LTO V2.0 Deflationary Fee-Burn Token Economics. DeFi and P/E married with B2B and enterprises.

Main • Published on: Jun 24, 2020 • Last updated: Jun 27, 2020

*Wait, what the hell am I looking at?* - good question! Looks pretty cool though, right? Let's get to the core of this and figure out what is P/E and the relevance of these numbers.

What does LTO Network, blockchain for B2B and enterprises, have to do with Decentralized Finance and Ethereum? In terms of use cases, not much. But there is a lot to learn from successful DeFi projects: Compound, Aave, MakerDao, Synthetix, Kyber. What do they have in common?

Value capture model. A value capture model can be described as a business model. An example from the real world: subscriptions business model. Whether you have a news website, custom suits, or a food truck - a good business model would work if you adapt it to your clientele. This is what the article is about.

This piece is a collection of slides on the deflationary fee-burn token economics proposal, with comments from the LTO Network core team. If you prefer to see the raw file, you can see this ipfs-hosted PDF. Overall, we are super excited to present you the research and some on-chain stats.

Let's go!

Disclaimer. This is not financial advice or guidance. It is a network upgrade proposal mixed with subjective data, estimations, and projections. Please keep in mind some use cases may be delayed, the usage could potentially be lower, and other risks associated with it. There is no guarantee for price appreciation. If you find any mismatching data, let us know and we will fix it together.

There is no OTC. LTO is tradable on Binance, BitMax, etc.

As the space goes further, actual usage matters more and more. We are getting to the point where actual verifiable on-chain data will be more important than hype partnerships. From hype to usage.

We have come a long way with the community since 2017, and have built out the tech stack which has been validated by multiple integrators. However, this is just the start for adoption!

See the list of use cases: https://www.ltonetwork.com/use-cases

Some run their nodes directly, some use integrator nodes to anchor - including the LTO Network client node: https://lto.tools/engagement-monthly. We will further decentralize this process.

Transactions are not a pure metric by itself. It's important to know who generates them and for what purposes. Transactions which are paid for with real $ are a much more meaningful signal.

The trend for user base validation has been growing since the end of 2019, with DeFi capturing most of the investor attention and even overshadowing Web3. But there is more to blockchains than DeFi.

P/E is the ratio for valuating a company that measures its current share price, also sometimes known as the price multiple or the earnings multiple. The smaller it is, the more healthy a valuation it is seen.

Projects have tried to boost their APY [annual percentage yield] by simply minting more. However, the real negative yields are not really attractive anymore. It's about real network revenue now.

28.5% of the fees burned. In case the price per LTO goes up too high, the network will be able to vote for the fee reduction, with the burning either adjusted or staying the same. This is a dynamic feature.

The non-inflationary APY can stay the same even if the AUM [assets under management] increases - that is due to transactions growing. Pricing in burning, the APY in fact becomes better than it is seen.

*Moderate* implies transaction activity based on 70,000 daily transactions - which is quite modest. Beyond that *extreme* growth is possible, so let's focus on over-delivering!

When will the changes go live?

The tentative date for these changes to potentially go live is July 2020, with the vote deciding the future. The changes discussed would simply need another mainnet upgrade vote as was done in 2019 and 2020.

The GitHub changes can be seen and are already on their way. We expect to finish the proposal code changes and test it by the end of July. It is likely that the vote would also be around mid of July. Stay tuned for more news!

Sources and inspiration: