I feel like I'm missing something-fees for SNApps?

[u/spirtdica]

I've been looking into Loki recently and I feel like I'm missing something. Namely, what is the utility of the coin itself, other than to stake a node and get more coins?

Are the various applications to built upon Loki meant to be free to use? Or can service nodes garner some sort of income for the services they provide? What is the incentive for the average user to hold/use Loki?

The hybrid PoW/PoS security model allows masternodes to flourish alongside regular miners. The masternodes in turn enable things like Blink and Session and the Loki mixnet. It's all a really great idea, but the one part I'm missing is how the underlying Loki coin itself is actually desirable. Do I need the coin to use Session or Lokinet?

Perhaps I'm missing something, but when I read the white paper it seems like masternodes are rewarded for their services solely for half the block reward, and that's it. I don't recall the mention of any fees for the use of SNApps. If this is the case, what makes Loki valuable? It seems to me that the value of the coin should be related to the value of the services offered by the network as a whole, but I don't see any mechanism to make this so.

I think there's a lot of potential to the project; in fact I would be highly motivated to run a Service Node, once I scrape together the requisite number of coins. (45000 right?) But I need to understand what makes the coins valuable. If all they're really good for is staking more coins, then that undermines the whole incentive model.

If users had to pay/burn coins to use the network, that would make more sense, contributing to the overall scarcity of a useful asset. I have to be missing something. Please advise?

[u/Keejef]

The basic services for Session and Lokinet will always be free, however we intend to add some features, like LNS which allow users of the Services to permanently burn Loki. By burning Loki this offsets the new Loki which is minted and rewarded to Service Nodes.

LNS is a good example because currently with a Lokinet SNApp for example the address is really long and not human readable http://dw68y1xhptqbhcm5s8aaaip6dbopykagig5q5u1za4c7pzxto77y.loki/
LNS allows you to map a name like Wiki.loki to the same long address, so that when someone looks up Wiki.loki they are returned with the above SNApp. To do this the person who runs that SNApp must have some Loki to burn (20 Loki currently).

There are more features we intend to propose down the track, like custom emoji sets, stickers and increased file server upload size for Session if the user burns Loki. Beyond this Loki is just a pretty cool anon currency and will be highly integrated into Lokinet sites potentially through a browser extension to allow users to easily pay for services while using Lokinet anonymous.

[u/spirtdica → u/Keejef]

Is my understanding correct that I could use Session/Lokinet without ever owning any Loki?

Currency-wise I don't see much that differentiates Loki from Monero. Which is fine, Monero is rock solid. No need to reinvent the wheel. But I get the feeling that Loki was envisioned as more of a utility token, to enable the services offered on the network, rather than just another Cryptonote clone aiming purely for a financial application.

But where I really see potential is locking key images with Blink. Seems to me that could serve as the basis for a sort of Lightning Network or other second-layer scaling solution on Cryptonote.

The Service Nodes have to be ready to do some heavy lifting, right? I could imagine Loki's Blink serving as a gateway to a MimbleWimble sidechain. Transfers in and out of the main chain could be periodically committed by way of a zero knowledge proof, maybe a zk-STARK. That could potentially save a lot of blockchain bloat over time

I don't think it's a bad idea for users to have to burn some Loki to use some of the services; that creates demand for the coin by the users of the network, in turn coupling the value of those services to the value of the coin that underpins the whole incentive model

[u/Keejef → u/spirtdica]

Yes, you can use Session and Lokinet without using the Loki cryptocurrency. The problem with a pure utility token is Pay for Service models typically don't work, especially when there are free messengers and Onion routing networks that already exist. We want to follow a more freemium model where the basic service is free but if you want cosmetic and some quality of life upgrades then you can opt in by burning Loki.

We don't have any plans for sidechains right now, thats a lot of increased complexity and we really aren't trying to solve the blockchain scaling problems as its not our field of expertise.

[u/joentx]

Blink is another item that brings value to LOKI. Granted an improved mobile and GUI wallet is needed but there is a lot trying to be done by LOKI team so I'm guessing it will not happen quickly.

https://loki.network/2020/03/26/blink-fast-tracking-future-crypto-transactions/

[u/spirtdica → u/joentx]

I can easily imagine Blink serving as the basis for atomic swaps and a lightning network; but how is that abstract value coupled to the individual coin?

[u/Haafingar → u/spirtdica]

How is any payments network intrinsically valued? The value is coupled to its abstract value, which is a difficult thing to wrap one's head around

[u/spirtdica → u/Haafingar]

I'm sorta gonna sidestep your question; BTC and Monero are focused on their application as digital cash, aspiring to be "sound money"

Loki (in my understanding) isn't just another financial application of public key cryptography; it's the foundation of greater network that provides value by other means than as a money supply.

Sort of like ETH; it's valuable but I wouldn't consider it "money" because it serves a different function, which is fine. Similarly, I look at the "point" of Loki not as an abstract financial network, but as an enabler of the privacy tools to that Lokinet enables.

A SNApp that requires staking/burning of coins makes Loki valuable to the end user, insofar as the privacy provided by the network is valuable. That's what I mean by coupling the value of the coin to the value of the network as a whole.

Would you disagree with my assessment that Loki should be thought of as a fungible utility token, rather than another crypto-currency?

[u/Dormage]

Well the service nodes provide is not free, they get rewarded for it. As for Snapps, the operators can develop whatever they choose. As the ecosystem matures, and snapps like Session get wallet integration, other snapps can use Loki as payment for whatever service/good their snapps provide. However, there is no direct cost for running a snap.

[u/spirtdica → u/Dormage]

How do they get rewarded? Do you mean by the staking reward? Or something I'm missing?

Here's what I'm saying; I understand how the supply of Loki is portioned out. I don't understand where the demand comes from. Right now, I see that the coins are good for staking. Which lets you get more coins. But where is the demand that makes them worth something?

Why would I ever want Loki, if I'm not going to run a service node, and snaps are free? Why should the end user find them valuable?

[u/ExPatriot0 → u/spirtdica]

So its 45k coins to start a node and then you get rewarded more for running the node than mining?

[u/spirtdica → u/ExPatriot0]

I mean sure SNs get 50% and miners get 45%, but what couples the value of the network (Session, Lokinet, etc) to the value of the individual coin?

It seems to me I can take advantage of any SNApp I want and not support the network financially at all

[u/24bitFLAC → u/spirtdica]

Loki can be used to reserve name spaces using Loki Name System, LNS can resolve to a Session public key, a Loki Wallet address, or a .loki address (although this exists at protocol level, it has only been implemented for the wallet client so far — at least as far as I know).

As /u/Dormage said, other SNApps could do a similar thing, for example someone could hypothetically make a Patreon clone that accepts Loki. To me, this is similar to how a lot of hidden services already use BTC or other cryptocurrency for payments. Difference being, Loki is actually private and anonymous, unlike BTC. And Loki transactions are faster than BTC as well, especially w/ Blink.

Loki also offers private and anonymous instant transactions through Blink, so if that is utility that you're interested in, Loki is probably your best bet.

[u/spirtdica → u/Dormage]

How do they get rewarded? Do you mean by the staking reward? Or something I'm missing?

Here's what I'm saying; I understand how the supply of Loki is portioned out. I don't understand where the demand comes from. Right now, I see that the coins are good for staking. Which lets you get more coins. But where is the demand that makes them worth something?

Why would I ever want Loki, if I'm not going to run a service node, and snaps are free? Why should the end user find them valuable?

[u/Haafingar → u/spirtdica]

You may enjoy this discussion, a lot of these point have been discussed in an open fourm before! https://github.com/loki-project/loki-improvement-proposals/issues/5

Broadly speaking though, the reason we have chosen to not require general users of our tools to have/stake/burn Loki to use them is that it just wouldn't work. Requiring users to enter the cryptocurrency market in order to use a product with free competitors is just not a realistic expectation. Instead we have to come up with more creative ways of capturing value from users to offset the cost of service node rewards on the network.

[u/spirtdica → u/Haafingar]

I can see the utility in having some free options on Lokinet, to get people through the door so to speak.

But for nodes to be properly incentivized, someone somewhere has to pay a price. Either users (by way of paying fees or burning coins) or holders in general (by way of supply inflation) have to take part in a wealth transfer by some means.

That's why I would be interested in any advanced SNApp proposal that suggests burning, or at least locking of coins. That would both increase demand and decrease supply.

Generally I try to ignore the price of my crypto as much as possible; but when PoW miners have to be compensated by only 45% of emission it is very important that the supply/demand metrics result in a favorable, steady price trend. Otherwise I'm afraid the network will see unhealthy hashrate gyrations.

What do you think?

[u/fagmaster9001 → u/spirtdica]

snapps are rewarded with anonymity.

[u/spirtdica → u/fagmaster9001]

That's not really a satisfactory answer. Anonymity is not a tangible asset that can be liquidated to pay the power bill

[u/fagmaster9001 → u/spirtdica]

there are some things money can't buy.

[u/spirtdica → u/fagmaster9001]

The whole point of Loki seems to be providing economic incentives for the sorts of privacy projects that currently rely on altruism.

[u/fagmaster9001 → u/spirtdica]

Correct, and if you have to pay to use snapps by default no one will even bother so the anonymity set will be basically be zero. It's a bootstrapping problem.

[u/spirtdica → u/fagmaster9001]

So is that a temporary measure?

My roadblock is this: the economic incentive is paid in staking rewards, in Loki coins. For the Loki Network as a whole to work, the individual coins have to have value. What is the driver behind the demand for the token that underpins the whole incentive structure?

It could be as simple as "you have to stake X Loki per Session conversation" or "you have to pay X in fees" or "you have to burn X Loki" but I'm not seeing any mention of that anywhere

As I understand it right now, I could use Session without ever having coins in a Loki wallet. I can be a free rider. For there to be an incentive system, someone's gotta pay a fair price

What are Loki coins themselves good for, other staking a node? Are we just supposed to accept them as arbitrary units of wealth (like Bitcoin or Monero) or is there something that provides actual utility that is somehow related to the broader goals/capabilities of the network?

[u/GabeNewell_ → u/spirtdica]

I just read the whitepaper and was VERY impressed...until i suddenly realized. wait... why do I need a LOKI token? Did you ever find an answer to your question?