Those of you who have been following Loki for a while have watched Session grow into one of the main products — and one of the most talked about aspects — of the whole Loki ecosystem. But for newcomers in particular, it may not be immediately clear how Session fits into the Loki ecosystem, and why it’s the project’s most promising development yet.
Put simply, Loki enables the creation of a unique, decentralised cloud infrastructure perfectly suited to providing anonymous message routing and storage services to end users. Session is the product that leverages this system that end users interface with.
To holders, Service Node operators, and keen observers of the Loki ecosystem, it may not be immediately obvious how Session actually creates and captures value for the wider Loki network. The Service Nodes aren’t doing volunteer work: at some point, the network pays for the rewards that they’re receiving, in the form of inflation. And as Services Nodes become more expensive to run because of the potential millions of users that Session attracts, they may start dropping off the network if the value of the Loki that they’re earning isn’t sufficient to offset their running costs.
Essentially, Session needs to bring value to the Loki Project — it needs to make money for the network. Session is a product that is being offered to the world for free, and without a monetisation scheme, the people who ultimately end up paying for it would be holders and Service Node operators.
This is exactly why the community and the development team have been discussing monetisation as a key consideration not just for Session, but also for Lokinet. In fact, we’ve been discussing the issue for over a year now.
One of the more obvious solutions to this problem involves passing Session’s operating costs onto Session (and Lokinet) users themselves. This might involve a requirement to own some Loki, to stake some Loki, or to burn some Loki in order to access the services. This neatly solves the monetisation problem. However, requiring prospective users to acquire cryptocurrency (Loki, BTC, or otherwise) in order to use Session would make the app deeply uncompetitive with the dozens of completely free secure messaging solutions already on the market.
In order for Session to bring value to Loki without alienating users, we’ve had to design a monetisation scheme that:
- Doesn’t impact the core (free) functionality of the Service
- Provides optional benefits and features that directly brings money into the ecosystem
- Can’t easily be skirted around by modifying or forking our open source clients
- Doesn’t compromise user privacy
In-app advertising would be one potential solution. However, while advertising could be implemented in a safe and fairly decentralised manner, we still wanted to avoid putting ads in Session. We feel that ads would significantly degrade the perceived quality of the app and reduce its chances of attaining mass adoption.
The main proposed method of monetisation is through LNS. Because Session does not use phone numbers or a centralised registration system, it’s a little more difficult to add people than it is on Session’s competitors. You can’t just send someone your phone number or have them look you up by a static name. You either have to copy, paste, and send your public key, or show them your QR code in person. Both of these methods are fine, but there is a lot of convenience that comes with a username system.
That’s why we’re leveraging the Loki blockchain to allow users to buy privacy-preserving usernames on Session though LNS. By burning a small amount of Loki, Session users can privately link their chosen username to their public key. They can also update their public key, and add a wallet address to that username should they wish.
Because usernames will be hashed before being added to the public register, Session IDs will remain hidden from anyone who doesn’t know the associated username. LNS will allow people to quickly add their friends while also acting as a form of authentication — proving that a given pubkey belongs to the intended recipient, all the while maintaining the anonymity and security Session is known for.
Because LNS involves burning Loki, rather than paying a fee to the network, the value captured in the transaction directly offsets newly-minted Loki created as a part of Service Node rewards. This means that the whole network benefits equitably from this monetisation model.
Further to this, we’re exploring methods that would allow any Session user to purchase LNS names without having to go through the process of purchasing crypto. Buying BTC, using that to buy Loki, then using that to buy an LNS name is a lot of work, even for someone with crypto experience. Because of the way App Store and Play Store in-app purchases work, we can potentially create a system where users pay for a Session username using Apple Pay or Google Pay, and the Loki Foundation then registers that name on the Loki blockchain — all without the user revealing any personal details to the Foundation, or revealing any information about the name being purchased to Apple or Google. This is a promising interim measure to make adoption of Session LNS names easier without compromising privacy. Extremely privacy-conscious users will still be able to register names themselves as usual in the Loki wallet.
This system meets all of the criteria described for the Session monetisation scheme — but is it going to be effective?
We believe so. Running some basic numbers, we think Session has the potential to reach tens of millions of users in the coming years. Our medium-term goal is for Session to have over a million active users into 2021. With that being the case, and looking at some other examples of monetisation schemes similar to this, we think that 8-12% of Session users purchasing LNS usernames is a reasonable expectation. With this as an assumption, at around $10, LNS names could burn as much as $1.2m worth of Loki in the first year.
Considering these Session username projections, in combination with name purchases for Lokinet SNApps, we believe that LNS will serve as a key monetisation engine for the Loki network. However, LNS isn’t the only way Session will bring value to the network.
Another key feature that we want to build into Session is a Loki wallet. With the implementation of Blink, Loki supports instant transactions, meaning that users can transact using Loki in the blink of an eye without compromising on privacy, anonymity, or security. That’s a pretty neat thing to have integrated into Session — which is fast becoming a class-leading option for secure and private messaging. We believe that Session users will find uses for the currency in the form of in-app exchanges of value using Loki. With a Loki wallet integrated into Session, and Loki being used for everyday transactions by Session users, value will be added to the network as a whole, as Loki’s utility as both a medium of exchange and a store of value will increase. This is a slightly longer-term goal. In order for Session-Loki Wallet integration to have a notable effect on the network as a whole, a significant proportion of the Session userbase will need to be using Loki for transactions. However, we believe that in the long term, this will become one of the primary driving forces behind the value of Loki.
Hopefully, this clarifies how Session and Loki are a match made in heaven — and how Session will be a key driving force in bringing value to the Loki Project as a whole.