Messari Summary Report on Covalent (CQT) Data Availability With Billions of Data Points

• Covalent (CQT) offers a Unified API that allows developers to reuse queries across multiple blockchains.
• The project has provided data to many crypto companies with a wide set of use cases, namely Consensys, CoinGecko, Rotki, NFTX, and Rainbow.
• As of December 2023, Covalent supports 210+ blockchains and plans to support more than 1,000 by the end of 2024.
• The Covalent Network is live with two critical roles: the Block Specimen Producer and Block Result Producer.

Overview of Covalent

Covalent’s Progressive Decentralization

Embarking as a hackathon project in 2017, Covalent has transformed into a leading blockchain data indexing engine. Originally supporting only Ethereum in October 2020, it now supports over 210 blockchain networks available for API queries. Backed by influential supporters and fueled by industry clients like ConsenSys, CoinGecko, and Rainbow, Covalent’s business activities have validated market demand, laying the foundation for the extensive data offerings accessible through its Unified API.

Network Participants

Covalent’s decentralized protocol involves multiple network participants, known as “operators”. Currently, two network operators, the Block Specimen Producer and Refiner are live along with staking functions. As of December 2023, 15 Block Specimen Producers (BSPs) operate, including notable names like Chorus One, Woodstock, StakeWithUs, and Meria. However, the BSP role remains permissioned during Covalent’s ongoing decentralization.

Meanwhile, the Refiner is a processing framework designed for scalable and verified data transformations. One of many possible outputs is a Block Result, a one-to-one representation of block data returned from an RPC call to a blockchain node with optional and additional informative fields. As with the BSP, the Refiner employs cryptography to ensure that the transformations are valid.

The other network operator roles that have yet to go live include Query Operators, Auditors, and Storage Operators.

• Before responding to API queries, *Query Operators* load the transformed data into local data warehouses.
• Each network operator gets paid for performing their roles after *Auditors* confirm each proof for a particular epoch. Before payment, a group of Auditors is randomly chosen from the total set of network operators to act as Auditors during the audited epoch.
• When Block Specimen Producers upload data to a storage instance, they can either run that instance locally or pay *Storage Operators* to run it. Storage Operators are expected to increase the data availability of proofs by loading them through IPFS and storing them locally.

Covalent currently manages these roles as it works to open them up to entities eager to participate.

Covalent told Messari that it plans for all of its network operator roles to be live by 2024. As Covalent decentralizes its protocol, the overall effectiveness of its decentralization will be revealed in the growth and activity of network participants like Block Specimen Producers, Refiners, and Query Operators.

Covalent raised roughly $15.71 million from one private seed sale, two strategic private sales, and one public sale. Private sale participants from sales in 2020 include Woodstock Fund, 1kx Capital, Mechanism Capital, AU21 Capital, Brilliance Ventures, TRG Capital, and CoinGecko. The 2021 private sale saw participants from Hashed, Binance Labs, Coinbase Ventures, Delphi Ventures, Hypersphere Ventures, and the entities behind Avalanche, NEAR Protocol, Elrond, and Moonbeam.

The Covalent Query Token (CQT) was launched on Ethereum with a 1 billion maximum supply with varying vesting schedules. Private sale participants received roughly 33.3% (333 million CQT), Team and Advisors were allocated roughly 16.4% (164 million CQT), and the remaining allocations accounted for roughly 50.3% (503 million CQT) of the max supply. As of now, all private and public investor tokens are unlocked.

CQT serves as a governance token for staking and settling payments with network operators. As Covalent decentralizes, governance is still in its early stages and requires manual intervention from the team. Improvement proposals from the community undergo evaluation by the team, with successful ones moving to Snapshot for a final off-chain vote. Covalent has held four votes on Snapshot as of December 2023, with the latest in September 2023.

While governance uses CQT on Ethereum, staking and payment settlement are conducted with CQT bridged to Moonbeam. Following a Stake-for-Access (SFA) model, network operators stake CQT for their duties and subsequently get paid. Starting tentatively in Q2 2024, payments will be made in USD-denominated stablecoins. These stablecoins will be used to market buy CQT to reward operators, potentially impacting the asset’s value dynamics.

Holders opting not to run operator nodes can delegate CQT to network operators, earning a variable yield based on staked CQT and operator commission. The yield includes inflationary staking rewards that incentivize network operator activity for up to four years. With sustained activity, rewards will transition from inflation to payments made to the protocol for querying Covalent’s API.

Final Thoughts

After years of servicing elite companies in the crypto space like ConsenSys, CoinGecko, and Rainbow, Covalent has iterated its Unified API to include a robust set of granular data with measurable market demand for a growing list of over 210 blockchains supported. As the world trends toward a multichain future, Covalent will be at the helm of the on-chain data indexer space. It’s set to offer users a secure, quick, and unified approach to querying data from parallel networks.

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