What Is Covalent? (CQT)
The Beginner’s Guide to Covalent CQT
Covalent is a software that aggregates data from several of the leading blockchain platforms, including Ethereum, Avalanche and Polygon, and allows participants to access these data points for a variety of use cases.
By fully indexing entire blockchains and accessing their data from a unified API, Covalent aims to capture granular information recorded within smart contracts that are not accessible with existing tools.
Thus, Covalent aims to make it easier for developers to gain a more complete, timely and accurate overview of the full blockchain ecosystem. Additionally, Covalent states that in the future, once all blockchain data has been indexed, users can also integrate private, enterprise data as well.
To achieve cross-blockchain data availability, the Covalent software allows users to create, validate, index, store, and retrieve granular levels of blockchain data. They are then rewarded for their contributions to the data querying process with Covalent’s native cryptocurrency, Covalent Query Token (CQT).
Covalent positions itself as a ‘no code solution’ which means no specialized, costly developers or complex queries should be needed to retrieve the specialized blockchain data users require while building their projects.
Who Created Covalent?
Covalent was founded in 2017 by Ganesh Swami and Levi Aul. The team has raised more than $5 million in two funding rounds from several investors, including Alameda Research, CoinGecko and Hashed Ventures, among others.
How Does Covalent Work?
The Covalent software can be used to index the entire history of blockchains, including every smart contract, wallet address, transaction and more.
This indexed data, regardless of its blockchain source, is normalized into the same format, which Covalent calls ‘block-specimens.’
Covalent enables users to query data from various blockchains through one unified API. A detailed overview of the Covalent Blockchain Data API can be found here.
In order to deliver greater access to blockchain data, various roles are needed for data retrieval, storage, and query processes:
- Validators ensure data integrity and accuracy as well as honest participant behavior. In order to become a validator, a user must stake CQT tokens and, if they act maliciously, their staked tokens can be slashed.
- Block-Specimen Producers compete to gather timely and accurate data from the various blockchains Covalent aggregates by running a node on those chains. Once blockchain data has been collected, Block-Specimen Producers publish the data to a storage node (which they can also run) and receive a CQT reward.
- Indexers race to produce and publish results to the Covalent network. Their job is to fetch the data, check the data for accuracy and publish these results to the storage network.
- Storage-Request Responders fetch the data requested by Covalent’s end users, wrap the signed request, and submit this information to the Covalent chain. Storage-request responders work directly with other nodes, allowing them to compare prices and capabilities offered by other network participants.
- Query Request Responders fulfill a similar role to storage-request responders on the Covalent blockchain, but rather than utilizing existing internal data maintained on the chain, query nodes mostly handle external requests submitted from Covalent’s API.
- Directory Service Nodes help Covalent customers find the ideal nodes that match the specific resource and capabilities that they require, at their given price point for a specific data request.
Why Does CQT Have Value?
The Covalent Query Token (CQT) is a Proof of Stake governance token with a maximum total supply of 1 billion CQT.
CQT has a variety of use cases within the Covalent network that give the token utility and value:
- Infrastructure Currency – CQT serves as the native currency of the Covalent network and participants can pay for their data requests in standard dollar figures using either CQT or stablecoins.
- Reward for Fulfilling Query Requests – Covalent’s business model is similar to many other e-commerce stores or web based service providers. Covalent states that they are responsible for managing the upkeep and operation of the larger platform, while enabling more nimble, individual service providers to meet customer needs and differentiate their offerings. Participants that are able to best fulfill Covalent user needs, with the fastest queries and at the lowest costs, receive higher rewards.
- Delegating – CQT holders can delegate their tokens to validators. This allows smaller token holders to still participate in, and benefit from, engagement with the Covalent network.
- Governance – CQT holders can propose, vote on and encode changes to the protocol. Covalent aims to provide token holders and service providers with a voice in the future strategic development of the platform.
- Data Analytics Applications– The Covalent software development kit (SDK) is also available for all developers to host their unique applications in a dedicated app store and receive CQT.
- Staking – By staking CQT on the network, validators are able to earn more rewards by providing utility to the network and ensuring honest behavior.
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Why Use CQT?
CQT may be of interest to developers seeking to create applications that need to aggregate data from different blockchains.
Additionally, investors may want to purchase CQT and add it to their portfolio if they believe that the Covalent team will be able to efficiently consolidate the cross chain data decentralized applications often require to operate and scale.
Decentralized application users may also benefit from holding CQT in order to utilize the aggregation services it aims to bring to market.
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