Paperbyte: LTO Network ($LTO)
The LTO network is a European hybrid blockchain platform (that is, both a private and public blockchain) geared toward enabling the securing, verifying, and exchanging of business data between independent parties. It does so on the foundations of blockchain technology: enabling trustless transfer of data, publicly verified, while keeping that data private between the parties involved.
The LTO Network prides itself on enabling decentralized workflows, where automation can happen by removing the trust barrier between parties, regardless of whether they are competing or collaborating.
The team is a qualified group of individuals with various backgrounds in artificial intelligence, machine learning, blockchain, and software. Moreover, their advisory team consists of people like Mike Egorov (CTO of NuCypher, a privacy blockchain) and Sandor Klein (VP of Sales at Docker, a VM container).
In a world where data privacy and regulations abound, particularly in the EU, enabling the LTO Network enables a progressive integration roadmap for businesses. Instead of needing to overhaul their technical infrastructure, businesses can opt-in to what LTO has to offer, such as:
- Anchoring data through immutable timestamps
- Enabling business identities on-chain, both public and private
- Issue accreditations and credentials that meet standards
- Trustless collaboration between businesses on a private network
Since the main purpose of the LTO Network is to automate and facilitate the trustless exchange of data between two or more parties, LTO takes a specific and nuanced approach to blockchain. This is actually a strength as they are focused mainly on the relationship between business organizations and entities, and defines a deterministic way to automate those relationships without bureaucracy or costly intermediaries.
Most notably, the LTO Network does not employ Smart Contracts as we normally think of them. Instead of building a contract that acts like a "box of value" (like Ethereum, for example), which releases that value after a condition is met, LTO utilizes what it calls Live Contracts. These don't necessarily hold value; just a deterministic specification on how both parties ought to act, and the workflow to reach consensus.
This contract is binding just like any paper contract. It is, however, verified and recorded throughout its lifetime on the blockchain, and thus cannot be tampered with. This allows a degree of trust that up to this point has not been available.
Live Contracts included a decentralized workflow — meaning that the entire process of and lifecycle of the contract (from proposal, to revisions, to approval, to verification, to record-tracking, to the actual sequence of all of these) are kept on-chain.
The end result is public verifiability of a contract between two parties without sacrificing privacy and business-sensitive information, and prevents it from ever being revealed to parties outside the contract.
To accomplish this, the LTO Network employs two types of chains:
- Ad-hoc event chains
- Global permissionless chain
1. Ad-Hoc Event Chains
The Event Chain is an ad-hoc (on-demand) private chain that signals and tracks events within a contract. Each response within a contract is wrapped in an event, which can be viewed as a block. The sequence of events form a hash-chain (uniquely identifying the data with a SHA-2 256bit hash) that is visible to all parties within the contract.
Each Event Chain is only shared between nodes that the identities within the contract choose. For instance, a node will store and facilitate many event chains at once, but they are completely isolated and do not know about each other unless determined within the contract.
Creating an event chain can be done by anyone, and the identity of that user is embedded into the event chain's Genesis block (the first), and all subsequent blocks thereafter. Other identities will be invited into the private chain at will.
The main benefit of ad-hoc private chains is that they can be completely erased at will, and many are after completion of the Live Contract. This presents a unique case in blockchain, where data is usually immutable and always on-chain (i.e. cannot be removed).
This allows LTO to be GDPR compliant, and gives users in the network complete control over their data, since they can erase it or request it at any time. It also supports zero-knowledge proofs, which means data can be verified without conveying any information beyond that it knows the data is correct.
2. The Global Chain
The Global Chain is the public blockchain component of the LTO Network, and exists to support Live Contracts and event chains. If all chains in the network were private, there would be little ability to provider interoperability between both event chains and other blockchains at large.
The Global Chain is where data can be anchored (hashed for immutable record-keeping), identities can be created, and where interoperability between blockchains, event chains, and applications is achieved.
The Global Chain is from the Nxt family, but is a fork of the WAVES platform. It utilizes benefits such as the NG protocol, which allows fast transaction settlement. It also enables transaction types, such as anchoring, authentication, authorization, certificates, a chain of trust, and smart accounts.
This becomes apparent when looking at anchoring. When an anchoring transaction is broadcast to the network, it is instantly visible. After 3 seconds it is pre-approved, and after 1 minute it is within a block.
With the hybrid nature of the LTO Network, two consensus mechanisms are needed to keep event chains and the Global Chain in a state of agreement.
Ad-Hoc Event Chains
Event chains have low participants by nature, so newer consensus mechanisms are not sufficient (such as PoW, PoS, and PoA). In light of this, event chains take a completely different approach: correct until proven otherwise.
As such, event chains rely on optimistic concurrency control. Too many conflicts would obviously put too much strain on the consensus algorithm. The event chains consensus algorithm is used to calculate the probability of a conflict occurring on an event chain, and thus reserve computing power for cases where chances of conflicts are high (such as many participants in the contract).
Transactions that pass consensus can be anchored into the global chain, but this is not required to achieve consensus.
The Global Chain
The Global Chain uses a variation of Proof-of-Stake called Leased Proof-of-Importance. The typical PoS algorithm determines a generator of a block (from the network of nodes) based on the amount of stake a generator holds. With LPoI, the chance increases based on the usage of the network by the node.
LPoI also allows "leasing" of a users token to another node, similar to Delegated Proof-of-Stake, or mining pools, where rewards are shared among all parties contributing.
Consensus algorithms like this tend to lead to high centralization of tokens, and makes the network less secure since a single party can get closer to holding enough tokens to perform a network attack.
LTO prevents this by including a limit on leveraging leased tokens: any node needs to own at least 10% of the tokens that it stakes, and Proof of Importance incentivizes the node to perform work instead of passively staking.
- Max Supply: 403,393,276
- Average ROS: 4-6% APY
LTO uses an incentivized tokenomic structure in place of traditional SaaS price models. In the case of the latter, a user will pay a monthly or annual fee at a fixed price, regardless of how they use the service.
With blockchain, a usage-based pricing model is available. The staking mechanism of the LTO Network actually incentivizes users to stake enough coins to match their cost associated with using the network. In fact, it is possible for users to maintain a net zero cost for using the network by holding enough stake on their node to earn rewards equal to their usage of the network.
LTO categorizes 4 types of users, and associates distribution of tokens among each category during the maturation phase like so:
- Integrator & Partner: Stakers in the network, usually running their own nodes and acting on their own behalf or the behalf of their clients. Targeted supply is ~50% of all tokens, since these are the most invested.
- Clients: actors using the network and paying transactions fees. Targeted supply is ~30%.
- Passive Stakers: actors that will stake their coins (potentially through a lease), and run a node simply to validate transactions. Targeted supply is ~10%.
- Non-Active holders: non-active participants simply holding coins but not leasing/staking them to a node. Targeted supply is ~10%.
Rewards for staking are incentivized toward participants in the network, meaning there is direct correlation to participation and reward (hence the Leased Proof of Importance model described above).
For example, a node that stakes 10% of the total supply on the network, as well as produces 10% of the total transactions, will have a higher than 10% chance at validating a block.
A overly-simplistic example would be that a node staking 40% of the supply but only producing 20% of the transactions would receive around ~4.2% Return on Stake (ROS). Conversely, a node staking only 23% of the supply but producing 25% of transactions would receive closer to 6.2% ROS.
The LTO Network has a novel approach to blockchain design, particularly in GDPR compliance and data ownership. Where it's typically difficult (if not impossible altogether) to remove data from a blockchain, the LTO Network has this capability built-in.
Furthermore, praise can be given to the team for focusing on a hyper-focused approach to automating business-to-business contracts. That being said, such contracts could be still utilized by both governments, individuals, and organizations alike. The use-cases are demonstrable, evident, and have a skilled and talented team behind them.
Enterprise entities have yet to determine a solid blockchain winner that covers their goals, and while other competitors exist, we have not found any that offer what LTO Network does, particularly as it relates to Live Contracts and complete privacy and data control.