Why are the LTO transaction fees not pegged to USD or EUR?
As an important part of the LTO tokenomics strategy, we want integrators to hold and stake LTO tokens. A fixed fee (in LTO) incentivizes integrators to purchase tokens upfront, while a pegged fee would incentivize purchasing tokens on-demand.
For a project, integrators need to take the purchasing costs for the transaction fees into consideration. They will add a margin to calculate the minimum price at which they can offer the service.
With a fixed fee, integrators aren’t subjected to token price fluctuations when they’ve purchased the tokens in advance. In other words, they lower the risk of having to run the project at a loss.
With a pegged fee, this would be reversed. Integrators would take a risk by purchasing and holding tokens upfront. To reduce this risk, they’re incentivized to purchase on-demand.
A fixed fee creates incentives for integrators that benefit the network. Pegged fees don’t.
Wouldn’t integrators buy and hold LTO anyway as they can do more transaction(s) if the price increases?
If the fee is pegged to the euro, holding LTO increases risk, while holding euro reduces risk.
Holding LTO with pegged transaction fees would be speculation. Risk wise it wouldn’t be that different than holding any other cryptocurrency (like BTC). Integrators are reluctant to speculate with company funds, especially when intended for a project.
Doesn’t a fixed fee incentivize integrators to keep the LTO price low?
Integrators that hold LTO benefit from an increased LTO price, as they’re able to offer a better price than new competitors. This benefits the ecosystem by ensuring that new players have to deliver new or better services in order to compete and can’t simply rely on delivering the same and undercutting the price.
A focus on price could start a race to the bottom, pressuring margins. Ultimately this would result in integrators that focus on quality rather than price to choose a different network.
What if a project requires more transactions and the price of LTO has gone up a lot?
It’s foremost the responsibility of the integrator to buy and hold enough tokens to pay for the transaction fees for a project. Integrators that choose not to, run the risk of having to purchase tokens at an unfavorable price.
Members of Ecosystem V that did purchase tokens, but are running out because of the unanticipated success of a project, can make a claim on the “Strategic partners” fund. For tokens purchased from the market at a higher price, they will receive additional tokens from the fund.
Token from the “Strategic partners” fund can only be used for transaction fees and not be sold on the market.
What if, at some point, the transaction costs need to be recuded to keep the fiat prices for txs to an acceptable level?
The transaction fee is decided by node owners. When a block is mined, transactions that offer less than the configured fee aren't accepted.
Lowering the fees doens't require a change to the network consensus. Node owners can take initiatize to lower the required fee. When enough node owners change the configure fee, the others will follow in order not to miss out on transactions that offer to lower fee.
It migh be necessary to lower the burn fee in order to maintain a fair reward for staking. This is done through a feature vote. Currently the burning fee is fixed to 0.1 LTO per transaction. In the future, we might switch to percentage based fee burn instead.
In might be conceivable that the procedure of changing the fee will be streamlined and automated. But initially this procedure will be done manually in collaboration with all parties involved to insure all interrests are alligned.
Why would LTO, as a company, be interested in a higher token price?
The main responsibility of the LTO team is to safeguard the network in these early stages. LTO Network has a proof-of-stake consensus model. Governance is also managed through staking. With PoS a 51% majority will give you control over the network.
This means that keeping the network safe, directly correlates with the market cap. For instance; if the total market cap would only be $1M USD, a $510k share in the network would give you control of it.
Given the seriousness of projects that depend on the safety of LTO, a high market cap is essential in order to deter bad actors due to the high costs of malicious activities.
Higher token prices would increase our budget for M&A. This will open up more opportunities and possibilities which allows us to get even bigger growth.
Why does LTO aim to be a top 20 project in terms of market cap?
First of all, a high market cap brings recognition to a project, which attracts more integrators and can help win projects.
Second, M&A is an important strategy for growth. Currently, the LTO market cap is too low to use the M&A fund. There a lot of interesting projects with a small market cap. With a $1B+ market cap, we can put the M&A fund to great use.