Thank you a lot for the feedback! I agree, having these opportunities should be reason of excitement for the community, such interesting times for theHub. I think the answer to the question “why a token?” resides mainly in governance complexities and interest alignment. After consulting and studying TradFi businesses that EntryPoint wishes to mirror we understood how overwhelming the management of such a platform would look like. Blockchain allows for simplifications of processes and massive operational costs reduction, so by leveraging on-chain governance you can build extremely efficient (but more complex than ATOM’s) governance structures. This we couldn’t do without a token. Moreover, having your own token allows to have more flexible incentive mechanisms to align and attract experts and new participants in the community, without relaying on a broader platform like the Hub for day to day operations and constant governance activity (the Hub should instead act as a key strategic partner, not as a manager of each chain in my opinion). The value of the token will reflect the value created by the platform, as it happens in the majority of the companies around the world (where governance rights are not even there the majority of the times).
Thanks for the reply Matt.
I do think this product is something that could help bring in institutional capital into the AEZ and Cosmos at large. To be honest, I am still unsure of why this requires an appchain on day one, rather than a dApp that becomes an appchain as it scales.
I am familiar with SimplyStaking’s typical services and the overall commitment to the Cosmos eco. The AEZ and community pool SHOULD be used to align teams like yourselves - I want to make that point clear. I also believe the Hub should hold a much more significant position in Entry if this were to move forward. 10% of ENTRY and 100% tx fees probably wouldn’t provide upside of a venture-style bet, especially because I’m quite confident it would take years to see the upside materialize. I think 25% to the Hub (with 15% sitting in the community pool) with 100% tx fees and 50% vault/Mgmt fees would seem reasonable this early on in. The real value is coming from the vault fees, not the tx fees in my opinion.
With that being said, would you be able to provide some background on any institutional partners you have connections with that could help jumpstart EntryPoint? What would the first year look like in terms of adoption/next steps/integrations?
To drive this point home, if the team decided to pivot to a dApp on Neutron or Noble and gave a healthier allocation to the Hub/community pool, I’d reconsider my position as long as the valuation made sense.
The AEZ wants teams like yours here to foster growth - it just needs to make sense for both parties. Hopefully the community as a whole can find a middle ground.
Thanks for the reply, I’ll let Matt answer most, just wanted to clarify a point where you mentioned “this early on” most of the development on EP is complete, we are putting the finishing touches and verifying some code changes and should be going to Testnet / Start of audit in a month or so
Hard NO vote from us. Consumer chain economics must be figured out first. Small validators are essential for network security and cannot afford to vote yes for every consumer chain.
Smart contracts, liquid staking, and native asset issuance are core necessities. Duality DEX is debatable. Index token is unnecessary. Please launch on Neutron, or Noble after they onboard.
could you share a link, company information and where is the company registered? Are there CV’s on the website and lead projects?
People want to buy indices when they want to be safer. For crypto, most people choose BTC + ETH as the index, who wants to put $BNB, $XRP, $MATIC, or even $TRX in the index?
Thank you for all the effort, but honestly, your product has a low chance of success, and asking for a 2.5M amount is hard to accept compared to P2P or Stride team.
You should seriously consider Effort’s suggestion, reduce your requirements or change your product. Hope your effort is put in the right place.
Thanks for your reply Sereja, keep it blunt, that’s always useful. I will also be blunt and say that I am not sure I understand the second part of your message. Could you please elaborate on that?
On the issue of validator costs, this is indeed a real, important problem to solve. At the same time, if the Cosmos Hub does not build out a group of incentive aligned projects working together towards developing an ATOM economic zone while it waits for this problem to be solved, than it risks to lose much of its competitive advantage, especially if the solution takes over 6 months to be identified and agreed upon (I suspect it will take longer).
While this solution is found, one potential way of ensuring blockchain projects wanting to build within the AEZ can build while still being long term aligned with the AEZ is for the Hub to help fund the teams developing such chains and projects in return for some amount of native tokens of these chains. In this way, projects can start off their project as a standalone POS with very limited validator set while at the same time the Hub is ensured a significant say in the governance of these blockchains. We would be open to going down this route.
This solution will also give time to the Hub community to get a better understanding of the demand and revenue that is being captured on-chain and have a much better basis on which to define any agreement based on revenue sharing for providing the actual security when the time comes for the chain to make use of ICS.
The Hub would be leading the way in terms of blockchains funding each other, allowing teams not to have to rely on solely on VC funding. Not that VC funding is bad, but if the Hub has the means to fund these projects, why should it rely on 3rd party funds to take the lead in bringing these projects to life. The alignment of such funded projects with the Hub will be much greater than if these projects where initially backed by 3rd parties, since in this case, rightly so, the projects are more aligned with their initial backers.
Thanks again for your reply!
The process of managing indexes in TradFi is well understood, and while not completely straightforward, can be replicated through on-chain governance. We have developed a process for exactly this, based on discussions with various people from the field. I would love to hear your opinion on the process we developed.
This process relies on a number of working groups for specific fields, one of which is management of indexes. However, on-chain governance still has ultimate decision making power in ratifying the proposals of the working group. We do expect this process to evolve in the coming years, also as we discuss with experts from the legal field and regulators on how such a self-governing system can be regulated.
At its core, EntryPoint is a self-governing application specific blockchain and I personally think that it will be much harder to manage the project without a token.
This is one of the reasons why a token is important in the system. Another use of the token is to align stakeholders with the project, including working group participants (excluding the core contributors), liquidity providers and other potential partners.
At the same time, given you have such a strong opinion on this, I would like to understand your point of view better. What are your main concerns around projects having tokens? How would a team launch this project without a token? Who would fund this development? Should the Cosmos Hub not be involved in funding the development of an AEZ?
Re using the ATOM accelerator for funding is not ideal given that the ultimate decision on running ICS chains is in the hands of the Cosmos Hub community, so discussions should be had with this community.
Thank you for your reply!
Correct, the project is currently being self-funded and incubated by Simply Staking, a blockchain services provider active in the space for since Cosmos Hub genesis. The team working on the project is comprised of mulitple teams as my colleague specified in a comment above.
We expect the funds to be used to continue developing the product over the coming years. We would like to be cautious on providing extremely details plans around the development since such plans are hard to adhere while developing a project in its early stages within a very variable and dynamic market. But we can commit to providing the right level of reporting as we build out product, which will be imperative to keep the Hub informed.
Thank you for your reply!
I am happy to see that there are people in the community who understand and can get behind our vision and that financial primitives like Index tokens are important as the crypto space starts to mature. I suspect that in 3-5 years time this will also be clear to most of the market participants and the development efforts we make till then will bear fruit.
Thank you for taking the time to digest our proposal and seeing the value that we are looking to bring to the Hub. Also thank you for the kind words re Simply Staking.
While building a dApp can make sense for some applications, we have chosen not to go down this route for a number of reasons. We wholeheartedly believe in a vision of multitudes of self-governing sovereign application specific blockchains. This vision allows for the chain’s governance structures and technology to adapt to the requirements of the application being built, in this case index management and provisioning.
From a practical point of view, given that we have been building this application for some time and we needed to make use of features like the endblocker that were not available for CosmWasm smart contracts until recently. In the long-term, having full control over the chain’s stack is extremely important as we would not be completely reliant on the platform we are building on.
Finally, given that the Cosmos whitepaper was developed to address specifically the problem of applications requiring to be sovereign and not be developed on top of “world computers” it would be a shame to not build in line with this vision.
Having EP as a sovereign app chain is the only way forward. Besides the fact that we are on the cusp to getting to testnet, we have already build multiple custom modules to handle the complex trading logic. Further customisations are in the pipeline to allow for trading to occur in a fragmented liquidity market as well as other performance customisations.
Another important reason is that we are in discussion with regulators. Experience has taught us that any future regulatory approval requires command of the tech stack as the regulator may require specific customisations/measures.
Your proposal for adjusting the details of the proposed partnership between the Hub and EntryPoint is very welcome. I do not agree with the full extent of proposals, but we will take them onboard as we work on a draft proposal that incorporates all the feedback provided by the community.
A question regarding the proposed allocation to the Cosmos Hub, to whom should the 10% not in the community pool go to and why shouldn’t all of them go to the community pool?
Regarding institutional partners, after speaking to a good number of such entities mostly based in Europe it became evident that they require regulatory clarity around the DeFi products before they are able to provide liquidity. We understood this pushback and started approaching legal teams and regulators to understand how to bridge this gap. These discussions are still in their infancy and will take time to come to fruition.
Given the European MiCA regulations coming into force in the coming years, and the European Commissions’ indication that discussions on DeFi regulations also being in the pipeline, we have seen openness from the legal and regulatory space to work on finding solutions.
We believe that these solutions and associated clarity will lay the foundations for institutional capital to enter the space in full force.
Thank you for your reply!
As discussed in a comment further down, the company self-funding and incubating the project is Simply Staking. Links to the website can be found here. I would be happy to have a chat if you were not aware of us and want to know more.
Thank you for your reply.
Will focus on your first comments as other comments are tackled in other posted answers.
It is true that the fundamental value of some large crypto assets by market cap can be questioned. At the same time, investing in an index of large cap assets in the long term will always capture the average of the market, even if some of these assets end up not delivering. Such assets would have a small allocation within the index and will ultimately be dropped as the project loses value. While this is not always ideal, selecting specific projects only introduces selection biases and emotional decision making that index driven investment are designed to avoid.
Ultimately, as much as we can question today the fundamental value of let’s say XRP or MATIC, nobody know the future and how these project will evolve over the next 10 years. Many people question the fundamental value of BTC and of ETH and of ATOM etc, only time will tell what value these projects ultimately deliver over the next decades.
Looking great.
What about different phase of the project?
Did you consider having a vesting / locked token depending of delivering? TVL?
I didn’t get this point. How do you manage to make newcomer outside of cosmos come?
Same of how can it being sustenable ?
I don’t think that the (potential) solution in the case of the opportunity the AEZ is our only savior against the possible issue of stake centralization, etc. is viable. As in, IMO, the latter prevails.
The AEZ is, by far, not something that will be a game changer tomorrow. It will play a role, yet it not tomorrow and not the central role IMO.
I also don’t think POA is the answer here. Sorry, have to disagree again.
Teams don’t need to rely on VC funding. Any chain is (potentially) capable of allocating these resources via governance, which brings us to my “second part of the message”.
I was leading prop 26 in early 2020 As you can see, back then, along with the cyber team, we have long foreseen what is now referred to as the allocator / DeFi summer / etc. My biggest argument back then was diversification - the answer to “why does the atom community need this?”. And at peak (and even still) it would have been a very successful investment. Now, the prop was rejected, primarily by a few people that were followed back then. I must say, at least 2 apologized publicly for voting no. Of course, if that prop happened, cosmos would have been the first of its kind to do what we proposed, before even DeFi summer.
Now what is my point? My point after 11 years in crypto, including ICO experience in 2016 and much, much more, is that diversification is a key. To many things… Focusing the AEZ on the E that stands for economical and only on that is, IMO, a mistake. A mistake that will backfire in a long time from today in the shape of lack of revenue streams, lack of market share ownership and very specific citizens (users). I believe that the zone should be focusing on the E - economical from a larger perspective. Economy doesn’t mean just DeFi, that’s what I’m saying. It means good allocation and management of your resources. IMO, focusing on DeFi protocols only is not good resource management.
Sorry for the rant =)
I do appreciate the openness to feedback, after the Q&A (appreciate the invite btw) I had only a few concerns, but those mostly really only have to do with credibility of the professionals managing the indexes. But as to this point, I do see what you guys are trying to do very commendable and we do need indexes. My only feedback is the investment seeking of 2.5 million which is very high given the environment, the valuation based of quasar, and the token. Other than that I think you’re on a good path, and have the right mindset. It’s just my opinion at the end of the day, I don’t speak for the hub nor the validators. I think we need to see if you want to pass it 1. Less ask from the hub comp wise 2. Tokenization reconsideration 3. Realistic Valuation given the environment 4. Names and credentials of the fund managers. I think if you nail 3/4 it should pass with flying colors, look forward to our call this weekend God bless
I think you raise some valid points - the AEZ will certainly not be a game changer by tomorrow.
But how do you see the AEZ/Hub getting there without making investments that may or may not pay off later? It is certainly true that the Hub should manage its community pool with thoughtfulness and care. There are no guarantees to anything, though it seems pretty certain that the AEZ wont materalise along its vision if the community decides to play is overly safe.
The lack of revenue early on across the AEZ combined with validator costs does indeed pose a real challenge, true, which needs to be addressed in a way that at least allows validators to stay afloat while the AEZ is built out and starts producing serious value. However, I’m not entirely sure I follow this line of argument. Usually, it takes a while for new companies and such to start generating net positive revenue, no? At the same time, many validators have been making a lot of cash during the last few years.
At this early stage, I feel like the most important thing for the Hub to focus on is to onboard relevant chains that can create synergies amongst each other. As long as the Hub does not make large investments excessively As per Matthew’s post, this is certainly the case with index tokens, don’t you think?
Agree that diversification is crucial - but wouldn’t Hub (as a shareholder and perhaps user of index vaults) get that indirectly through a broad-market index? Not all tokens in the top 100 or so are degen DeFi stuff, right?
Thanks for the discussion!
ATOM has already proven itself as a store of value across the interchain. This doesn’t take much practice to notice. But if you have good analytical skills for the market and have seen some ecosystem cycles before, ATOM has it already (try seeing how much atom gets locked across pools and compare the incoming / outgoing assets to and from the interchain). That does NOT mean that we shouldn’t look at revenue streams for the hub. We should. As I pointed out above, I was one of the authors of the first such proposal from Cosmos. Certainly, btw, AEZ is not the best tool in the world. In fact, the amount of anti arguments that can be brought to the table are astonishing. And yet again - in the lack of other “alternative” streams - we have this, so let’s discuss it.
I’m not sure what else to add to the argument. I feel like it’s been stated, no sarcasm intended. I think that a) it’s not real diversification, b) the stake centralization issue and the potential security risks outnumber all possible result IMO.
The issue in the misunderstanding as I see it now is rather simple. Most people here, including yourself, argue from the point of profit. But, alas, a) there is no guarantee for it, b) the harm can be much, much worse, c) it seems ironic, that instead of slowly finding open market, web3 solutions (such as the hub investing into chains directly, without putting the pressure on the validators) - it seems that a lot of peopel woke up after the bull market finished and try to find a quick fix, ignoring all the signs of potential risks.
So, yes - we are saying the same thing. But our methods are different =)
Thanks for listening 
“How do you manage to make newcomer outside of cosmos come?”
Because in TradFi indexes have been an easy way for anyone to invest in a diversified portfolio without needing any prior knowledge = lowers barriers of entry by making investing more accessible.
In a similar way, crypto indexes can serve to onboard new users who are either unable or unwilling to deal with the technical complexities and time-consuming research of managing an active portfolio =)
The project is now in the final stages of development for a v1, with testnet planned for this quarter. Mainnet will depend on audits and ICS discussions. After mainnet launch we expect to launch a couple of vaults - a Broad Crypto Large Marketcap (S&P500 style) and a Cosmos Large Marketcap, while making sure the system is working well IRL and UX is fine tuned. Once the vaults are established, we will work on integrating Index tokens within Cosmos DeFi eg lending protocols and DEXes.
Re vesting, we were planning a 4 year vesting schedule with a 1 year cliff. You can find info in the tokenomics section of our documentation. We will be digesting community feedback and amending these if we deem it is appropriate.
Re onboarding users outside of Cosmos ecosystem, this requires work on multiple fronts. The broad crypto index token is best positioned to address the needs of non-crypto native and non-degens and we can focus awareness campaigns around it. Integration into existing non-Cosmos tooling such as metamask and other wallets will help grow adoption among that userbase. We see large projects like dydx go down this route and for good reason given the larger userbase. As said, this is a large endeavour and will require significant multifaceted effort that I feel is beyond the scope of a forum post discussion.
Long-term sustainability is directly linked to the on-chain revenue accrued from the fees charged by the vaults. These go directly to the blockchain’s treasury.