Crowning the Next Big Airdrop King
EVMOS, ARBI, OP - Dump, Farm, or Buy
It’s not often three blockchains release, or tease the launch of, their native token within a single week of each other. After several early fumbles by the Evmos team, which included problems claiming airdropped tokens and eventually a chain halt, the testnet has been running smoothly and the relaunch is slated for as early as 4/26/22.
Optimism was the first and loudest of Ethereum’s Layer 2 chains, but has had a difficult time attracting new projects and teams outside of the Synthetix cartel. They’ve seized the opportunity to steal back the narrative from upstart Metis (and perhaps OMG/Plasma/Boba) with “community ownership and governance,” aka a token. Moreover, the discovery of the $OP ticker on Coinbase cemented the impending launch of an Optimism token.
Finally, Arbitrum, the strong and silent Ethereum L2 leader, has long been rumored to be launching a token later in 2022. Perhaps Optimism’s aggressive token launch plans have forced Arbitrum’s hand, when Steven Goldfeder tweeted a cryptic message alluding to a token:
In this article, I’ve developed a framework for thinking through how to compare these upcoming token airdrops as far as investible assets. Don’t get me wrong, I am bullish all three tokens ($EVMOS, $OP, $ARBI) after having interacted with the DApps and using similar software, so this is a relative comparison.
Finally, none of this is investment advice, and I do not have any inside information about impending token launches for Optimism and Arbitrum…this is purely speculation and an exercise in mental modeling.
In case you’re wondering, I see EVMOS with the highest upside of the three tokens, ARBI next, and OP bringing up the third spot. None of this is financial advice, and please read on if you’d like to understand how I arrived at this conclusion.
Current TVL
Evmos - $0. This is the birth of blockchain and all of the DApps. Evmos has big plans to expand, has many DApps deployed on the testnet, but won’t launch their mainnet until 4/26/22 (at the earliest).
Arbitrum - $2,210,000,000. The biggest by a wide margin.
159,000 unique wallets over the last 30 days. Also, 33% of Nansen’s “Smart Money” has assets on Arbitrum.
Source nansen.ai
Optimism - $518,500,000
41,500 unique wallets over the last 30 days. A much smaller portion of smart money, 13.3%, has bridged to Optimism.
Source nansen.ai
DApp Ecosystem
Arbitrum and Optimism share DeFi blue chip stalwarts like Uniswap, Sushiswap, 1INCH, and Aave. These DApps ensue liquidity for swaps, lending, and liquidity provision.
Arbitrum specifically has some exceptional teams building unique DApps like GMX, Dopex, Aboard, Premia, Rari Capital, Dodo, Treasure, and Vesta.
Optimism has piggybacked off the early mover, Synthetix, to bring in spunoff projects like Thales, Lyra, Kwenta, and Polynomial. Zipswap and Clipper are Optimism native DEXs, and a great team, Velodrome Finance (fromerly veDAO), is bringing a Solidly fork that should attract many new protocols.
Evmos plans tons of DApp deployments, all of which are offering airdrops to the JUNO, OSMO, and ATOM staking communities. This is an interesting user acquisition approach because it’s targeting Comsos natives rather than trying to bring in Ethereum-first DeFi users.
Interoperability
IBC - In theory, any IBC enabled asset (native token or LP token) could be collateral in Evmos. In addition, wrapped ERC20 assets can be bridged from Ethereum or other EVM compatible chains and used for collateral on DEX’s, money markets, or other Evmos DApps. This gets interesting with Cosmwasm implementation, where smart contracts can be used across different DApp chains. E.g. a yield farmer can access their LUNA-UST LP from Astroport (Terra) via Evmos’ money market instance as collateral for a DeFi loan. The capital efficiency enabled by IBC and Cosmwasm is still undervalued by the crypto markets. (I guess Layer Zero knew making a 10-minute YouTube video and getting a bunch of DeFi VCs to promote the narrative is how to win *shrugs*)
ERC-20/ERC-721/etc - The majority of EVM compatible tokens can be bridged to the L2s as collateral. I also anticipate OpenSea and LooksRare marketplaces to expand to L2s to save users gas. New DeFi innovation has already started migrating to L2s, and NFT minters will soon follow.
Composability
Evmos - Depending on the bridge infrastructure used, protocols may be able to work across both Ethereum, L2s, and Evmos. This would be really cool as it could save users fees and enable access to deep liquidity that exists on L1.
Arbitrum/Optimism - For the L2s it’s really anyone’s race. Aave is taking the lead by deploying cross-chain lending, and has deployed on both Arbitrum and Optimism.
Bridges
Evmos selected two trust minimized bridges, Connext and Nomad, as partners to get ERC20 compatible assets into their ecosystem. Nomad has raised a significant amount of capital, but does not have a token. Connext’s Hyphen bridge is one of the best in the space, and they recently announced their $NEXT token. These are seemingly good choices, but I’d lean to using Connext’s bridge over Nomad due to a proven track record for security and successful token transfers. This could be a really great second order effect for additional liquidity mining.
Both Optimism and Arbitrum built their own bridge solutions for easy token transfers into their ecosystems. However, getting tokens out via the native bridge requires a 7 day waiting period, so routers like Synapse, Celer, Hop, Hyphen (Connext), Anyswap, and others have created instant liquidity.
Tech
Evmos - The name “Evmos” is a concatenation of EVM (Ethereum Virtual Machine) on Cosmos. This is the first Cosmos app chain that enables easy liquidity and DApp migration from Ethereum (since the code is written in the Solidity smart contract language), to run on a Cosmos SDK. There are some advantages to Cosmos’ infrastructure, most notably speed, interchain security, and IBC composability. A drawback is the limitation of decentralization, as there are only a maximum of approximately 150 validators in the active set. Typical scalability/security tradeoff. Evmos must rely on the Cosmos development team to contribute, test, and implement new code for the SDK.
From a UX perspective, Cosmos works very well with Keplr wallet + Ledger, however, Evmos has had issues getting this to work thus far. It does not appear the Keplr+Ledger integration will be ready at launch, so users will need to use Metamask and a custom UI to claim their Cosmos airdrops. This is a bit messy and may cause frustration for some users.
Celestia has already reached out to the Evmos team to educate them on the benefits of scaling through a separate data availability layer. They are hustlers, and blockchain agnostic, but could be a viable scaling solution for non-rollup chains.
Optimism and Arbitrum are both Optimistic Rollups, but have subtle technological differences (e.g. Fraud Proofs are implemented on Arbitrum, but are in development for Optimism). Both have plans to increase transaction speed and reduce fees, which are currently higher than other L2s in the below chart. Arbitrum Nitro is on devnet and launching imminently. Optimism also has a roadmap to reducing fees through Calldata and compression. Long term, these L2s benefit from the security of the Ethereum chain, and will continue to improve their individual tech stacks.
The UX is exactly the same as Ethereum, where Metamask and Ledger work well, and your wallet address is the same as your Ethereum mainnet wallet.
Staking Rewards
Evmos - Validators are required to bond a minimum number of tokens in order to be part of the active validator set. Users can delegate EVMOS tokens to a validator of their choice and earn staking yield (emissions). APY will be very high until the token gets broadly distributed.
There will also be a race for teams to build up a warchest of EVMOS tokens in order to qualify for the top 150 validators. I expect pretty strong buy pressure from this phenomenon in the early going.
Optimism/Arbitrum - Unknown. It’s possible node operators who run a relay can earn emissions, but that’s TBD.
Liquidity and Liquidity Mining
EVMOS - EVMOS will have liquidity on Osmosis initially, as it’s the centerpiece for liquidity in the Cosmos ecosystem. The EVMOS/OSMO liquidity pool probably will be incentivized with dual rewards. Once DApps launch, multiple DEX’s will allow users to swap ERC20 assets (ETH and stablecoins) for EVMOS. CEX listings are unlikely in the near term due to a lack of VC holdings and low float.
OP/ARBI - Very likely Optimism and Arbitrum will pay for early CEX listings (see Cobie’s tweet below) for broad distribution of the token. In DeFi, the usual suspects (Uniswap, Sushiswap) will have organic liquidity (perhaps incentivized), plus maybe a curve ball, like Zipswap, for OP.
Token Utility
EVMOS - First of all, an exciting component Evmos carried over from Ethereum is EIP 1559 style burns for transaction fees. The critical difference is those tokens aren’t burned, they are redistributed as rewards to the smart contract deployer (devs) and validators/node operators. I love this as it promotes growth and rewards useful protocols and operators. I also see how this could be gamed with spam tx’s…something to watch. Evmos has thought through their tokenomics and it’s worth reading about in their blog.
ARBI/OP - Big question mark. Governance, yes, but so what? Transaction fees are paid in ETH, so this will be very interesting to watch. Both OP and ARBI have had the luxury of watching METIS and BOBA launch, and can see the pros/cons of a native token. A hybrid fee model where transactions are paid in both ETH and the native token might be interesting, but ponzinomics are important now for airdrops.
VCs
EVMOS - None, yet, but believe me, many a fund are knocking down their door. Tokens must be earned by validator rewards and are airdropped to users via Rektdrop, across Ethereum and Cosmos protocol users.
OP - Recently raised $150m at a $1.65b valuation
ARBI - Recently raised $120m at a 1.2b valuation, which is conceivably much higher now. The TVL was $10m at the time of the previous raise…a simple rule of thumb is to multiply the current valuation by the TVL ratio between ARBI:OP (4:1), so between $4.8-6b.
Airdrop Dumping
Evmos - A significant number of tokens were airdropped to OG Ethereum DeFi users, who may not care about the launch or success of Evmos at all. This implies two things: 1) They might not claim their tokens and 2) They may immediately dump them for ETH or stablecoins. I don’t see these phenomena as bearish because of the way the tokens are distributed and group 3) curious yield farmers who want to try out Evmos. The airdrop will require users to make several transactions to collect the full allocation. These activities are claiming, staking, sending tokens cross chain, and participating in governance.
Arbitrum/Optimism - There is a huge question mark about how many tokens will be airdropped, and to whom, for the L2s. Both projects have a large amount of capital backing them, which means it’s highly likely there will be pools seeded for incentivized liquidity mining. Market makers/VCs will be incentivized to support the initial price of the token.
Arbitrum’s significantly higher TVL and DAUs would imply a higher probability of the airdrop being gamed, where users created multiple wallets. This implies a higher likelihood for airdrop dumping.
Intangibles/Memetics - The “Ape Effect”
EVMOS - The excitement for Evmos has mostly been within the Cosmos bulls and IBC crowd. Ethereum maximalists don’t see Evmos as a good scaling solution/layer 2 due to security flaws and bridge risk, however, yield farmers are rejoicing for the opportunity to build massive TVL and mine new tokens. There will surely be a rotation play to take advantage of the plethora of token launches and co-incentivized yield farms.
Arbitrum - Tetranode, Tzok-chad, and the GMX Blueberries have built a strong meme army. One tweet or retweet from Tetra can move millions of capital, create a price floor, or crash a token.
Optimism - Kain and Synthetix are building a nice ecosystem for traders and structured products. Nothing too exciting, but the deep DeFi pedigree will attract TVL and users.
Valuation
EVMOS - Cosmos app chains are notorious for launching at somewhat low valuations. The most recent examples of this have been Osmosis, Juno, and Crescent, which all quickly increased TVL and grew market cap despite high emissions and airdrops.
Juno peaked at a $2b valuation with ~3 DApps and a huge governance problem
Osmosis has steadily grown TVL, peaked at $3.5b valuation and is now $2b.
Evmos could easily have a $2b FDV, even without any DApps deployed, purely based on hype, speculation, and the ecosystem potential. Let’s dig in a bit more:
EVMOS has 100m airdropped tokens, 100m in strategic reserve/community fund. Any unclaimed airdrop tokens will go back to the community fund for additional equity incentives.
So theoretically, there's a max circulating supply of 100m tokens.Let's assume 75% of airdropped tokens get claimed, making the liquid supply 75m + staking emissions from bonded EVMOS.
So 75m liquid supply ($400m circulating market cap) would put the price of EVMOS at $5.33.
OP/ARBI - This is extremely difficult until we know the circulating market cap/% of supply that’s airdropped and liquid at launch. We have a couple of analogues, Metis and Boba, other Optimistic Rollup L2s, to comp against.
METIS - $140m TVL, $230m circulating market cap
BOBA - $79m TVL, $212m circulating market cap
I would apply at least a 20% premium to both Optimism and Arbitrum due to their investors, budding ecosystems, and team reputations. The average ratio of market cap:TVL is 2.1 for the aforementioned comps, so we’d arrive at:
Optimism 2.1 X 518m X 1.15 = $1,305,000,000
Arbitrum 2.1 X 2,210,000,000 X 1.15 = $5,569,200,000
So is Optimism overvalued and Arbitrum undervalued? Perhaps…but these are my very crude models.
Completely Subjective Rankings:
1 being the highest and 3 being the lowest rank, Arbitrum scores the best of 27, Evmos comes in 2nd at 29, and Optimism third with 33 points. Think of it like golf scoring.
One way to interpret this is to assume your investment capital could be sized largest for the top ranked token (aka you decide to dump less of the airdop, or hold the entire bag). Don’t get me wrong, I expect all three of these to perform well over the next year, but capital allocation is very important for outperformance.
My personal rankings are slightly different.
EVMOS
Likely will have the lowest valuation at launch, but ample liquidity and incentives on Osmosis will attract investors
Significant EVMOS token hoarding by stakers and investors looking to build up EVMOS holdings in order to qualify for a top 150 validator spot
Mercenary farmers on Osmosis will need to buy EVMOS to earn yield
Rotators playing the EVMOS narrative
Newer teams and DApps have been deploying on non-Ethereum chains due to costs, for chain incentives/support, and to scale their userbase
Highest technical risk due to launch issues and reliance on Cosmos SDK
Highest upside volatility due to a lack of VCs
ARBI
Most vibrant and liquid ecosystem today
Proven tech stack and roadmap for reducing fees
Sustainable security from Ethereum base layer
Possibly undervalued based on TVL and recent VC raise
Lowest token volatility (assuming low float on launch)
OP
Growing ecosystem through BD and Synthetix effect. Velodrome partnership is big
Proven tech stack and roadmap for reducing fees
Sustainable security from Ethereum base layer
Possibly overvalued based on TVL and recent VC raise
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