Examining the Tokenomics of a Utility Token in a Security Token Ecosystem
Examining the Tokenomics of a Utility Token in a Security Token Ecosystem
The Tokenomics of Landshare
Introduction
I believe there is no better way to start this article than with a small meme:
Real estate has long been regarded as a lucrative investment, providing benefits like passive income, inflation protection, or the security of having a place to call home. However, for many individuals, owning property remains an elusive dream due to the substantial capital requirements and barriers to entry. Institutional investors often dominate the real estate market, leaving little room for the average person to participate.
To address this challenge, Real Estate Investment Trusts (REITs) were introduced as a means for investors to gain exposure to the financial performance of real estate companies. By investing in REITs, individuals could receive dividends from the rental income generated by these companies' properties. While REITs offered a partial solution, the accessibility to direct real estate ownership remained limited.
Enter Landshare, a platform that aims to revolutionize real estate investment by enabling fractional ownership through tokenization. Landshare empowers investors to participate in tokenized real estate with a minimum investment as low as $50. By leveraging blockchain technology, Landshare opens the doors to a wide range of DeFi opportunities, including the ability to use tokenized real estate holdings as collateral for loans.
This article delves into the integration of the $LAND token into the Landshare ecosystem, how different user groups interact with the token, and the sources of its value. It aims to provide an in-depth exploration of the $LAND token and its role within the Landshare ecosystem.
$LAND Tokenomics
Below we can see the value flow diagram for Landshare. This showcases how the system works, where the relevant sinks and faucets are, and how value flows through/around the protocol.
A zoomable version of the diagram can be found here.
If you’re interested in the condensed, need-to-know tokenomics information for Landshare, check out the report on Tokenomics Hub.
Ecosystem Participants
Landshare’s Ecosystem consists of three groups of participants with different goals and roles:
LAND Token Holders / Stakers:
This user group consists of individuals who acquire the $LAND token for various reasons. Some purchase the token for speculative purposes, anticipating potential price appreciation and capital gains. Others seek to earn passive income in the form of additional (emission-based) $LAND rewards by staking their $LAND tokens. By holding (or staking) $LAND tokens, they also receive voting rights which they can use to participate in Landshare’s governance.
Liquidity Providers (LPs):
Liquidity Providers form an important part of the Landshare ecosystem by providing liquidity to the LAND-BNB Pool on Pancakeswap to ensure a smooth trading experience for users. LPs are incentivized by receiving a portion of the transaction fees generated within the liquidity pool as a reward for their contribution. Additionally, LP tokens can be staked to earn more emission-based staking rewards as a further incentive to provide liquidity over a longer time horizon.
Real Estate Investors & Traders:
This user group represents the primary beneficiaries of the Landshare platform, as it is specifically designed to create value for them. Real estate investors and traders acquire asset tokens from real estate offerings provided on the Landshare platform, which are essentially security tokens. These offerings are divided into two categories:
Rental properties: These enable investors to earn passive income over the long term.
House flips: These provide the opportunity to make a quick yield. This group also engages in secondary market trading to buy, sell, or trade asset tokens.
Furthermore, participants in the Landshare ecosystem can take advantage of the GameFi features, which enhance the yield potential of the rental properties they invest in, adding an additional layer of profitability and engagement to their investments.
Due to the scope of this article, I will not dive much further into the GameFi mechanics, but if you are interested, feel free to read about it here.
Protocol Components
Real Estate Offerings (Primary Market)
The Landshare platform provides investors with two categories of real estate investments. The first category involves purchasing asset tokens (security tokens that represent an ownership stake in the underlying property) from properties that are rented out, allowing investors to earn monthly rental income. This type of investment is ideal for those seeking a long-term investment strategy with stable returns. Those returns are distributed in $BUSD proportionally to the respective investors every month.
In addition to rental properties, Landshare offers the opportunity to participate in house flips, which are considered riskier investments but have the potential for attractive returns within a relatively short period of time. The house-flipping process usually takes between three to six months. Here, the return is paid as a lump sum in $BUSD to investors who participated in crowdfunding the respective house flip. Unlike asset tokens from rental properties, house-flipping tokens are not tradeable on the secondary market.
For those unfamiliar with house flips, it is a real estate investment strategy where properties in need of renovation are purchased, renovated, and subsequently sold at a higher price when the renovation is completed. This process usually takes between three to six months. Feel free to read more about house flips on Landshare here.
Asset Token Trading (Secondary Market)
Asset tokens from rental properties can be traded on the secondary market. Currently, this trading is facilitated through Stobox DS Swap, serving as a decentralized exchange (DEX) specifically designed for security tokens. Stobox DS Swap operates independently as a third-party platform and is not developed or maintained by Landshare.
In the future, Landshare intends to introduce over-the-counter (OTC) trading for asset tokens. This OTC option will allow investors to trade significant quantities of asset tokens without causing substantial price impacts, offering a convenient solution for executing large trades.
Asset Token Loans
Landshare will introduce the asset token loan feature, allowing asset token holders to utilize their assets as collateral and access short-term liquidity without the need to sell their asset tokens. Through this feature, holders can borrow up to 60% of the asset token's value in BUSD, providing them with immediate funds for their use.
To retrieve their asset tokens, borrowers must repay the loan in full, inclusive of the interest accrued in $LAND. By repaying the loan, borrowers regain ownership of their asset tokens.
If you're curious about how the price of the underlying asset is determined, Landshare sets the price based on the market value of the respective real estate. This approach is commonly employed for security tokens that represent illiquid assets like real estate.
GameFi Ecosystem
The GameFi Ecosystem introduces an exciting opportunity for asset token investors. To participate in this ecosystem, investors are required to own a real estate NFT. Those NFTs are granted to property investors who purchase a minimum of 5 asset tokens during the initial offering of a given property.
By staking their asset tokens on the NFT, holders can enhance their overall yield by earning additional $LAND rewards on top of the monthly $BUSD rental yield. To further maximize their $LAND rewards, investors can consider upgrading their virtual house or NFT within the ecosystem. This upgrade offers an opportunity to unlock even greater benefits and rewards within the GameFi ecosystem.
AMM (LAND/BNB)
Another component of the Landshare platform is the LAND/BNB Liquidity Pool on Pancakseswap, where users can buy and sell $LAND. Liquidity Providers are rewarded with the transaction fees that are charged for every swap and earn additional $LAND rewards by staking their LP tokens in the LAND/BNB LP Staking Vault.
Staking Vaults
Lastly, the Landshare platform features two staking vaults where users can either stake solely their $LAND token to earn emission-based $LAND rewards or stake, as already mentioned, their LP tokens.
When a staker uses the auto-compound feature to automatically reinvest the earned $LAND rewards, Landshare charges a 2% performance fee on each compound performed, as well as a 0.1% withdrawal fee if the staked tokens are withdrawn within 72 hours.
Value Creation
Value creation refers to how the protocol is creating value and for whom. Value is created when a problem gets solved. Read here to understand more about value creation.
Problem
In the current market landscape, the dream of earning rental income or relying on it for a sustainable livelihood seems out of reach for many individuals. The exorbitant costs and capital requirements associated with real estate investments make it extremely challenging for the average person to enter the real estate market. Furthermore, the burdensome bureaucracy and complex tax structures create additional obstacles and discourage potential investors from buying and owning properties.
Overall Goal
Landshare's overall goal is to revolutionize the real estate market by making investments in this traditionally exclusive asset class accessible to the masses. Landshare aims to achieve this goal by tokenizing and fractionalizing real estate investments. Through tokenization, the division of real estate assets into smaller, more affordable units is enabled, allowing investors to purchase fractional ownership in properties that were once financially out of reach. This fractionalized approach not only lowers the barrier to entry but also increases liquidity and diversification opportunities for investors.
Ultimately, Landshare's comprehensive solution empowers individuals to build wealth, earn rental income, and benefit from the long-term appreciation of real estate assets, thereby democratizing access to one of the most sought-after investment opportunities in the world.
Value Capture
This refers to how the protocol is capturing the value it creates. Essentially, if value is being created then it has to flow somewhere (ideally to wherever the protocol deems most viable). Value capture can be broken down into (1) value accrual to the protocol and (2) value accrual to the token. Read here to understand more about value capture.
Value Accrual to Protocol
The treasury of the Landshare DAO mints itself 2.5% of all staking rewards harvested from the staking vaults. It is not a fee to-be-paid by the one harvesting the staking reward, it can be considered as a form of dynamic release schedule in that rather than a lump sum of tokens being minted to the treasury at TGE, they are minted gradually. Additionally, 12.5% of the 2% performance fee associated with the auto-compounding feature is allocated to reward bounty claimers.
This should ensure that the Landshare DAO has a growing pool of tokens to support its operations and initiatives.
Value Accrual to Token
On the Landshare platform, users are required to pay $LAND for various transactions, including a 10% fee to purchase asset tokens (both, house flips and rental properties) and the accumulated interest for asset token loans.
Importantly, these platform fees are burned. This means that the fees are permanently removed from circulation, resulting in a reduced circulating supply of $LAND. Consequently, if the demand for $LAND remains steady or increases, the reduced supply can potentially contribute to an increase in the price of $LAND.
If you are concerned about the possibility of Landshare running out of tokens as more and more tokens are burned, let me address that. Technically, it is possible, but due to the token having 18 decimals, the price would have to reach astronomically high levels for it to become impractical to pay fees with the smallest unit of the token available.
Business Model
Its important to understand the business model of the protocol since it ties into how value is flowing in the system and is relevant for the sustainability of the protocol.
Revenue comes from:
10% of the value from purchasing asset tokens (both, house flips and rental properties)
Interests from asset token loans
2% performance fee from the auto-compound feature of the $LAND staking vault
2.5% of the harvested staking rewards (keep in mind that this is not a fee, but rather an additional emission-based reward that is minted to the DAO’s treasury)
Paying to upgrade real estate NFTs
5% transaction fees on Landshare’s NFT marketplace
Revenue is denominated in:
$LAND
Revenue goes to:
Burning address
Landshare DAO treasury (bounty claimers): Only 12.5% of the 2% performance fee from the auto-compound feature.
Token Utility
This refers to how the token is being used within the project and by whom. Essentially the token’s use case. Read here to understand more about Token Utility.
Asset Token Purchases – Fee Payment Token
$LAND is the utility token within the Landshare ecosystem. One of its key utilities is as a payment method for platform fees. Landshare requires that 10% of the value of every asset token purchase is to be paid in $LAND, which is subsequently burned. The remaining 90% is to be paid in $BUSD. This mechanism is not only a demand driver for $LAND but also reduces the supply over time, leading to increased scarcity and potential value appreciation.
Asset Token Loans – Interest Payment Token
Moreover, by utilizing asset tokens as collateral for borrowing BUSD, borrowers are required to pay the accruing interest in $LAND, which is also subsequently burned. With the loans being overcollateralized, this approach not only safeguards the lender's investment but also incentivizes borrowers to acquire and use $LAND tokens for fulfilling their interest obligations to receive their assets back.
GameFi – Yield Boost Token
In addition, $LAND plays a crucial role in the broader GameFi ecosystem offered by Landshare. Although we will not delve too deeply into it here, it's important to note that $LAND can be used as a payment token within this ecosystem. Users have the ability to purchase "Power," a resource that can be utilized to enhance the yield generated with asset tokens. This integration of $LAND within the GameFi ecosystem adds another layer of utility to the token, providing users with opportunities to optimize their investment returns and engage in a dynamic and interactive experience.
Staking & Governance
Lastly, participants have the opportunity to stake both the $LAND token and the LP token acquired through liquidity provision in the LAND/BNB Pool on Pancakeswap. This staking process enables users to earn additional rewards in $LAND, which are emission-based.
In addition to the staking rewards that users can earn, individuals who hold or stake $LAND (including $LAND in the LP) possess the ability to exercise voting power and take part in Landshare's governance, whereby each $LAND token represents one vote. By utilizing their voting power, stakeholders can contribute to crucial determinations such as marketing events, fee structures, grants, and other platform-related matters. This approach ensures that stakeholders have a voice in shaping the future direction of Landshare, fostering a sense of community ownership and facilitating collective decision-making.
$LAND Demand Drivers
Demand for a token can from three sources, those being the demand for token due to its utility, demand for token due to a mechanism (i.e staking) and demand for a token due to speculation. Essentially, demand drivers refer to who is buying/holding the token and why. Read here to understand more about Token Demand Drivers.
The demand drivers for the Landshare token are closely tied to its utility within the ecosystem, particularly for real estate investors. These investors have a range of needs that motivate them to purchase and utilize the token within the Landshare platform.
First and foremost, the token is essential for investors to pay various platform-related fees. This includes purchasing asset tokens, which serve as the primary demand driver for $LAND. Additionally, investors utilize $LAND to cover interest payments for asset token loans and to enhance their yield by upgrading their virtual houses in the form of NFTs.
Another factor driving the demand for the token is the opportunity for investors to earn staking rewards by staking the token and participating in Landshare's governance. By holding or staking the token, investors gain the ability to influence decision-making processes within the ecosystem. Furthermore, there is a speculative element, as investors can anticipate capital gains. This is due to the fee-burning mechanism in place, which has the potential to increase the value of $LAND over time.
$LAND Distribution & Unlocks
It's important to understand how the supply is being split up into different allocations and how these allocations will be distributed (vested or emitted).
Reward Pool:
Landshare's official documentation does not provide specific details regarding the distribution of tokens within the Reward Pool. However, according to information shared by administrators in their Telegram channel, approximately 2,000 $LAND tokens are currently released per day. Based on this information, it can be estimated that the complete allocation will be distributed over a period of ca. 8 years, considering the TGE on August 2nd, 2021.
It is important to note that the distribution within the Reward Pool is subject to potential changes through governance proposals.
Seed Round:
In July 2021, Landshare conducted a seed sale in which 1,000,000 $LAND tokens (equivalent to 10% of the maximum supply) were offered at a price of $0.3 per token. Following a lockup period of one month, these tokens were distributed linearly over a span of 10 months.
IDO Rounds:
Landshare conducted a presale on Seedify on July 21st, 2021. During this event, 187,500 $LAND tokens (equivalent to 1.875% of the maximum supply) were offered at a fixed price of $0.8 per token.
Furthermore, Landshare conducted an Initial DEX Offering (IDO) on Superlauncher on August 2nd, 2021. In this round, a total of 150,000 $LAND tokens (equivalent to 1.5% of the maximum supply) were made available at a fixed price of $1 per token.
For both the presale on Seedify and the IDO on Superlauncher, the tokens were unlocked linearly over a period of 3 months, without a vesting lockup period. This means that approximately 33% of the tokens were unlocked at the time of the Token Generation Event (TGE).
It is worth noting that the information provided in the articles regarding the IDO Rounds does not align with Landshare's tokenomics allocation, as the IDO Rounds should account for a total of 3% of the token supply. However, based on the given information, the cumulative allocation amounts to 3.375%. This is yet to be clarified by Landshare’s core team, feel free to reach out if you’re reading this.
Liquidity
Another important aspect of the token allocation is the Liquidity allocation. Based on the allocation table provided by Landshare, 75,000 $LAND tokens (equivalent to 0.75% of the maximum supply) are allocated for pairing with BNB to facilitate trading on Automated Market Makers (AMMs). It is worth noting that the pie chart indicates that the Liquidity allocation should be 1% of the maximum supply. However, this deviation can be attributed to the requirement of initial liquidity for the IDO event, which is necessary to establish the starting price.
(An interactive version of the release schedule chart can be found here)
*The Release Schedule is excluding Allocations with a non-algorithmic distribution (such as the Marketing & Partnership Allocation, which release is dependent on governance decisions)
Feedback Loops
A tokenomics analysis is focused on how value flows through the system and how it interacts with different users/components of the protocol. Feedback loops are relevant since they may be positive or negative and thus have an outcome on the underlying value capture (be it on the protocol or token level).
Landshare's tokenomics exhibit three notable feedback loops:
Real Estate Offerings and Token Burnings:
As successful real estate offerings are presented and funded on the Landshare platform, the demand for $LAND tokens increases. This rise in demand, in turn, leads to more token burnings. Token burnings occur as a result of fees (for purchasing asset tokens) being paid with $LAND tokens. Therefore, the more real estate offerings are successful and funded, the higher the demand for LAND, and consequently, the greater the number of token burnings.
Asset Token Circulation and Interest Payments:
An increase in the circulation of asset tokens on the Landshare platform contributes to a rise in interest payments (when the feature gets launched) that accrue in $LAND. More real estate investors use their asset tokens as collateral to obtain loans, resulting in increased interest payments. These interest payments have to be paid for in $LAND tokens. Thus, as more asset tokens circulate within the ecosystem, the interest payments and subsequent accumulation in $LAND also increase.
Staked Tokens and Overall APR:
When more $LAND tokens or LP (Liquidity Provider) tokens are staked within the staking vaults, the overall Annual Percentage Rate (APR) for participating stakers decreases because as more tokens are staked, the overall supply of staked tokens increases. This larger supply of staked tokens leads to a lower APR for stakers, as the rewards are distributed among a larger pool of participants.
In summary;
The presence of real estate offerings on the Landshare platform drives demand for $LAND tokens and results in higher fees being burned.
The circulation of asset tokens leads to increased interest payments that accumulate in $LAND.
The staking of LAND tokens or LP tokens affects the overall APR for stakers.
Ultimately, the more real estate offerings on the platform, the greater the demand for $LAND tokens, leading to increased fees and burnings.
Observations/Thoughts
One concern with the current token allocation strategy employed by Landshare is the significant reliance on emission-based rewards, which constitute a minimum of 66% of the token allocation. The problem with this approach is that these rewards do not represent "real" yield. Financial rewards are created out of thin air, and token holders who do not stake their tokens end up indirectly shouldering the cost. While some users may utilize their earned $LAND tokens within the ecosystem without selling them, the majority of token holders typically engage in speculation, seeking capital gains and wanting to exchange their $LAND rewards for more established tokens like BNB, BUSD, or other.
To tackle this problem, a potential solution could involve reducing the amount of emission-based staking rewards and allocating a portion of the collected fees to reward stakers, while still burning the remaining fees to maintain the deflationary aspect. By diminishing the dependency on emission-based rewards, Landshare would be able to establish more sustainable, less inflated, tokenomics. Additionally, it may be prudent to consider the implementation of a fee distribution mechanism where stakers receive a portion of their rewards in BUSD, rather than $LAND. This adjustment would effectively reduce the selling pressure that can arise from distributing rewards solely in $LAND. Additionally, such an approach would cater to the needs of investors who are keen on diversifying their holdings and seeking a broader range of assets
Moreover, $LAND stakers already receive double rewards by design. They earn staking rewards and have the potential to benefit from price appreciation resulting from the burning mechanism, provided that demand remains stable or increases. However, there is a valid argument as to whether the burning mechanism is the most efficient way to generate value for the token. Like most utility tokens, the Landshare token is closely correlated with major cryptocurrencies such as BNB, ETH, and BTC. Consequently, price appreciation resulting from token supply reduction is influenced by this correlation. It would be advantageous for token holders to receive the "real" staking rewards directly through fee distribution rather than indirectly through token burnings. This way, they can decide for themselves whether to continue holding the tokens or sell them.
Lastly, the fee payment process for purchasing asset tokens especially can be streamlined by enabling investors to pay the full value in BUSD and automatically swapping 10% of the value into LAND within the same transaction. This approach eliminates the need for investors to hold $LAND tokens in their wallets upfront, reducing entry barriers while maintaining the desired effect.
Summary
Landshare presents a comprehensive ecosystem for tokenized real estate investments, providing a range of features related to the buying and selling of asset tokens. At the core of this ecosystem is Landshare's native token, $LAND, which serves as a payment token for fees, with a deflationary mechanism in place through token burning. It's important to note that the deflationary aspects of $LAND are primarily realized in the long term due to the significant allocation of staking rewards based on emissions. As Landshare continues to evolve and grow, the deflationary nature of $LAND will become increasingly evident, contributing to the long-term sustainability and value proposition of the ecosystem.
As a final note, Landshare has announced plans to enhance its tokenization strategy by introducing the RWA token, which is a more scalable and DeFi-friendly solution. The RWA token serves as a fund token that consolidates all existing and future rental and flipping properties into a single token. This approach eliminates the need to create separate legal entities for each property, simplifies integration with DeFi features by requiring only one contract address, diversifies the risk, and enhances liquidity compared to the current asset tokens. Since this is yet to be launched further detail & analysis is needed to determine if this newfound service offering will effect in any way Landshares tokenomics.
If you’re interested in the condensed, need-to-know tokenomics information forLandshareincluding all the resources used for this article, check out the report on the Tokenomics Hub
This post does not contain financial advice, only educational information. By reading this article, you agree and affirm the above, as well as that you are not being solicited to make a financial decision, and that you in no way are receiving any fiduciary projection, promise, or tacit inference of your ability to achieve financial gains.
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