LOC Token Economy And Its Core Value

We’ve been receiving regular questions about the core value of the LOC token and how its economy will affect its aftermarket. This is why we are writing this post, dedicated to the LOC token economy and the factors that affect it.

Before we start, we want to elaborate and provide examples of the specific questions that were brought in this regard:

• “How is the LOC token going to perform over time?”
• “Will the LOC value increase on the aftermarket?”
• “What is the core value of the LOC?”
• “Why should I buy the LOC token?“
• “How do you (the company) profit if you are not charging any commissions on the bookings?” //this question might sound as non-related, but actually is directly related to the token economy//
• “When are you going to integrate with an exchange after the tokensale?”

As probably most of the readers already know, the price of any token is the result of the balance or dis-balance between the supply and demand for that token on the market.

In simple words, we have people that want to buy it on one side, and people that want to sell it on the other side. These two sides interact with each other and if they are in a balance, then a price equilibrium results, which would mean that the price of the token would be unchanged until this state is dis-balanced. If however one of the sides has dominance over the other and there is a dis-balance, the price either starts to increase (in case there is more buying pressure), or it decreases (if there is more selling pressure). There are many factors that affect the buying and selling of the token, and they can all be described as the building parts of the token economy.

In our case, we want to emphasize on critical elements of the LOC token economy that are important to understand and how they favor the demand over supply:

1. Token Generation Key Metrics

The first and foremost important elements of any token are its generation event key math metrics:

• Total Supply / Hard Cap — in general the lower the hard cap is, the better because this creates digital scarcity. LOC has an extremely limited supply of only 9.25M Tokens. Total supply is 18.5M, of which 25% (approximately 4.62M) are company reserve which will be held out of circulation for indefinite time (years). This essentially means that the actual max supply of LOC will be around 14M after all vesting expires. This is specifically important with the present oversupply of projects. The less people can get in at the beginning, the more there would be after that willing to buy with a premium and vice versa.
• Distribution and Team Vesting —Team, advisors and reserves have a 1 year vesting to ensure they don’t affect the aftermarket (and that they don’t favor supply over demand). Reserve itself wont be put into circulation for much longer.
• Unsold Tokens Management — In case we don’t reach the LOC hardcap, any unsold tokens will be destroyed. This ensures that in worst case scenario, where hard cap is not met, the total sold and circulating LOC on the aftermarket will not be greater than the initial demand that took place during the token sale event. Some companies keep any unsold tokens for themselves, which we consider as a red flag.
• Smart contract and Purchase process — This is the actual process through which the token is generated. Some companies have the possibility to create tokens with a push of a button, whereas in our case, LOC can only be generated as a result of incoming ETH. This is an extremely important factor as it defines the resistance/tolerance of the token to panic sellouts and price decline in general. It also limits us from offering any discounts to big investors, because simply, mathematically we can’t create the LOC that we would need to deliver as a discount even if we wanted to. Anyone can validate this by looking at the source code of our smart contract on github here.
• Discounts on big/whale investors — this question is specifically important and is related to the previous point “Purchase process”, because it represents the risk of someone who could have possibly gotten a much better buying price on the token and would consequently be prone to selling that bulk volume at a market discounted price at early stages of the aftermarket, which could tip the dis-balance in favor for the supply and thus trigger a downtrend or a panic sell. In our case, and as outlined in the previous point, LOC can be generated only as direct result of ETH. Even when we receive bank wire payments, we exchange that fiat money into ETH (on behalf of the buyer) and then we send the ETH to our smart contract. This is because there is absolutely no other way for LOC to be generated.

2. LOC Core Value

• Sound Business concept — We have a clear business concept and our vision is driven by specific plan of actions that will lead to solving an existing problem — how to make accommodation 20% cheaper and to cut out middlemen with low added value without compromising quality of service and user experience.
• Straightforward plan of action — We are launching an alpha version of the marketplace where people can spend their LOC as soon as Oct 2017 on properties that will be 15–20% cheaper than the competitors.
• Dependency on external companies — We are actually launching two projects simultaneously — on one hand, the market application which will provide the retail service to people who want to book a stay, and on the other hand, the decentralized booking engine (the LOC Ledger) which will be open source and free to use. The two projects create a self sufficient relationship and create a user friendly retail ready experience for end users that would not put the LOC token to rely on any adoption of the technology at the beginning in order for an immediate proof of concept.
• Team credibility & experience — Our team is extremely experienced, and our project is the only one in the world who is backed by a former president of a EU member country.
• Market potential & Founders’ incentive — 500 Billion USD growing industry. It is also extremely important to look from the perspective of the founders. With LockChain, we do not strive towards maximum profitability of the market application providing the booking service (hence offering a 0% Commission on revenues). Instead, our goal is to make the market application as disruptive as possible in order to be able to compete with current established market leaders and grow as a market share. This on its end to increase the adoption of the LOC token, from where team and founders will be incentivized. This interest is perfectly aligned with the interest of the contributors who buy the LOC token during the tokensale event.

3. Differentiation from Competitors

• Why we are different — We are the first project to focus on building a 0% commission on Revenue accommodation marketplace. We believe we are different because of the unique business demand driven approach that we are applying, in order to achieve market penetration, and service adoption in this ultra competitive niche. Our plan to build the marketplace, together with the decentralized engine and shared database, is immediately valued by hotel and property owners (because they are the ones paying the commissions and looking forward to being part of an ecosystem which does not charge them). This is how we want to create a new kind of accommodation supply. After creating the supply, we will market to end buyers and we will rely on the viral effect that the extremely high value service will create, due to the price sensitivity of the end customers.
• How we are different — By focusing not only on the blockchain technology, but also on the gaps between the blockchain and the end users and building in addition a centralized application that will be the bridge between the two and by providing a user friendly environment. Also because we are making one step at a time and we are measuring our steps very carefully based on the extensive business experience that we have from before. We believe many of the current companies are taking an idealistic approach which is more often than not, overly-obsessed about decentralization while neglecting user experience and the big picture in general in terms of established market leaders and user behavior.
• Community of end users — Our collective community is approximately 14,500 users at the time of writing this post. The number of people actively discussing the project in our Telegram channel just reached 1,000 members. Approximately 55% of the LOC contributors are small time retail buyers, of which, approximately half are also potential end users of the booking marketplace. We have both travel lovers and hotel owners buying 1–2 ETH worth of LOC just because they want to see us succeed. We have also been receiving thankful letters from hoteliers around the world which is a testament to the level of support which they are willing to make. This also has its significant implication on the aftermarket of the LOC token, because those buyers are not looking for immediate gains (such as most speculators) and because they are long term and have stronger resistance to price swing volatility.

4. Circulation of the LOC Token

How the service pushes token circulation and what its implication is on supply and demand.

• Booking Service and its effect on the token — LOC is used for every single reservation (regardless if it will be in fiat payment/payout or in LOC). Even if the end user does not realize that and places a reservation in fiat, our exchange algorithm will convert the fiat into LOC and will send it to the smart contract. This means that the LOC will be taken out of the market circulation for the duration between the booking request and the check-out of the guest. There is an extensive post on this regard, made by Hristo Tenchev (COO of LockChain) and we urge you to read it thoroughly by clicking the following link . The circulation of the token tips the disbalance in favor for demand and generally speaking, the more people place reservations in LOC, the higher this effect will be. This is also the reason why we want to make the service disruptive (0% commission). We believe the token has a much stronger increase potential that could offset any potential lost profits from the retail booking market application itself.
• Liquidity — Since we plan to provide fiat payments for the end customers who wish to place reservations on our marketplace, we need to integrate the LOC with a liquidity aftermarket provider. This is why we are negotiating with almost all exchanges at the moment. Our plans are to integrate with at least 2 exchanges immediately after the end of the tokensale (Dec 2017).

5. Censorship Resistance

This is generally associated with the resistance of the decentralized technology to any external factors that could affect its development or to shut it down completely

• Decentralized LOC Ledger DAPP — The LOC ledger will be completely decentralized and there will be no “off switch” to it. No one can’t buy it and place an end to it. It will encompass in it the rates, availability and database of the booking service which would practically make it a turnkey “plug-in” service for any application that would like to connect and start offering booking services in LOC (or in fiat if it processes immediate exchange into LOC like we plan to). Even if in case the market application is shut down (for whatever reasons that might be) the decentralized ledger, the booking service and its database will continue to exist for all other applications that would connect to it.

Conclusion

LockChain (LOC) is a combination of an extremely demanded business driven service, $500 Billion growing market and a carefully designed decentralized technology with a token economy that could potentially create a positive dis-balance in favor for the demand on the aftermarket. We like to think of our project as being unique for the reason that it aligns the interest of accommodation clients and accommodation hosts without affecting the value of the service itself and profitability.