Adoption at its core

Ideally speaking a healthy token economy is one where actual network usage leads to an increase of token price. Adoption should be the number one determinant for mature blockchain projects. To exemplify this we take a look at the stakeholders currently present within each blockchain project (image 4).

image 4: common actors and stakeholders in blockchain

Mature blockchain projects interfere in this landscape by discouraging the amount of strong passive stakers and encouraging active network participants. These can be validators or clients using the network.

LTO Network is one such an enterprise that attempts to provide a solution between the disconnect of network usage and token value. LTO consists of both a private and a public blockchain. The private layer of the chain creates value from a business perspective and it is this part of the chain that direct clients of LTO use. Then there is a public layer, which represents the private layer from an economic perspective — the token value of LTO.

LTO tries to incentivize ‘Joint Business Builders’ — the actual enterprises using LTO — to run a node on the LTO network. In order to do so however they need a stake in the form of a set amount of tokens. Two problems arise however:

most companies cannot buy or own tokens for a number of reasons. most blockchains do not incentivize network usage but rather the holding of a set amount of tokens

LTO solves both problems by introducing a new consensus algorithm and splitting token holders from end-users.

WAVES and NEM combined — Leased Proof of Importance

LTO’s consensus algorithm Leased Proof of Importance (LPoI) builds upon WAVES’ Leased Proof of Stake (PoS) and NEM’s Proof of Importance (PoI) and combines the two. Especially NEM’s PoI is a very innovative approach to solve the problem of network usage =/= token value.

PoI states that productive network activity, not the amount of coins one holds should be rewarded. Hence when one runs a validator node, one does not automatically receive a set amount of validator node rewards. The odds of reward selection and the pool of rewards is dependent on the amount of work you contribute towards the network. This means staking rewards are skewed by network activity in the form of transactions. Note that gaming this system is not possible, for details on those I would refer to the tokenomics paper.

The more transactions you make while running a node, the higher the probability you are selected as a validator node and thus receive compensation. And so network activity drives token value, it might not sound like a big deal but utilizing a PoI consensus algorithm this way is actually very unique in today’s market. LTO even dared people to come up with projects which create value this way and promised 5,000 LTO tokens in return. While PoI creates network value, the leased part makes it possible to connect token holders with end-users.

“From a company’s perspective, this makes sure that they can run the product without actually having to buy or own tokens. They can simply spin off a node and attract token holders who want to lease their tokens, improving the model from passive stakers into useful network participants.” (LTO network, token economy, p.8)

Now this is beautiful for a very simple reason. Companies that are not 100% familiar with blockchain or token markets do not need to concern themselves with acquiring tokens. This removes all the frictions, entry requirements and/or hassle for companies that want to make use of blockchain networks like that of LTO. The main purpose is to make it as easy as possible for them.

Clients of LTO (like Heineken or Deloitte) do not need to actually buy tokens from the market to utilize LTO’s chain. The only thing they need to do is set up a node on the mainnet, those with LTO tokens can then lease out their tokens to Deloitte for example. This way Deloitte does not need LTO tokens but they do use LTO tokens. Of course if clients know how to buy tokens and are able to do so themselves, they are very free to do it. Perhaps their integrators can even buy it for them? In any case, the LTO token is used at all times — whether companies purchased or leased them.

Whether tokens are leased or (in)directly bought — the higher the usage of LTO’s platform, the less tokens are circulating on exchanges for speculative purposes.

Summarized, LTO came up with a way to create value for clients while transposing this into a token. Thus solving both the frictions companies have in acquiring tokens and incentivizing real network usage. There is not a single blockchain project out there which effectively make this possible. The critical reader here might however ponder whether the network will be decentralized enough to deter any 51%-attacks and for those I duly advise them to read on to LTO’s article on defeating centralization.