A deeper look at LTO Network
A look at LTOs Tokenomics and much more
I decided to write this to bring forward the case for LTO a little further into the minds of skeptics. In the stock market we also see companies that are undervalued but have great potential, the difference is that crypto markets are a place where things can go 100x for having no value at all in fundamentals.
First, I want to emphasize that LTO is actually a Utility token and not a security. LTO is used to power the LTO blockchain, which means that what you are actually buying is the token used by companies to anchor transactions in LTO blockchain and hoping that it goes up.
I want to bring your attention that in crypto universe most projects are just promises, while others are actually being used and fulfilling their purpose, off course LTO is one of those.
First let’s take a look at what fundamentals mean, I’ve seen a lot of people not understanding the concept and we need to start by getting it right.
What are fundamentals?
“In business and economics, fundamentals represent the primary characteristics and financial data necessary to determine the stability and health of an asset. This data can include macroeconomic, or large-scale factors, and microeconomic, or small-scale factors to set a value on securities or businesses” -taken from Investopedia.com
As you can see when we have fundamentals and a place to measure the health of a company you have a way to measure if a company is undervalued or overvalued. Undervalued is a company that fundamentals are higher than their stock price or utility price and overvalued is a company that its fundamentals are lower than their price or nonexistent making them a big gamble.
What does Warren Buffet say about fundamentals?
Warren Buffett follows the Benjamin Graham school of value investing, which looks for securities (in our case utilities) whose prices are unjustifiably low based on their intrinsic worth.
Intrinsic value, what is that?
Intrinsic value: Intrinsic value is a measure of what an asset is worth. This measure is arrived at by means of an objective calculation or complex financial model, rather than using the currently trading market price of that asset. – Taken from Investopedia.com
As the definition says it, Intrinsic value is not taking into consideration the current market price of the asset (or utility). Instead, we look at the health of a company based on their current and forecasted financial data.
LTO as far as we know has intrinsic value that can be measured. Even though you would think this is obvious, in crypto, it isn’t. Many projects have no way to value capture, health or any financial data other than the price of the asset on exchanges.
Before I start putting numbers here, I want to say this: LTO has an unjustifiably low price based on its intrinsic value so guess what? We are on the right track!
Now to some numbers:
LTO makes more than 100,000txs daily (we’ll take 100k as the basis here) (lto.tools/txs). Each of these Txs are paid by clients to anchor into the LTO Blockchain.
It costs .35 LTO to anchor a document. LTO burns .10LTO in every transaction and nodes get .25LTO for every tx on chain. Using the current price of around 50c per LTO we would see that that makes LTO around $12,500.00 that go directly into the nodes validating transaction, and since we have a deflationary tokenomics, we are burning an extra $5,000 daily. On average on a month this means: $375,000 paid to nodes and $150,000 burned.
Money paid to nodes its then redistributed into people leasing their tokens to those nodes (at around 95%-97.5% depending on the node) and earning them on average 7% apy.
The APY is based on many factors and those are:
- The amount of LTO staked in the nodes
- The amount of daily transactions These factors are changing daily since the blockchain onboards new clients and their already big clients bring in more txs into the blockchain.
Cheat sheet: when leases go down apy goes up if txs remain the same. When leases go up apy goes down if transactions remain the same. If transactions go up and leases stay the same apy goes up. If transactions go down and leases stay the same apy goes down.
As you can see it’s an ever-changing number hopefully transactions are fast growing as leases stay the same we keep around 7% apy and get a good payout every time the node we lease to pays us.
We can clearly see that getting clients in the real world pays up, not only for the LTO company but for everyone involved.
So, who and what are LTOs Clients, Partners and use cases?
- Capptions: Inspection reports on the Blockchain
- SignRequest: Digital signatures on the Blockchain
- IBM: Environment data on Blockchain
- United Nations: Open source land registry for third world countries on the Blockchain
- Openbaar Ministerie: Judicial cases on Blockchain
- Quislex: Legal contracts on Blockchain
- ScanTrust: Supply chain on Blockchain
- Inspectie Leefomgevin en Transport: Waste transport on blockchain
- CMS: Lease agreements on Blockchain
- NEN: Certificated on Blockchain
- DUSK: Digital shareholder register on Blockchain
- Firm24: Notary procedures on Blockchain
- VIDT: front end services and artwork authenticity on blockchain (also recently acquired by LTO)
- Aratos Medica: Medical bracelet on blockchain
And more…
Out of these partners and clients one that really captures my attention is United Nations. The UN land registry is actually only starting in Afghanistan.
This Land Registry will be expanded to many other countries, already LTO has interest in Africa to start deploying the Land Registry. Since the UN has decided to do it open source it will be easier to integrate and every tx will be anchored in LTO from every different Land Registry application.
There are many other clients and use cases that I haven’t mentioned yet such as the Shrimp project and others that I still don’t have enough information on.
Roadmap
As far as the initial roadmap LTO already completed that and it has launched a new Roadmap for 2021, this one is more focused on Digital Identities on the blockchain. This is how the roadmap goes: · Q1: DID URL Support, DID documents, Derived DIDs. · Q2: Publishing certificated, Cross/chain DIDs and Web trust · Q3: Cross-chain Associations and Oracle collab with Chainlink · Q4: Identity workflows (including GDPR)
Even though this roadmap consists on mostly DIDs it doesn’t mean LTO won’t keep working on the original usecases. DIDs are bound to become the most exciting part of blockchain and LTO is innovating in this side. LTO will grow further using this new focus and will still keep growing the initial use cases.
Deflationary tokenomics
The deflationary economics is also part of the value capture. Currently LTO has around 50% of their circulating supply (271M) leasing in nodes, which means the actual number of tokens being sold and bought are around 135M in exchanges. This helps since every time people lease into the nodes there are less and less circulating tokens in the market for people to buy making scarcity be another point where LTO wins.
As clients keep using the blockchain LTO burns .10LTO for every transaction which also makes the total supply go down in the long run. There is also a burn mechanism pegged to VIDT buyback program that further burns more LTO.
Decentralization
We can’t leave out one of the best aspects about blockchain and that is decentralization. When we decentralized voting, confirmations and control we have a more secure and trustworthy ecosystem. Something that nodes do in the LTO Blockchain is decentralized the validation of transactions making the blockchain immutable.
We need to keep in mind that decentralization has to be an important focus and it is my understanding that LTO is not only growing its own community to create more nodes and make the blockchain more secure, but they are also partnering with other node hosts to further security and decentralization.
In a decentralized blockchain, transactions anchored cannot be changed once they are anchored the information in them is immutable and unchangeable. Use cases like the United Nations need decentralization since many of the countries they are working with are corrupt and change the names on the deeds of certificated of ownership to appear as if someone else is owning the land.
The reality is that blockchain is a major solution for immutable information and the UN found a very reliable partner on LTO that will keep on using for the rest of their use cases. This is just one example of how Decentralization will and is changing the world.
The speculative case of LTO survival in the bear market
This has been talked before. Even Rick (LTO CEO) talked about it in an AMA. The reality is that when a bear market comes people stop buying and only keep selling since they think they will not make capital gains on any of their crypto investment.
Now this is just speculative so don’t really trust me on this. But one of the potential ways LTO can be a hedge in a bear market is because their clients are in the real world.
LTO clients and partners buy up from the exchanges to refill their nodes for their transactions. They are not per se in the crypto space they are actually charging fiat to make these transactions and their clients don’t even know about crypto.
We have to understand that LTO clients will keep on buying for their nodes and transactions even in a bear market so we can see that there should be some buying pressure from them that will keep coming up regardless of where the market is.
The other idea is that LTO is a hybrid blockchain focusing on making a bridge between the real world and the crypto world, they don’t depend on other crypto projects to keep going or keep being cashflow positive so the progress will not stall in a bear market.
Off course I want to say this is all speculative and my honest opinion on the matter. In conclusion, the reality is that very little projects have this kind of tokenomics and fundamentals, most of them are hype or have inflated market caps that cannot sustain the real value of their tokens.
On the other hand, we have LTO having great fundamentals in place, already paying clients and growing every month, we should start looking at companies that bring value to the space and work our way to bring them to the front, these are the companies that will bring the crypto space to the eyes of the world and actually change the world.
We are in the beginning of a new era where crypto goes from speculation to real world usage. Where systems are immutable and reliant. In a world where most trust systems are decentralized, and this is the beginning. We are in LTO early and it feels good.
So, tell me something, are you in or are you out?
NOTE: this is not investment advice in any way.Most of it is my honest opinion on the matter.
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