This week's interview is with Marton Ven, CMO of TE-FOOD. TE-FOOD is a farm-to-table fresh food traceability ecosystem on the blockchain. It provides full physical (identification materials) and virtual (client software, blockchain ledger) elements which are necessary to implement food traceability. You can find part 1 here.

You have decided to limit the number of masternodes, so they will stay profitable. What was the reason behind this decision, and why wouldn’t you let market supply & demand decide the number of masternodes?

The token economics of TE-FOOD differs from most other projects. Most projects reward masternodes with their own volatile tokens, without any revenue backing. This is like printing money, which resembles to pyramid schemes.

TE-FOOD will only pay out a part of its transactional revenue paid by customers. We will pay it in a stable token with no price volatility, which represents the exact value the customers owe to the service providers. This is why we can't allow any number of masternodes, because after a certain number, it wouldn't be a profitable service anymore. We think it would make no sense to require service providers to operate at a loss, so limiting the number of masternodes seemed to be the most obvious choice.

The limited number of masternodes can lead to a scenario where new investors don’t want to buy TFD because they have a small chance of becoming a masternode owner. Also, once masternodes start and it turns out there are too many, investors who aren’t selected might sell their TFD, causing a dump. What actions do you take to prevent these scenario’s leading to TFD price going down?

The utility of TFD is to be a tokenized software licence. Anyone who wants to use the TE-FOOD ecosystem will need a certain number of tokens to cover the user number and the transactions in the ecosystem. This means masternode licencing is not the only use case TFD has.

As we might anytime need to extend the number of nodes, we implemented the Sleeping Masternodes. Operating Masternodes which provide good service are entitlled to provide their service with less and less TFD licence tokens each year, as a Reputation Discount. Sleeping Masternodes are also entitled to enjoy some Reputation Discount (1% per month) to be available to start service anytime. This means once the network demand grows, and a Sleeping Masternode is required to become operational, the number of TFD licences it has to hold will be less.

You’re giving potential masternode owners the ability to lower their earnings and lock up their tokens for a longer period. Investors with lower requirements will be more likely to be selected. Is this a fair way to select masternode owners? Will somebody who has a shorter registration period, but better conditions be more likely to be selected? Shall different masternode owners have different conditions, or will you choose the same conditions for everyone based on the results?

In our approach, providing masternodes is a service. When any company or individual has to select between service providers, they will select the ones which provide the best conditions. This is what people do when they buy their telecommunications provider, internet provider, hosting provider, etc.

Applications which commit for a longer fixed time period, or require less Reputation Discount will be preferred, that’s what logic dictates.

There are still undecided points in the structure (e.g. how many masternodes will be needed for start, or how much revenue can be achieved). We are working on these calculations, though sometimes it requires to calculate with amounts we don’t know yet.

To be more exact:

  • we serve 400,000 transactions today, but as the system grew organically, there were parts we needed to optimize in the new system. There are transaction types in the old system which won’t be, or will be bundled in the new. This is why we don’t exactly know how much transactions we can calculate with.
  • The price of TFD is volatile, but the payment for the masternode services is bound to fiat revenues, the market movements can affect the ROI of masternodes. We know about this risk, but paying masternodes with our token is undefendable legally. We believe Reputation Discount mitigates this risk.