Transcript written by Felix Hildebrandt, published through Rob from Luksoverse.
Disclaimer: Felix Hildebrandt does not directly speak for the LUKSO project, and the transcript is no official statement of LUKSO. Answers represent his own opinions.
Within the last week, community member Elias Blackwood raised some questions about Fabian Vogelsteller’s video of the LUKSO token distribution. We had a lovely conversation on the KEEZ Discord server, and Felix Hildebrandt from the LUKSO team joined the loop. As community members might have similar questions and ideally do not want to go back and forth within channels, we transformed the conversion into one interview. The messages have been slightly modified to keep the article in a fluent text. However, context and opinions haven’t changed.
If you have questions about the LUKSO tech stack, supply, or blockchain use cases, the LUKSO Ecosystem article is the latest official publication. For token economics specifically, the team introduced the LUKSOs token distribution chart at the rICO. This chart does not represent the current state and is understood as an archive page. LUKSO will hopefully update the graph soon.
0:44 – Fabian talked about the max supply
Elias: 100 million will not be the max supply in LYX because it has been confirmed that validator rewards are not included in the count. That’s not a problem, but a little misleading, in my opinion.
Felix: Thanks for pointing this out, you are correct, this fact should be given more attention. We will have to wait for news and clarification from the network team or an upcoming Tokenomics publication about how these future block rewards will expand the supply per year. In general, however, it is expected that these rewards will not take up a significant position in the total supply.
1:20 – Fabian talked about network laggards
Elias: Here, he talked about the problem of latecomers and the cost of fees, two topics that are not problematic given the DPoS and PoS nature of Lukso, which should make fees very low. The real problem of distributing everything right away is, instead, related to the risk of centralization, which is typical of many PoS, and the team’s colossal supply availability exacerbates this.
Felix: I think the problem of latecomers and the cost of fees is about network occupation and traffic. At the start, not so many projects will be on the network, but adoption will rise when more and more projects and companies join in. So fees will also increase. That’s why Fabian and Marjorie are in for natural growth, giving the network time to unfold and generate a user base from LUKSOs own relayer to start new projects. Over time, companies can join in and maintain relay services themselves as a new business model, taking onboarding complexity and fees from the user back.
Yes, there is a problem with PoS being centralized when using it from the start. And you can be sure that the team was aware of that. LUKSO wants to offer a sustainable and, in perspective, environmentally friendly EVM chain, and using PoS is the best of both worlds combined with long-lasting ICOs. The rICO was wisely planned out to last eight months, where users could always opt-out. They could not just “buy everything at once” but instead buy a certain amount they stuck to over a longer time.
The same will be valid for supporting many projects across the network over a long period, where projects will likely use this ICO standard again. I would be interested in some metrics on how spread-out LYX is at the current time, so we have some data that we might compare.
2:12 – Fabian talked about the supply for ecosystem building
Elias: About 40 million LYX seem to not be locked in by vesting or anything else. There are no release dates- it’s all based on trust. In my opinion, that isn’t good for a crypto project. Therefore, those LYX will be used for ecosystem development and belong to the team. Another 10 million belong to founders and the team’s future development. These huge supply positions give the impression that at least 50% of the total supply is distributed to the team for free.
Felix: To clarify, only 5% belong to founders and collaborators directly. I agree that there is trust to give about securing or managing the funds for ecosystem building. But that’s because this is not fully fledged yet. As I stated before, this is the chart pre rICO for early investors and people that want to participate. There likely is something on the way to specify precisely how and from whom will manage this. I could guess some foundation or transparent, automated mechanism locks and hands out small amounts of LYX for ecosystem building to the team or organization behind. Only the 15 million supply was generated and is in circulation for now. All the other supply management will be discussed or stated before release.
4:31 – Fabian talks about standards as common goods
Elias: In my opinion, all cryptos and developed standards must be profitable because nothing survives unless it produces a satisfactory return on investment, not even the best idea in the world.
Felix: Sure, standards are built to be profitable but not to directly gain payment streams for LUKSO. We don’t want to be a monopoly. LUKSO intends to create a new economy here for everyone to jump on board- not necessarily on our chain. LUKSO will likely offer the best convenience since there is a whole ecosystem including profiles, a relayer service, brands, a mobile app, and browser extension around them, creating benefits for every participant in the network. Think like ERCs and LSPs are HTTP, HTTPS, and other protocols from Web2. They are building blocks for whoever comes and wants to create a business model on top of them.
4:58 – Fabian talks about profiles not producing income
Elias: I don’t think that Universal Profiles do not produce income since it is part of the LUKSO ecosystem and, therefore, an already known business model.
Felix: UPs, by default, do not bring value. It’s what is being built on top of them. Does ERC20 make income, and does any EIP, ERC, or LSP? They are standards, and developers can use those tools to create value and revenue for their projects, e.g., making their own business model. LSPs and UPs will work on any EVM chain, not only LUKSO, so that’s why we are not opponents with any other chain. LUKSO wants to spread value and new tech across networks and economies. Those standards can be used everywhere and bring lots of value to the outside of our network too.
Elias: In my opinion, the project is great, but there is a lot of confusion from a financial perspective. The team is taking a lot of guarantees, all to the detriment of early-comers. When I’m looking at the supply chart, it seems LUKSO is choosing to double the supply when the mainnet is released. From experience with other cryptos, we know that the market cap does not double by releasing supply in a short time but stays the same, tending to halve in price- not a wise way to encourage adoption, especially in bear markets.
Felix: I agree with you that there is confusion from a financial perspective that the community and LUKSO can not deny- it’s a known critique. There are risks when investing in a project that is not entirely out or ready on its road map. But there will hopefully be news on that end soon to reduce risk or clarify the current supply plan. Of course, the team is taking a lot of guarantees. LUKSO just had its BETA test network out. Those who support early take more risks but also have bigger chances. That’s how the game is played.
Remember that the supply is not being doubled at the mainnet launch. This misunderstanding likely comes from the old supply circle. As stated in the LUKSO Ecosystem series, two public sales were initially planned that would have stayed open for months. LUKSO never introduced the second public sale due to not reaching the threshold of 10 million LYXe in the first round. The last update was that LUKSO had added the differences from the public sales to the reserve pool. Therefore, the initial supply on the mainnet launch, with no new updates since march, is roughly 15 million less- 5 million from the first public sale and 10 million from the second public sale. There likely will be a clear update on that end, as already referenced. Please also know that LUKSO might never release some or most of the supply on the network, as mentioned in the latest Medium publication.