Loki is another privacy coin that has recently been attracting a fair bit of interest in crypto circles.
This is a privacy conscious cryptocurrency that which joins a long list of similar coins that are trying to take advantage of Bitcoin’s lack of privacy. Indeed, one could be forgiven for feeling slightly overwhelmed by the sheer number of projects developing privacy centric blockchains.
In this environment, can Loki really stand out and carve a niche for itself? Or will it come and go like similar other privacy coins?
In this Loki review, we will take an in-depth look at the project. We will analyse the underlying privacy protocols and technology as well as delve into the team experience, user adoption potential and long term LOKI token prospects.
Loki was created as a fork of Monero, which is already one of the most anonymous and private cryptocurrencies. With Loki, the developers are looking to create a completely anonymous, private, secure network for communication and trade.
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So how then does Loki differentiate itself from Monero? In several ways actually.
First of all, the Loki team is not competing with Monero. It simply uses Monero’s privacy features to create a foundation for its second service layer of Service Nodes. The Service Nodes utilize an architecture that is similar to other private internet protocols to allow private communications on the Loki network.
It’s these peer-to-peer protocols that help to create the decentralized network for routing traffic over the internet in a private fashion. Monero uses ring signatures and stealth addresses to create plausible deniability for its users when signing transactions.
A ring signature works by creating a ring of signers, where all but one is just a decoy. While Loki uses ring signatures in the same way as Monero, it also improves on Monero by enforcing a minimum ring size of 10, where Monero has a minimum ring size of 5.
Stealth addresses also ensure that the public key of the receiver of a transaction never gets linked to their transactions. These work by creating a one-use stealth address every time a transaction is sent on the Loki network.
The funds are sent to this address and the receiver calculates a private spend key for this address, allowing them to take ownership of the funds without revealing their own public address. This anonymity for receivers is one of the core features of the Loki network.
Of course, in order for Loki to adequately differentiate itself from other privacy coins, it has to have some of its own unique technology. Below are some of the features that were exclusively included in the Loki network.
As mentioned above, ring signatures typically contain the true unspent output being sent and a number of decoys. These decoys are called mixins. They look like unspent outputs, but are not necessarily so.
Loki samples mixins based on user spending habits, which means a third-party can’t ever assume the oldest mixin is a decoy, because the distribution of chosen outputs reflects the possibility of an older unspent mixin being included in the ring signature. This sampling was included to increase the network defenses against a temporal association attack.
Loki creates an equilibrium in the rewards for miners and service nodes by using a block reward equilibrium algorithm. This algorithm regularly rebalances how the block rewards are allocated. If hashing power and difficulty on the network declines the miners will receive a higher proportion of the block rewards.
On the other hand, if the number of active Service Nodes decreases below an expected amount, the Service Nodes are given a higher proportion of the block reward. It’s expected that this will encourage miners to increase when hash rate drops. The target split for block rewards is 50% to miners, 45% to Service Nodes, and a static 5% to the governance pool.
There are significant staking requirements to become a Service Node, which encourages honest behavior. The Service Nodes are also capable of creating Service Node Applications (SNApps) to serve and store private messages.
The very first SNApp planned for the Loki network is a decentralized, private, encrypted messaging service called Loki Messenger. While there are already private messaging applications these are all built using centralized servers that can be the target of a third-party attack. In the case of Loki Messenger, public-private key cryptography is used to maintain privacy.
The receiving address will be a Loki holder’s public key. The sender broadcasts their message to three randomly selected Service Nodes, and it is signed with the receivers public address. Each Service Node can hold messages for up to 24 hours in their “message pool”. Messaging functionality is planned to be available in the Loki wallet software, as well as via a mobile application.
You’ll find two unique encryption features as part of Loki Messenger:
Loki has also created a hybrid model to prevent Sybil attacks and have called it Runes. Runes will be necessary for access to SNApps. Initially this will only include Loki Messenger, but as more SNApps are added to the network they will be included as well. The requirement for each Rune to be bound to a public address will give the nodes a means for confirming “identity” while also maintaining privacy.
Runes will be created as rewards given to Rune miners. Each Rune that is mined is considered as “unbound” when first discovered. This means a Rune miner can either bind the Rune to their own public key, or they can sell it to another user to be bound by them. There is no way to unbind a Rune once bound, so they cannot be transferred after being bound.
Runes remain valid for 20,000 blocks, which is roughly 30 days, after they are mined. Users have the choice to collect Runes by mining or by purchasing them on the open market.
The ownership and binding of Runes occurs on a secondary blockchain in the Loki network known as the Runechain. The Runechain is maintained by the Service Node network because it is separate from the primary Loki network layer. There are future plans to implement a decentralized exchange that will allow users to trade LOKI for Runes.
The Loki website lists 4 executive team members, 10 developers, and 8 supporting organizations.
By some accounts the most impressive team member is lead developer Tom Winget, who was previously a huge contributor to Monero in 2014 and 2015. His experience has been vital to the development of Loki.
The Founder of Loki is Simon Harman, who has a background in web development and project management. He is also a member of Australia’s Blockchain Center, which is the country’s largest community of blockchain entrepreneurs, experts, mentors and investors.
Loki conducted a private sale of tokens in March 2018, selling 15% of the 150 million total token supply at $0.68 and raising $9 million. The remaining tokens will be held for mining rewards, but there was also a large airdrop held following the private sale. There was never a public ICO for Loki.
After the airdrop the price of LOKI dropped throughout most of 2018, reaching a low around $0.13 in August 2018. It has been rallying since then, and as of late October 2018 is trading at $0.4433 per LOKI. That gives it a market cap of nearly $13 million and makes it the 301st largest coin by market cap.
If you’re looking to buy LOKI you can only do so at Cryptopia or TradeOgre. There are no other exchanges currently supporting LOKI.
Storing LOKI must be done in the official Loki wallet available on their website for Windows, MacOS and Linux. The wallet not only allows storage of LOKI, but also opens up the possibility of mining LOKI and beginning to use the system for trading and eventually sending and receiving private messages.
As a privacy coin Loki has made several improvements over Monero, but I’m not certain that’s enough to recruit the Monero faithful. Indeed, you can see how the price of LOKI tokens suffered following the conclusion of the airdrop, although they have been making a strong comeback lately.
Those interested in private messaging will certainly be interested in Loki Messenger, but until the platform can begin to deliver more SNApps I’m not sure the messenger alone is enough to garner widespread adoption.
There’s also the question of exchange support. With only two exchanges offering LOKI it’s very difficult for the coin to gain traction. Unless some of the major exchanges such as Binance, OKEx and Huobi pick up LOKI I can’t see how it will gain additional traction.
I like the concept and the plans of the team, but the token needs better marketing or it could very well end up lost in the obscurity of the host of other privacy and messaging coins being developed.
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