Understanding Archway, the Value Capture Chain to be Sold on Coinlist

Understanding Archway and its Value Capture Chain, available on Coinlist.

CoinList will launch the Archway (ARCH) token sale at 01:00 on June 16th Beijing time, marking the beginning of Archway’s journey to capture value.

Archway is a native Layer 1 blockchain built on the Cosmos development components. In addition to the general functions shared with other public chains, over a year ago, the Archway protocol proposed the idea of “value capture,” whereby anyone who contributes to the protocol can receive value in return. The idea of capturing value is popular, and some protocols have attempted it through gas rebates and token redistribution, but to date the core problem remains unsolved, that Dapps cannot truly benefit and participate in the value capture of L1, and in proportion to the value they create for L1.

In March 2022, Phi Labs, the developer behind the Archway protocol, announced the completion of a $21 million seed round of financing, led by CoinFund and Hashed, with participation from 1confirmation, IDEO CoLab, Figment, Blockchain Capital, Wintermute, Chorus One, stake.fish, Lemniscap, Cosmostation, and Hypersphere Ventures. Griffin Anderson, founder of Phi Labs, has been a contributor to Ethereum since 2015 and served as senior product director at Consensys. Prior to founding Phi Labs, he was product manager at Ignite, a core development company of Cosmos.

What is a value capture chain?

Simply put, it is to benefit from the value created on Layer 1. Currently, the main beneficiaries of value capture on Layer 1 are miners, or large token holders/stakers, but Dapps that provide value to the on-chain ecology by continuously driving L1 value growth through user payment of gas fees, do not directly enjoy this value capture.

The Archway protocol contains a value capture engine, which appears in the form of several new modules added to the existing Cosmos SDK modules. The value capture engine enables developers to receive a portion of gas fees, a portion of inflationary tokens, and additional margins. In this way, developers will receive sustainable income directly driven by the value they bring to the network.

Dapp developers on Archway will receive income proportional to the value they create. Specifically, the value capture engine module enables the protocol to calculate the amount of gas generated by each smart contract in the Dapp, and directly allocate the earned token percentage to the wallet address of each relevant smart contract on a time-shared basis.

For example, if a stablecoin project is built using the infrastructure of Archway, the network will programmatically send ARCH tokens to its creator every time stablecoins are transferred. Additionally, whenever a contract is called by another contract on Archway, both the calling contract and the original contract receive ARCH tokens. This means that both the stablecoin issuer and the calling contract will receive ARCH when the stablecoin is used on another Dapp on Archway.

Project owners can implement these ARCH rewards in a variety of ways to improve the economic benefits behind minting, transferring, and burning stablecoins. For example, the stablecoin issuer can decide to put their earned ARCH rewards into a reserve pool, which can be used for certain DeFi operations through the issuance/transfer of these ARCH tokens.

Use cases for ARCH token

Use cases for the ARCH token on the Archway Network include:

  • Security: ARCH will protect the Archway blockchain through staking. Token holders can choose to become delegates by staking their ARCH to Archway validators, whose shared responsibility is to validate transactions and maintain network security. As a reward, validators and their delegates earn a portion of the token inflation.

  • Governance: ARCH will be the native governance token for the Archway Network. Holders will be able to propose chain upgrades, community decisions, parameter changes, and more through on-chain governance. Delegates and validators will be able to vote on proposals proportionally based on the number of tokens they hold.

  • Transaction fees: ARCH will be used to pay fees on Archway, which will be allocated to network validators and smart contract developers.

  • Dapps issuance revenue: ARCH tokens will be programmatically allocated to developers based on smart contract usage by block.

The Archway Foundation recently launched a grant program to support ecosystem development. The core team created Area-52, a free interactive online platform that teaches developers of any skill level how to build and deploy Dapps on Archway.

In fact, strategies that might have been successful in the early days of the cryptocurrency community are unlikely to work today, and most platforms compete similarly in many technical areas. To Archway, both users and investors want to understand the actual key differentiating factors in the operating model. In the long run, the existence of a financially fair model for all stakeholders may be a key factor in winning. A sustainable business model will provide continuous drive for the development of the community.