Kusama Parachain Auctions Batch 5 - Pontem Nox

Introduction

Testnets of testnets of testnets. The occurence of this phenomenon may seem strange to some people, but the bigger the main project, the less leeway there is for mistakes and problems. That's why big projects in general move so slowly. A delayed or a long testing period will always beat problems with an already launched project. These problems can range from displeased users to legal trouble or the end of the project itself. If you have a look at Kusama and what it stands for as being the canary network of Polkadot, this seems to be the inherent function of it. In my personal view, I prefer the dynamic approach projects like Composable Finance are trying; both parachains, the Polkadot one and Kusama one, act acta s independent entities with unique functions that complement and support each other, instead of one just being the testnet of the other.

What is Pontem Nox

As with a lot of other Kusama parachains, Pontem Nox is the canary network of Pontem. Pontem aims to be the experimental network for Meta's (formerly Facebook) Diem. From that I would conclude that Pontem Nox is the even more chaotic, experimental network for Meta's Diem.

Diem singled out four development challenges:

• Permissioned blockchain makes developing interoperability costly
• Siloed liquidity from permissionless crypto
• High barriers to entry with strict compliance
• High cost for finding product market fit

To tackle these challenges Pontem focuses on four broader topics:

• Sandbox for diem  - Discover Diem's potential. Pontem lets you validate ideas before porting to the Diem Blockchain.
• Multi-chain liquidity - Pontem uses existing bridges to connect liquidity and data from other permissionless networks to the permissioned Diem Blockchain
• Development FRAMEWORKs - Focus on user experience. Pontem integrates with a broad suite of developer tools and pre-built smart contract modules so teams can focus on their product, not blockchain infrastructure.
• Compatible with DIEM - Pontem Network is the easiest way to build apps for Diem, allowing teams to iterate quickly on a permissionless, incentivized network that is interoperable with the Diem Blockchain.

Pontem is a permissionless experimentation network that will enable and validate the technology and the product market fit via Pontem Nox and ensure compliance with Pontem via VASP framework. This will allow Diem to be technologically and regulatory ready.

So what is Pontem Nox bringing to the table? Why should people buy in? This is often the question if Polakdot projects use their Kusama project as the testnet. It's always interesting and important to have a look at the token they are rewarding crowdloaners with, as well as the inherent value it can create through its functions: Some of the initial utility features of the token are as follows:

• Payment of gas fees for the Move VM and transaction validation.
• Governance of network upgrades and features
• As rewards for crowdloans dedicated tot he participants of parachain auctions on Polkadot/Kusama.
• Staking (collators/nominators) and governance (rewarding voters and collators/nominators for participating in governance).

W3F Grants / Investors

Pontem was granted one W3F Grant.

With 16 investors and three heavy weights (Alameda Research, NGC Ventures and Kenetic) onboard, Pontem looks really well funded. Liquidity problems shouldn't be a challenge for Pontem.

Tokenomics

Pontem Nox offers 100.000.000 NOX tokens for crowdloan participants who help them secure its Parachain slot. 80% of the rewards are vested over the period of the lease, so this leaves 20% unlocked at TGE. The unlocking schedule is in favor of crowdloaners, as 85% of all liquidity at TGE is in their hands. The tokens of investors are locked for 6 months until they start to be vested on a 24 month time schedule. This model seems pretty fair to me.

Pontem Nox will reward crowdloaners at a fixed rate so you don't need to care about the KSM hardcap at the crowdloan. You'll receive a fixed base reward of 67,5 NOX. According to my market comparison sheet this means that 1 KSM would reward an average of around $1211 if NOX performs like previously launched projects. To be eligible for the rewards you must be whitelisted. You can start the process here.

If you register early to their whitelist you are eligible for a 30% early bird bonu, with an additional 10% possible if you are contributing before end of day three of the auction. For another 2.5% bonus follow this referral link: The rewards seem okay-ish and because of that Pontem Nox scores an average 17,50 points in crowdloan rating.

Although not having the greatest rewards per KSM. The tokenomics do look pretty solid. The allocation to Team & Investors is small and they have quite a big allocation to Community Initiatives and Adoption Programs. Because of that Pontem Nox scores a great 71,43 points in my Tokenomics rating.

In the overall Project Score Pontem Nox reaches a very decent score of 49,32 (Median 6,65). This puts Pontem Nox in the upper third of previously rated projects. Disclaimer: This spreadsheet favors strong tokenomics; in my view this is a good metric to give potential investors an easy to read indicator for how healthy and fair a project will work out in the future.

Concerns

While doing a deep dive into Pontem I found this FAQ. (https://pontem.network/posts/pontem-faq-general-questions) After reading it there were two questions which raised concerns with me: The first question is Q7: "Is Pontem partnered or contracted with Meta at all?" And the answer, unfortunately, is no. This means there are no legal or work relations between these two projects. Pontem is merely trying to create a good product for Meta that maybe Meta/Diem will at some point notice and invest into the product Pontem created. This brings an huge execution risk in my view, which is not adressed properly.

In Q10 Pontem answer the question what would happen if Diem fails: The answer is that Pontem will fail as well (at least with the model they are going for right now). To reiterate, this means there is an immense execution risk, but if it's working out you basically can invest here for cheap in a potentially Meta backed program. This seems to be heavy speculation with an incredible upside to me. To put some more emphasis onto this, the massive potential upside is comes with substantial risk.

Summary

From the first few normal categories I used to analyze Pontem Nox, the project looks like a mixed bag. The tokenomics are solid, albeit we don't know exactly what the community initiatives and adoption programs mean. So I would take the good rating with a grain of salt. The crowdloan rewards are not amazing compared to some other projects, but they aren't bad either. As I laid out earlier, the whole setup on which Pontem is operating is an extremely high risk play with the potential for extremely high rewards.. I wanted to bring forward my concerns with the Pontem team, but had no luck and basically got brushed aside.

Tip

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Kusama: EzVt5Z3pddR55HnS637AEqTutcxPDMKux2JzjK7pDG85Nmz

Polkadot: 13RBN6UF43sxkxUrd2H4QSJccvLNGr6HY4v3mN2WtW59WaNk

Metamask: 0xD7Da6c065fB6Ada5a9F2e8B2F88e84F4A63D0d93