by Selby | @SelbyFox
What You Need To Know, In A Nutshell (updated Oct 24th, 2022)
First The Numbers… Then Your Mind Gets Blown 🤯
As of the date of this writing there are roughly 15 million tokens in circulation, the vast majority of them being held by retail investors. At mainnet launch there will be approximately 20 million tokens “unlocked” (which includes the private sale, team members, the LUKSO Foundation treasury and advisors/partners), for a total circulating supply of about 35 million (more on this in a minute).
And that’s it folks…
There were approximately 10 million $LYXe that were ear-marked for a second public sale, which never happened… and will definitely not happen now. Any coins not part of the LUKSO Foundation’s treasury will not make it to the mainnet supply… call them “burned” if you will. But really they will just never exist. 👍
You can also see in the original release schedule below that there is about 50 million coins held by the team for the purposes of building out the ecosystem, grant program and DAO infrastructure. These were originally meant to be used to build the LUKSO network in some value-adding way. These coins will also never come into existence on LUKSO’s mainnet (assuming the Genesis Validators agree to this, which all indications point to them overwhelmingly supporting a smaller token supply.)
The final storehouse of coins in the above graph were meant to be a reserve pool for whatever future needs the network might have. Again, the Foundation will make do with a 10% supply to fund any future needs the LUKSO Network may need. Make sense, so far? Great!
Is a BIG Dump Coming? 👀
Everyone seems to be concerned about large holders dumping on the market. This is probably an irrational fear, at this point!
These unlocked tokens are, for the most part, held by large investors, advisors and partners… as well as the LUKSO Foundation, itself. The likelihood is that most of those 20 million unlocked coins are in the hands of long-term holders or participants in the ecosystem.
And a quick update: Fabian has made it clear that the more that large holders sell their coins, the more those coins are distributed… and in the case of staking/securing the network, the more distributed it is, the better.
In this regard, large holders selling isn’t necessarily a bad thing, as these will likely be sold into a rising and thriving market… but the greatest portion will be held by stakers, the Foundation, partners and, of course, projects that will use them as utility coins… let me explain;
If LUKSO teams up with an imaginary shoe company, let’s call it KNIKE, which provides an NFT along with the sale of each pair of real shoes, the customer will need a user-friendly digital wallet AND a simple way of getting that NFT onto that wallet.
SIMPLE = Mass Adoption
You see, young Padawan, NFTs require a blockchain, which are not always easy for the general public to use, especially in a retail setting like a shoe store. Instead, KNIKE does all the heavy lifting for the customer. The customer just downloads the app (powered by LUKSO) and KNIKE handles the transaction on the blockchain (including the fees, which are built into the price of the shoes). This removes all the technical requirements for the end customer (with the exception of downloading the app).
Less friction means more shoe sales.
Here’s The Mind-Blowing Part:
KNIKE needs LUKSO coins to pay for all these transactions, which means they have to maintain a treasury (reserve) of coins. Companies like KNIKE don’t like surprises, so when the price is right they will buy up large blocks of coins… on a continual basis. That’s called demand, my friend.
These companies are not speculating on the price for gain, rather they want to protect themselves from being forced to buy coins at inconvenient times.
This type of tokenomics is INCREDIBLY bullish. That’s because $LYX is a UTILITY COIN… meaning it has a function… meaning it’s needed by projects to DO things. It’s not just a cute shiba-shaped object for traders to get rekt on. Utility Rules, Dogecoin Drools 🤤
Utility Is The Goose That Lays The Golden Egg
Projects that have real utility will dominate crypto in the long run. Take for example another project with similar tokenomics: Chainlink. The projects and companies that use Chainlink oracles (to keep their businesses running) must use LINK tokens to pay for the oracle data. This means there is a built-in demand for those tokens. It’s not retail traders driving the price higher… it’s a growing number of successful businesses and projects with a lot of cash and a need for LINK tokens.
Ethereum and LUKSO are compatible smart-contract layer 1 utility blockchains that are not so different in regards to fees being paid to keep the network running (that’s a lot to digest, but hang in there). The difference is, if you want to buy an NFT on OpenSea or take out a loan on Aave (both on Ethereum), then YOU, the customer, will pay the fee. It goes a little something like this, hit it:
- You open your Metamask wallet (or whatever)
- Connect to the website
- Begin your transaction
- Pick how much you want to pay in gas (hoping you’re right)
- Then hold your breath and pray that the transaction goes through
Imagine being in a physical shoe store, in a rush, with lots of impatient people around and you’re trying to transfer an NFT on your phone 😬
LUKSO and it’s partners are solving this problem behind the scenes… with the use of what is called a “relay service” (not a relay chain, I often confuse the two… don’t be like me). This simply means the company, in this case KNIKE, is going to transfer (relay) the NFT to Miss Soccer Mom’s digital wallet for her, so that she can get on with her day… which is taking her three screaming kids over to Karen’s house, where they can wreak havoc on someone else’s furniture, while Mom low-key catches a red-wine buzz.
I digress.
The point is there will be a constant demand for LUKSO coins, as well as a constant need to spend them… in Fed-Speak this is called money velocity.
Wait! Is LUKSO Deflationary?
Not exactly. The coins that the companies spend don’t mysteriously disappear into purgatory. If we want true deflation we have to send them to a place where they can burn for all eternity 😈 🔥… No, not that place… I mean EIP-1559 (or whatever the LUKSO equivalent will be).
A fee burning mechanism is pure speculation, but Fabian has said that the LUKSO team will watch how well it’s implemented on Ethereum and act accordingly… this is because LUKSO has a similar fee structure as ETH2.0
(Update Oct. 24th 2022, it is looking quite certain that LUKSO will implement a burn mechanism, which could make $LYX “ultra-sound money.” This is great!)
So, what actually happens to coins when a company like KNIKE pays transaction fees? Those coins go to validators. Who are validators? They are the retail hodlers that are lustfully waiting to earn staking rewards. AKA, the folks that keep the LUKSO network running by providing decentralized computer processing power. AKA, the vast majority of $LYX coin hodlers who will lock up their coins in staking… which means NOT dumping on the market.
Ahhh! The tokenomics just keep getting better 💪
There is actually a virtuous cycle here. Validators keep the network running and are rewarded with coins. But, these validators will likely sell a portion of their staking rewards back onto the open market, which KNIKE and other projects then re-acquire. Round and round the coins go. It’s all connected.
More and more value is created as the network is adopted. The more projects that deploy on LUKSO, the more demand for the coins… and even though validators are recycling their coins back onto the market, there is a tendency to hodl more and more (ie wealth accumulation), as we’ve seen on Ethereum, and the price of the coin has an inevitable rise over time.
Screw KNIKE… Wen NIKE?
First of all, kindly go fu… for a hike! Secondly, it doesn’t matter. The only requirement for the coin to gain value is if the network is being used and adopted. Which it will be… in grand fashion 😁
I know what you’re thinking; “Nike would bring a lot of clout and publicity to LUKSO.” But, in case you haven’t noticed, crypto is kinda the most talked about thing in the world right now. Okay, second most… bleh! Point is, Nike would be great, but is in no way essential for LUKSO to be successful.
LUKSO is going to be discovered… it is written 🙏
But, the thing is, for LUKSO to operate as its founders intended, it needs a lot of new projects and start-ups to launch, instead of giant companies who’s corporate DNA requires them to seek monopolies. In the case of a blockchain, many small businesses are better than a few large ones. Something akin to decentralization, ya dig?
So How Do We Get Rich?
Who knows. But being a long-term coin holder (staker) seems to carry good odds. Just remember, LUKSO is not a stonk with shareholders, so there can be no expectations or demands on the team… in the traditional sense. This includes marketing which is sort of contrary to open-source culture.
“LUKSO’s business model is that there is no business model.” -Fabian
Also, LUKSO has made it very clear they are not interested in catering to traders. Simply stated: traders serve no function in the virtuous cycle between validators and projects. Besides, any liquidity imbalance will be handled by exchanges (yes, plural, meaning more than one kucking exchange)… which btw, should absorb a considerable amount of $LYX at mainnet, as well. Bullish!
Anyway, no price predictions this time, but for the true LUKSO hodlers, here are some things to think about:
- If LUKSO provides conservatively 10% the value that Ethereum is providing, what would the market cap be? Divide that by 35 million.
- What if LUKSO became a side-by-side peer to Ethereum? Is that possible? Or can you imagine a world in which LUKSO is more popular than Ethereum? If the technology is better, will the market notice?
- How many projects in the top 20 have no utility? Will LUKSO provide more value than them? Will businesses and smart money take notice?
The Bottom Line
LUKSO has really good tokenomics. And it will only get better over time. Hopefully you’re inspired to dig a little deeper yourself. Remember, nothing should be taken as financial advice. Always do your own research.
Cheers!
This rant (disguised as an article) was inspired by my friend Alts who also provided the bad-ass art for this piece. Thank you, Sir!
Disclosure: The 35 million supply is not a guarantee. The Genesis Validators will determine the supply at mainnet launch. This article is based on votes and sentiment by the community.
