TL;DR
EntryPoint provides benchmark and thematic indexes, allowing for non-custodial passive diversification backed by fully-collateralised index tokens. The project’s vision is to join the ATOM Economic Zone (AEZ) as a community-driven, decentralised, and self-governing public infrastructure with the aim of facilitating secure and easy onboarding for retail and institutional investors into the AEZ. Governance, including token whitelisting and index definition, is transparent, democratic, and decided by the protocol’s token holders. Through partnerships and synergies within the AEZ, EntryPoint aims to onboard new users, improve liquidity, increase the TVL, and strengthen the appeal of the Cosmos ecosystem as a whole.
EntryPoint’s Ask:
- Proposal for a long-term partnership with Cosmos Hub, involving a $2.5 million investment in EntryPoint
Cosmos Hub’s Return:
- 10% of EntryPoint’s token, $ENTRY (non-inflationary, fixed supply)
- Significant influence over EntryPoint governance and treasury spending
- 100% gas fees paid in ATOM
Open Letter
Dear Cosmos Hub community,
We, the core contributors of EntryPoint, write this open letter to start a conversation about the EntryPoint protocol and our vision to onboard it as a consumer chain of the Cosmos Hub. This letter is not an official proposal in itself, but aims to involve the community early on and gather feedback towards the upcoming official proposal.
EntryPoint is a sovereign, open-source, and permissionless Cosmos SDK application specific blockchain that provides benchmark indexes for the token economy, so-called index vaults, with fully-collateralised index tokens and non-custodial portfolio management. Our vision is to develop EntryPoint as a community-driven, decentralised, self-governing and self-sufficient public infrastructure project. The ongoing mission of EntryPoint is to heed the call of retail investors by offering a safer entry point into crypto along with a seamless user experience. By leveraging the core Cosmos technology developed over the past years, including IBC, ICQ and ICA, EntryPoint automatically trades with 3rd party DEXes, within the Cosmos ecosystem and beyond, to deliver fully-collateralised index tokens to its users.
EntryPoint’s index definition process and token curation structures are designed to be transparent, democratic, and community-driven. The management of Index Vaults, carefully curated sets of tokens that allow users to access passive, diversified investment portfolios in the new token economy, is a collaborative effort, with $ENTRY token holders collectively deciding on token whitelisting and new vault index introductions initially based on a one-token, one-vote principle. We will look to onboard experienced community members to an Index Vault Working Group to support the community in this effort, be it for backtesting, research or index proposals.
We believe that with the right foundational index management processes and open transparent governance structures that evolve over time, EntryPoint is well suited to address the needs of retail and institutional investors alike by embarking on a mission to provide this user experience in a regulated manner.
The implementation of Replicated Security marked a new chapter for the Hub and the AEZ, towards a vision of a thriving ecosystem of interconnected app-chains and decentralised communities, with the Cosmos Hub at the heart of the internet of blockchains. Given the Hub’s prominence across the interchain, we believe the Cosmos Hub community should be a key stakeholder in the definition of the benchmark indexes of the internet of blockchains and the provision of an essential financial primitive in any mature economy. In light of this, we propose a long-term ICS partnership with full commitment to the AEZ and we look forward to hearing what you think about this proposal.
Problem Definition
Witnessing the first consumer chains in Neutron and Stride being onboarded onto the Hub is an exciting and big milestone for the Cosmos community. Yet, as of today, the Cosmos vision requires both new users and far greater amounts of liquidity if it is to be realised. To achieve this, and ensure the AEZ thrives, it’s vital to understand and address the concerns of those deterred by the crypto industry’s perceived complexity and risk. Retail has a hard time keeping up and figuring out the tech, as do institutional investors who, in addition, require more stringent risk frameworks and a regulated point of entry.
Value Proposition
Passive benchmark indexes such as the S&P 500 have served a vital onboarding role in TradFi markets, and EntryPoint’s ambition is to bring the same rigour, best practices and simplicity to crypto; enabling users to access passive, broad market diversification, with minimal risk and opportunity cost.
Echoing the sentiments of Larry Fink, CEO of Blackrock, the world is indeed shifting towards passive investing, and this is a trend that EntryPoint is poised to embrace and enhance within the crypto space. He had this to say at the Dealbook Summit in November 2022:
Look, we’re in a world where people are moving more and more towards passive investing, and when you look at the growth of ETFs, that is the ultimate expression of passive investing…
So, I think ETFs will become more and more important, but they’re going to change. They’re going to become more actively managed. They’re going to become more customised. And they’re going to be more integrated with technology. And that’s where BlackRock is investing in its future.
This is precisely the trend that EntryPoint is poised to capitalise on. As the world moves towards passive investing, on-chain indexes and index tokens are emerging as the future of this investment strategy. Index tokens, in particular, offer users the ability to dictate their own risk tolerance, either passively holding or deploying them across different DeFi opportunities. They stimulate growth and diversification in the crypto ecosystem, holding significant potential in money markets by providing diversified, risk-adjusted exposure to tokenised assets. Recognised as valuable crypto collateral, they are suitable for DeFi lending and borrowing, assuring lenders of the collateral’s stability and liquidity. Furthermore, index tokens, with their broad market representation and liquidity, are an appealing choice for liquidity providers who can utilise them as base assets in AMMs helping to reduce the risks of impermanent loss while also allowing LPs to limit their exposure to the specific asset they aim to provide liquidity for (in respect to the overall crypto-market average).
The potential number and types of indexes is significant, but we believe that the most important index to focus on initially is one that captures as much of the broad crypto market as possible, similar to the S&P 500 or Total World Index in TradFi. Such an index would satisfy the needs of most users looking to invest in crypto. At the same time, providing such an index within the AEZ will significantly increase the inflow of liquidity from other ecosystems such as Ethereum, Avalanche and Polkadot, while showcasing the inherently cross-chain architecture envisioned in the Cosmos whitepaper.
To help garner trust of inexperienced crypto users and institutions, EntryPoint will seek to mimic and improve on the index concept and established best practices of TradFi, particularly with regards to risk management and through transparent, decentralised on-chain governance. This, in turn, puts it in a unique position to engage with regulators as it embarks on a mission to become a regulated on-chain financial service provider. A regulated approach to enable institutional inflows of capital also serves to address the need for liquidity in the Cosmos ecosystem. Based on ongoing conversations with fund managers, a simpler, regulated onboarding and more mature DeFi processes around risk management is critical to the future success of the AEZ and broader crypto ecosystem.
Altogether, this will allow EntryPoint to serve as a catalyst within the AEZ: facilitating retail and institutional onboarding, driving liquidity, boosting TVL secured by the Hub, while enhancing Cosmos’ visibility among new DeFi and Web3 users.
EntryPoint: A Product of the Cosmos Hub
The vision of an internet of blockchains, managed as public infrastructure by decentralised communities, has formed the basis for EntryPoint’s launch from the start. With the Cosmos Hub being the core facilitator of cross-chain trade via IBC at the centre of the internet of blockchains, we believe it would make a lot of sense to have the Hub and its community be the main economic and security partner to EntryPoint, and as a key stakeholder help define the benchmark indexes that can set new standards across the industry.
As such, EntryPoint can serve as a specific use-case from which we can start to understand how to move away from one-token one-vote, to bespoke governance structures necessary for the development of specific products and app-chains. The Cosmos Hub community has demonstrated its ability to reach social consensus on difficult and controversial topics. Thus, the Hub is well-positioned to play a key role in the development of these decentralised governance structures; to set a precedent for (self-)regulated digital public infrastructure and decentralised service providers.
Replicated Security provides the necessary security that risk-minimised benchmark indexes demand. By being a sovereign IBC-enabled Cosmos SDK chain, EntryPoint benefits from technical independence and leading cross-chain capabilities, crucial for the seamless provision of index vaults composed of tokens from across the internet of blockchains. Leveraging these benefits, EntryPoint is able to provide a seamless user experience similar to that of TradFi, alleviating users of the burdensome task of constructing and managing their own token portfolios.
EntryPoint and the Cosmos Hub: a Strategic Alliance and Long-term Partnership
@Lexa spoke of a long-term relationship between the Hub and its consumer chains, “an investment that may not pay off until later”, and no wonder. Innovation is rapid, regulation looms large, and the future remains uncertain. Nor is everything around Replicated Security crystal clear. At the end of the day, code is open-source and chains are well-validated, sovereign and free to choose their own governance and security.
Given this, we propose a strategic, long-term partnership, wherein the Cosmos Hub invests $2.5 million into EntryPoint (approximately 268,817 ATOM as of 2023/06/30, with the spot price of ATOM being $9.30, and the Hub’s current earnings standing at 300,000 ATOM per month) in exchange for a 10% allocation of EntryPoint’s non-inflationary token, $ENTRY. These funds will be channelled towards advancing EntryPoint’s development, from a technical, business and regulatory perspective. The specifics of how this proposed partnership will be executed will be explored in detail, subsequent to gaining an understanding of the community’s views on our proposal. At present, we suggest using Timewave-developed infrastructure to facilitate the proposed partnership.
While groundbreaking, we believe a blockchain to blockchain investment provides much greater alignment than a VC to blockchain relationship ever could, and lays the foundation for an economic relationship that extends beyond a mere service agreement. We’re inviting the Hub to have a seat at “the board of directors” of EntryPoint, so to speak, as the early lead investor of this fundraising round, and join in a durable alliance that together can help realise the AEZ vision, irrespective of future uncertainties. This partnership would grant the Hub significant influence in governance, including how EntryPoint’s treasury should be spent. Ideally, we see treasury spending as being a matter left in the hands of governance, but can also envision a situation in which part of this revenue is earmarked for Replicated Security payments from the start.
Likewise, the Cosmos community would have a vital role to play, both as contributors of the EntryDAO and as community members overseeing the development of the protocol. Related to this, the 33,500 ATOM previously allocated towards the EntryPoint project as part of proposal 72 will, in addition, be used to onboard relevant, specialised expertise to the EntryDAO working groups and propel the vision that EntryPoint has put forward in its constitution and governance documentation.
Revenue Model
The management of EntryPoint’s benchmark indexes by its community sets the foundation for clear revenue streams not linked to transaction fees or token inflation. In fact, the various participation fees of index vaults, such as streaming fees, entry and exit fees, accrue directly to the protocol’s community treasury, which $ENTRY token holders directly manage, including the Cosmos Hub. In this manner, EntryPoint’s initial revenue model is directly and clearly linked to the platform’s Total Value Locked (TVL). As revenue should first and foremost be used to drive the project forward, this may come to include paying for ICS fees. Future adjustments may be made based on on-chain governance proposals, in which the Cosmos Hub would play a major role.
In addition, 100% of gas fees accrued on EntryPoint, denominated in ATOM, will go to the Cosmos Hub. As EntryPoint grows and market conditions evolve, potential additional revenue streams may be introduced, pending governance approval. These could include partnerships with synergistic protocols, and refinements to traditional finance (TradFi) revenue models. In the future, as on-chain activity increases, MEV, especially cross-chain MEV, could also become another important source of revenue. For reference, a variety of potential scenarios and future revenue projections are illustrated below.
Tokenomics
Please note that the current version of the EntryPoint whitepaper does not include a dedicated section on tokenomics; however, upon ratification of this proposal, a pull request here will be enacted to integrate a comprehensive tokenomics section into the whitepaper to ensure complete transparency and understanding of the project’s economic model. At this stage, we’re open to feedback
Distribution
EntryPoint’s tokenomics model involves a fixed-supply token, called $ENTRY, with a vesting schedule to promote alignment, managing token circulating supply at an early stage and balancing voting power. Under a Cosmos Hub partnership, the following $ENTRY token distribution is proposed accordingly:
- 10% - Cosmos Hub (lead partner)
- 10% - Other partners
- 20% - Core contributors
- The core contributors from Simply Staking, as well as advisors working on EntryPoint, are dedicated to leverage the latest Cosmos technology and provide the AEZ with a product that can help bring new liquidity into the ecosystem, targeting users who require regulated products to feel safe participating in DeFi. Over the coming years, the team will also be able to focus on important infrastructural, technical and governance related to the evolution of the AEZ, e.g. IBC, ICQ, ICA, cross-chain voting and DAO management.
- 10% - EntryPoint Foundation
- 50% - Community Treasury
- The exact distribution of these funds will be decided by the governing community, which will have an impact on voting power as more tokens are distributed.
You can find a more elaborative version of the proposed, but yet to be finalised, tokenomics here.
Final words
First of all, we want to thank you for your involvement. We deeply value the Hub community’s support as we navigate this path together, and are excited to see what we can achieve together. The yield of the discussions here will be taken onboard and considered in preparation for EntryPoint’s forthcoming proposal, which you can expect to see in 10 days.
If you’re interested in learning more about EntryPoint, you can check out our website, read our whitepaper, explore our docs, or visit our blog.
If you want to get in touch or start contributing, we encourage you to join our Discord, or contact us on either Twitter or Telegram. We’re always happy to chat and answer any questions you might have.
EntryPoint’s core contributors wish to acknowledge and thank Stride, Neutron, Skip protocol, Imperator, SG1, ZKV, stake fish, notional DAO, Informal, ICF, Chorus one, Everstake, cosmostation, Chainlayer, Lexa (Hypha), Timewave and CryptoCito for their valuable feedback. Your input has been greatly appreciated.
DISCLAIMER This letter does not constitute investment advice, nor any promises, offers, guarantees, representations or warranties, and includes speculative forward-looking statements about potential post-launch capabilities of EntryPoint.