a sudden a product is multi-chain

In summary, at the time of writing this blog post, Covalent caters to more blockchain use-cases than The Graph.

The Covalent vs The Graph Approach

How is Covalent Different?

Covalent offers a wide range of rich data services that comes from indexing the entire blockchain. They offer market transaction data and complex on-chain data (like protocol fees from liquidity pools, staking rewards, interest income), granular per wallet data, and private data after indexing 7+ blockchains. Its prime focus is on crypto hedge funds, OTC desks, institutional investors, and exchanges.

CovalentThe GraphUnmarshalDuneNansenAlchemyChainalysisCoin Metrics
Indexing functionality
Historical Wallet Data
Market data
On-chain data
Individual wallet data
Scalable infrastructure
MarketB2B + B2CB2CB2B + B2CB2CB2CB2BB2BB2C
Compliance & tax management services
Non-ethereum chain data
Democratic Governance

Currently, Covalent stands out as a potential market leader in the sector, with high traction numbers, strong partnerships and a diverse customer base. They have built a strong leadership and core team which is shipping product integrations and capturing the market share at an incredible pace.

With their offerings, Covalent is uniquely differentiated. Their customers are diverse like Frontier, Uniswap, Coingecko, Security Token Exchanges, Autherium, Fund Managers, etc.

In a way, Covalent competes with everyone and no-one and is thus unique in its offerings.

Covalent Community

Covalent is backed by a strong community. They have engaged their audience with:

  • DeFi Behind The Scenes: a three-part video series that highlighted how Covalent APIs can be used to understand different DeFi projects. What is stunning about this short and informative series is that it was released in November-2019. Across blog posts, stakeholder letters, and video series, team Covalent repeatedly predicted the Summer of DeFi (2020).
  • Office Hours: are brainstorming sessions where Covalent discussed ideas for new products with the community. An example of these conversations can be found here.
  • Thought Leadership: Covalent has consistently put out extensive research pieces like Uniswap traction analysis, DAI and its velocity, DeFi user research on Set protocol & Gnosis wallets, and CryptoKitties adoption study among other articles. 
  • AMAs, Webinars, and Talks: hundreds of them.
  • Hidden Gems: in this podcast series, CEO, Ganesh Swami deep dove with engineers, innovators, and data analysts. Guests included Brecht Devos from Loopring, Aparna Krishnan from Opyn, Kyle Kistner from bZx among others.
  • Community Month: a four-week celebration of the Covalent community held in Feb-2021.

Moreover, there are three standout campaigns that had the data enthusiasts community abuzz with excitement for Covalent:

One Million Wallets
One Million Wallets campaign to celebrate the creativity and diversity of applications on Ethereum

One Million Wallets is a crypto-wallet design competition to celebrate the creativity and diversity of wallet-based applications on blockchains. People are diverse, and one wallet for everyone just doesn’t cut it. #OneMillionWallets empowers anyone from developers to creatives to build their own custom crypto wallet powered by the Covalent API.

To date we have seen thousands of wallet interfaces created for our network partners, NFTs, DAOs and many other use cases.

This campaign highlighted that Covalent is not only a technical solution, but also a strong business partner to have. One Million Wallets saw participation from 100+ teams building solutions for Covalent’s partners.

Dungeons & Data
DnD is a series of data science challenges, all enabled by Covalent’s powerful blockchain indexers

Dungeons & Data (DnD) is an industry-leading blockchain data science campaign with the purpose of empowering a wide community of ‘Citizen Data Scientists’, analysts, and enthusiasts to quickly and effectively analyze datasets with little-to-no coding. In the process, this community has created valuable data visualizations, apps, and case studies with partners like Aave, 1inch, Curve and Uniswap.

Alchemist Ambassadors
Alchemists will be key leaders in developing the Covalent ecosystem.

Through educational workshops , team building exercises, mentorship, challenging tasks, group chats and bi-weekly calls, these Alchemists have showcased incredible community-driven initiatives that will be central to building the new data economy. The first cohort saw 25 top-tier Alchemist OGs  selected out of a pool of 1000+ applications. April brought several more exciting updates where 525 new Alchemists were recruited, 20+ regional communities launched, and where Alchemist OGs have mentored 100+ Alchemists to step into more leadership roles where they are now managing teams of 3-6 individuals.

The program is continuing to evolve and have a life of its own. The third cohort has just officially launched for the month of May and has welcomed another 700 Alchemists to have a total of 1,300 Alchemists!

Through this program, Covalent is trying to bring inclusion in the field of data science by teaching people how to crunch data and draw insights from it. Here is a collection of articles written by Alchemists that cover topics like:

8. Brief Technology Review

  • Done an excellent job of solving the data problem by mirroring entire blockchains (transactions, states, logs) to databases.
  • Managing 80 bn records using Postgres partition methodology.
  • Disaster Recovery for the HUGE dataset.
  • Pagination and CSV export option for user-customized data analysis.
  • QueryInterface dashboard for users to build their own APIs and save them as endpoints for future uses.
  • Support for layer-2 solutions is in progress. Besides Ethereum mainnet, Polygon, Binance Smart Chain, and Avalanche are already live.
  • Planning to extend data-querying solutions to Cosmos and Polkadot.
  • Ubiquitous software architecture development – adding a new API or module doesn’t affect the existing modules.
  • All of the software’s Intellectual Property belongs to Covalent and the team has evaluated the open-source components with correct licenses and no liabilities.
  • APIs for major DeFi protocols with deep insights and analytics.
  • The first player to build a DeFi notification engine, an essential for DeFi users.
  • Working on patenting the Replay Tech built by the team.
  • Consistent Code for readability and uses Git hooks linter to make sure code remains readable.
  • 95%+ Test Coverage on the source code.
  • Integration tests on the current codebase are in place.
  • Performance Tests and Penetration tests are done every month.
  • Auto-scaling of backends through Google Cloud infrastructure.

The project has gone through security audits by Quantstamp and Certik.

9. Covalent Journey

10. Team

Ganesh Swami

CEO

Levi Aul

CTO

Adrian Jonklaas

CFO & Head of Research

Erik Ashdown

Head of Ecosystem

Harish Raisinghani

Head of Developer Relationships

Jacqueline Kim Perez

Head of Ops. & Token Marketing

Pratik Gandhi

Head of Marketing & Growth

The team is highly experienced in building and scaling startups. They also come with deep technical expertise in SQL, database management enterprise sales, developer relations, product/token marketing, research, and finance.

Ganesh (CEO) is a serial entrepreneur and a founding employee at Zymeworks. Ganesh studied Engineering Physics at Simon Fraser University and worked as a Software Engineer at a Biotech startup. He then moved his focus from Biotech to building web products instead and soon specialized in data analysis which led him to his first startup idea in 2013 and founded Silota in 2013, a software that helps companies compute key business metrics like retention, cost of customer acquisition, product adoption and In its last year, Silota experienced 10x growth.

Levi (CTO) worked on CouchDB at IBM and authored many open-source Erlang libraries. A CS graduate from the University of British Columbia. In 2010, he founded Peripia, a social operating system. In 2014, he joined Bex.io as CTO (Canada’s first Bitcoin exchange).

Adrian Jonklaas (CFO & Head of Research) holds an MBA from Baylor University and is a CFA charterholder. He has extensive executive experience across multiple ventures he has worked with over the last decade including starting a regulated security token platform in 2017. He is also a mentor at Futurpreneur Canada and volunteers to support affordable housing development.

Jacqueline Kim Perez (Head of Ops. & Token Marketing)  has been a part of the blockchain space since 2015 when she was a part of Victory Square Technologies, an incubator for emerging tech. She is the Cryptocurrency & Blockchain advisor at the Startup Canada initiative. 

Erik Ashdown (Head of Ecosystem) founded Indiloop. Most recently, Erik led the partnership’s efforts with Bidali. Fundamentally, Erik has strong experience in helping early-stage companies with great ideas succeed. 

Harish Raisinghani (Head of Developer Relations) has over a decade of experience in developer evangelizing. He founded Surrey Digital Academy which empowers people from all academic backgrounds to code. He was also the COO at Blockmason which built base-layer blockchain technologies for developers.   

Pratik Gandhi (Head of Marketing & Growth) has over 10 years of experience working with early-stage startups across the globe on the marketing and growth side. He has led growth functions at blockchain projects like bZx, Near Protocol, Terminal, BitClave, etc. He is an LSE and McCombs School of Business alumni.

Summary 

The Covalent team has over 100 years of cumulative crypto experience.

CEO Ganesh Swami and CTO Levi Aul have a combined expertise of 25 years building, scaling, and bringing to market forward-thinking products. They previously built the first business Bitcoin exchange in Canada and co-invented the fastest algorithms for protein-simulation modeling. 

Adrian brings additional entrepreneurship and product experience to the core team while Erik and Harish bring in the right ecosystem and developer relations that can be leveraged to scale to the project. Jacqueline’s expertise in token marketing and Pratik’s project growth strategies gives the Covalent team the right bench strength to scale their product.

Along with the deep expertise each team member brings to Covalent, they are also fundamentally aligned on the vision of making the project a resounding success. Adrian, Erik, Harish, and  Jacqueline have shared their Covalent journeys in blog posts shared on the website.  

11. Covalent Token Model

Covalent is launching its native token called the Covalent Query Token (CQT).

Utility 

  • Governance
    • Token holders vote on proposals to change system parameters such as new data sources, specific geolocations, and data modeling requirements.
  • Staking & Validation
    • Staked $CQT earns a variable 3%~20% APR based on the amount staked on the network. Validators will earn $CQT by answering queries. Token holders can delegate their voting rights to a validator. 
    • The staking economics is to reward validators for answering queries correctly and for meeting benchmarks. And penalties for slow queries and malicious behavior.

The token is not a payment token and users can access data without $CQT. When a user pays in stablecoins, a smart contract buys an equivalent amount of $CQT from the open market for network settlement. Today, the Covalent project is a traditional Software-as-a-Service platform like Salesforce. Their customers (exchanges, wallets, custodians, DApps, etc.) pay a recurring fee for using the API service. They will be moving that value accrual mechanism to the $CQT token through progressive decentralization.

Token Allocation

There is a total of 1 billion $CQT. 

The team has raised US$ 5.68 mn through Seed, Private Sale 1 and Private Sale 2 and they raised US$ 10mn via their Public Sale on CoinList.

Source: CoinList

Business Model

The business model currently is an on-chain SaaS:

  • Customers pay for API calls with USDC/USDT
  • The revenue will be accrued in the $CQT token
  • Validators get paid to answer the queries
  • Revenue collected from the API calls
    • Goes to smart contracts to pay to the network validators 
    • As an example, 10% retained earnings charged from the pool

Even prior to the token launch Covalent is generating a healthy cash flow. They had US$ 250,000 in sales in March-2021 and the value will start flowing to $CQT token with the launch of the decentralized covalent network.

The Covalent business team does the hard work to get one anchor customer in each vertical. The persistent, deep connections are then leveraged to land more customers in the vertical.

The data problem that Covalent is solving is extremely critical, and having already built a blockchain agnostic solution with the highest traction in their category, we believe Covalent has the potential to be a Top 25 project in the coming years.

Covalent Links:

Website Telegram AngelList Blog Github LinkedIn Medium Youtube Reddit

Sources:

Acknowledgements:

Thanks to Ankur Dubey, Nate & Carolin from Mintbase, Alex from Nansen, Ravindra from Frontier, and Joel John for their inputs.

12. Disclosure & Risk Warning

Woodstock Fund is an investor in Covalent and Unmarshal. Every financial product, asset class, or investment has risk. A cryptocurrency (also known as digital tokens, digital coins, or crypto(s)) is no different. That is why it is important for users to be aware of the potential risks present in cryptocurrency and blockchain projects. You should not invest funds in the cryptocurrency market that you are not prepared to completely lose; i.e., only allocate risk capital to digital tokens. Furthermore, we will not accept liability for any loss or damage that may arise directly or indirectly from any such investments.

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