Announcing Burning Mechanisms on the LockTrip Blockchain

Dear Community,

Today we want to share some of the architectural decisions we have made on the LockTrip blockchain, which will become active with the testnet to be launched by the end of this year.

1. Optional Burning Rate at Protocol Level

We are introducing an additional key property to the blockchain, which will make it possible for stakers to agree on a fixed burning rate for staking rewards, which will then apply for every staker across the network.

For example: Stakers agree on burning 5% of the staking rewards at the protocol level. This means, that a staker who receives a total of 3 LOC in rewards per day, will now receive 2.85 LOC and the remaining 0.15 LOC will be burnt.

This might sound confusing at first. Why would someone willingly agree to burn a share of his own rewards?

There is a selfish argument for this altruistic behavior.

Simply because he knows that every other staker will burn LOCs too. While the loss for the staker above remains at around 0.15 LOC per day, the burnt amount across the network could for example reach 100 LOC per day.

This will add a strong deflationary effect on the LOC economy and thus reduce the downward risks of the LOC price during the staking period.

In a way it becomes a protective mechanism for stakers to reduce their volatility risks during the staking period. The more they sacrifice from their rewards, the stronger the protection will become.

The burning rate will be agreed on by the voting mechanism and can become any rate between 0 and 50%. In case this feature should become unpopular among stakers, they can thus vote for 0% and disable this feature. The maximum cap of 50% makes sure that it is not possible to eliminate the incentives for stakers which would compromise decentralization.

2. Burning through Voting

The second burning mechanism we are introducing is regarding the voting.

Voting will be used to agree on key properties of the blockchain.

• Fiat gas rate — the fiat which will be converted dynamically through an exchange monitoring oracle
• Newly proposed Admins — these are the users who will have the authority to propose new votes
• Block Size — depending on the block size, the TPS capacity of the chain can be modified
• Protocol level Burn Rate — the percentage of tokens that will be burned from each transaction on protocol level
• Percentage as refund to LRC20 tokens — the percentage of gas fees refunded to LRC20 tokens who contribute to the adoption of the blockchain

Each voting can only change a setting within certain limits (for example 30%). If the transaction fees were set at $0.10 for example, they can only increase to a maximum of $0.13 or decrease to a minimum of $0.07 per transaction. This will make sure that there are no radical differences or manipulations.

More importantly, voting will happen through burning LOC. Let’s assume a yes/no vote. In this case there would be two different smart contracts which represent the outcomes yes and no.

Sending LOC to the yes smart contract will represent a yes vote. Same goes for no. The more LOC you send, the higher your voting weight will be. The voting will expire after a certain time period and the outcome of the vote will be determined by the smart contract with the highest LOC amount in it.

More importantly, all LOC sent to those smart contracts will be automatically burnt. This mechanism makes sure that people are not just “voting for fun”, as there comes an expense with it.

As a result, the voting advantage of bigger players will be offset by the fact that they are burning LOC for the good of smaller holders, basically increasing the value of their holdings.

Why Burning is Different

So far so good, but do we really need another source of demand? Isn’t the LOC economy based on very strong fundamentals already?

Here comes the difference. Some of the current demand sources are the following:

• Bookings executed through our marketplace
• Bookings placed on marketplaces that are connected to our distributed database
• Paying for premium features on our marketplace
• Staking LOC on the new blockchain
• Projects using our blockchain and thus engaging with LOC transactions
• etc…

All of those demand generators are very strong on their own and pose a very high combined upside potential when put together. However they all have something in common: Finite duration.

With demand types of finite duration, the most important factor becomes the rate at which demand is generated.

Example: As long as the booking rate increases, the LOC demand will increase too (see here). However at one stage, you will reach market saturation as there can not be an infinite amount of bookings. The LOC price will be very high at that time and reach its peak. Because a constant booking rate means new demand from placed bookings will exactly cancel out new supply from checking-out customers (ignoring speculation).

Burning LOC in contrast, is a weaker demand generator. However the duration is infinite. The demand generated by the burn will last forever, as the burnt LOC will never be circulating again.

With demand types of infinite duration, the most important factor becomes the cumulative sum of generated demand.

Summary

• So far, we were focused on building a strong economy that creates a high rate of demand, which captures the value of the current utility and reflects it in the LOC price.

→ Demand can vary and go up and down depending on actual usage

→ Peak demand is finite and is determined by the maximum utility rate possible

• Now, we are adding another (less aggressive, but very effective) economic layer, which captures a share of the cumulative demand generated.

→ Demand can only go up, as every burnt LOC is gone forever

→ Peak demand is infinite as every day new LOC will be burnt, which sums up a share of the cumulative demand created

Join us on Telegram and let us know what you think!

LockTrip is the first marketplace with 0% commission where you can save on average 20% on your hotel and rental bookings compared to anywhere else. Learn how to buy LOC tokens to enable access to our marketplace and its lower prices here!