The Bull Case For POKT

Retail sentiment is one of those ephemeral things that moves like the wind, and as the token price has dropped over the last year, it’s fair to say that sentiment has been negative. Fortunately, this can be reversed with positive progress and strong messaging. While many “solutions” to Pokt’s down trend in pricing have been offered, I believe there are only three factors that actually matter to the reversal of sentiment, and growth of the token value: sales/BD (demand), development/engineering (tech), and community/ecosystem (narrative support). Using those three parameters, I will illustrate why I believe that Pokt has a strong bull case for price growth THIS year, not next.

Sales / Business Development

Although CEO Michael O’Rourke outlined a shift to demand focus in the Q2 Stakeholder update last July, it took PNI’s business development team a little while to find their feet both with sales processes, and with what product lines they were going to focus on. The PAYG (Pay As You Go) product was pushed hard with the “monetized portal” narrative, but it didn’t end up being a sales catalyst to the degree that many of us expected.

What DID end up working well was the focus on enterprise class RPC users and large demand aggregators, in conjunction with new chain integrations, and the end of free public endpoints in favor of paid. Bolstering that effort was the addition of a strong affiliate / referral program. While reporting from PNI on sales results tends to be slow, Q1 finished strong with revenue growth that the entire community should find encouraging. Some highlights:

– PNI Q1 with strong growth in revenue (more to come in the Q1 report), most of it generated in March after the EthDenver conference, and despite losing two sales team members.

– This included a grant from Optimism ($120k) for public good services.

– A major RPC deal closed for 350 million paid daily relays.

– New chains are rapidly being integrated, including Velas, Oasys, Kava, Polygon zkEVM, and scroll, just in Q1.

– Two medium sized infrastructure partners (demand aggregators) were signed (Onfinality and GetBlock).

– Two new SDRs were hired to help generate leads, assisted by a strong sales push by the executive team also in Q1.

– Five referral partners signed agreements to help drive new leads.

– The team has developed a detailed sales strategy for Q2 based on industry targets and notable projects/companies in the space.

– PNI has a strong pipeline for Q2 with $200k in the contract stage and $750k in the proposal stage.

Additionally, PNI’s new head of marketing, Daniel Crowe, spent most of Q1 mapping out marketing strategies to be launched in Q2, which should result in growth in inbound lead generation, leading to even higher sales numbers by the end of Q2. Messari analysis is also scheduled to begin this quarter, which should lead to additional public / retail visibility.

PNI’s sales is a direct demand driver for the token as they have committed to using 60% of their RPC revenue for buying the token back from the CEX marketplace. Every single new sale they make is additional buy pressure, so all of the factors contributing to their sales growth represent opportunities for growth in token value. With the pending close of their reportedly successful fundraising round, PNI is poised to be the model for demand aggregators in the network (including gateway / portal operators). As each new demand aggregator comes online, this effect will be multiplied. Instead of dapps buying Pokt to stake individually, portal entities and other demand aggregators will be wholesale volume purchasers of the token to service their throughput needs.

Development / Engineering

It’s no secret that all eyes have been on the progress of v1 development for the protocol, given some of the issues that remain in the v0 version which limit the scalability, and still rely on permissioned architecture. One of the issues that has caused friction in the past is the lack of integration of the engineering team with both community contributors, and the ecosystem at large. Fortunately, PNI has been proactive in both recruiting community builders to assist in protocol development, and to report to the community at large on their progress.

The methodical approach to the upgrade should inspire confidence; Senior Product Manager Jessica Daugherty, working closely with Protocol Lead Daniel Olshansky, has pushed hard to keep progress moving forward, with a timeline that is considered a hard boundary, and delivery coming ahead of the deadlines. As of last check-in, the current status was as follows:

– The Protocol team has committed to their “must have” and “nice to have” features for testnet.

– 100% of the remaining must-have features are scheduled to go into dev in Q2 plus some nice to haves.

– The team is focusing on designing feature paths for stress, chaos, load, etc. testing.

– They have begun coordinating testnet GTM activities across PNF and PNI, and will share details by late May on what the incentivized testnet program will look like. They plan on doing a phased rollout and will begin to seek participants for the closed beta around this time.

PNI is working on hiring two more protocol engineers, and is apparently in closing talks with a familiar name to those in the ecosystem. Additionally, in a welcome improvement in coordination between PNF and PNI, they are forming a working group focused on expanding research into the token economics. Of particular interest (and an increasingly common topic of conversation) is the activation of the “ABR” (application burn rate), the mechanism by which dapp stakes are reduced during the process of minting noderunner rewards. Combined with the ongoing reductions in inflation and rise in demand, this will result in an effective supply cap, and parity in supply / demand mechanics within the marketplace.

Protocol chaos / stress testing is expected to begin by June, so I expect to see a number of major progress updates over the next month as we get closer to Summer. Noderunners interested in participating in the closed incentivized testnet should stay on top of attending the biweekly DevLog calls on the Pocket Discord, as all participants will have been selected by July. DAO proposals around the upgrade are expected to be published in September.

After what has felt like a long slog in the design and build of the v1 upgrade to the protocol, the rapid release cycle planned as the testnet rolls out will help drive excitement around the protocol, and provide plenty of fodder for crypto media mentions, especially in conjunction with Messari reporting. This increase in retail visibility should help to drive interest in token acquisition, especially if paired with growth from the all-time low as engineering progresses.

Community / Ecosystem

A common criticism of Pokt’s DAO early on was that it was too closely intertwined with PNI, the private for-profit company providing all of the development work on the protocol and portal. After a DAO vote last year fully separated the two entities, they’ve been working on untangling the shared responsibilities, and defining the future of the DAO with projects such as their POKT DNA initiative, which created a poetic statement of identity:

Pocket’s DNA is encoded in Unstoppable Open Data.

Unstoppable is a force.
It springs eternal and you know it when you see it. It’s undeniable.
It’s grit and determination that just won’t stop.
It’s resilience through adversity.
It’s a sovereign crypto network, decentralized on every dimension, built to stand forever.

Open means unlimited possibility.
It’s the uncapped potential of being optimistic and permissionless.
It’s participatory and welcoming, thriving through different perspectives and creating a true meritocracy.
It’s authentic and human, and it’s the impact and profound change that are possible when transparency and candor power collaboration.
It’s open source code you can verify and trust.
It’s an open organization and an open internet. It is web3.

The Foundation has spent its first quarter building out a roadmap for the future of the DAO, many in conjunction with initiatives already being discussed both at PNI and in the greater community. The priorities they plan to focus on in Q2 include:

– Decentralizing the gateway – true decentralization at the app stake level, not just GaaS, to facilitate more innovation on the demand-side and bootstrapping a multi-gateway ecosystem prior to the launch of v1.

– Protocol revenue – setting Pocket on the path to sustainable protocol revenue, sooner than v1, by introducing a gateway operator fee and burning the proceeds.

– Launching a PNF marketing function to serve the ecosystem – hiring a PR firm, hiring a Head of Marketing, taking ownership of the official website/Twitter, major upgrades to the website, and using the expertise of community contributors like PoktNews to improve and enhance the protocol’s social presence on Twitter and other platforms.

– Stewarding a reapproach on the creation of wPOKT, a wrapped ERC-20 representative token to provide access to DEX liquidity.

– Upgrades & programs to make Pocket’s community healthier, including upgrades to the forum/Discord, more frequent community calls, a well managed moderation team, and the rollout of Ambassador and Regional Hub programs to help propel the growth of the community and ecosystem.

– Upgrades & programs to make Pocket’s DAO more productive – Pocket DNA, GROW grants program, major trophy system overhaul, several QoL upgrades

This work will lead into the Pocket Network Foundation and the DAO taking the lead on protocol marketing while PNI focuses on Portal sales, and building out the Gateway as a Service program to allow for new gateway and portal operators to build up in the ecosystem. New gateway operators will themselves become the largest demand source for the token as they stake for large scale throughput, and become an ongoing demand source once the ABR is enabled.

Several of the larger noderunners in the ecosystem are already experimenting with standing up their own gateways, and I expect that most who have dedicated engineering teams will be exploring the possibilities. This change will fundamentally complete the missing side of the two sided marketplace outlined in the Pocket Network docs; while large noderunners have been a constant source of token sell pressure, the ongoing token needs of gateway operators and portal entities should finally provide the continuous buy pressure allowing for sustainable growth of the token value without the downward volatility which has been the hallmark of the market over the last nine months.

This progress will provide the greater Pocket community with something they’ve desperately craved during this market downturn: some actual good news that isn’t marketing fluff. And given the current low entry point, both existing and new speculators in the space are likely to begin eyeing Pokt anew.

While it’s difficult to even guess about the potential token value growth from here, we’ve seen countless times in the past five years how quickly positive retail sentiment can drive a speculative premium in token price. With a clear parity in supply and demand in sight, I expect to see increased speculation on the token ahead of those systems hitting economic stability. This range of volatility will likely provide tempting opportunities to traders interested in scalping profits on the way up. And since retail tends to follow market excitement, although it’s impossible to predict the future, I think it’s reasonable that we could achieve 10x-20x growth over the next nine months, with concentrated volatility and growth highest as we enter the public release of the v1 testnet.

If that thesis holds true, the next three to six months provide the single best entry point for investors looking to capture the upside of the next bull run.

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Disclosures: The author holds a considerable amount of the POKT token staked in a noderunning farm, and is not a licensed investment professional. This post is not investment advice, and solely reflects the opinions of the author. You should consult a licensed investment professional before making any financial decisions.