Feel the burn
TLDR: Due to the rise of the Ether since the moment we price-locked for the general sale period our set hard cap of €15 million (54,981 ETH for 36.9 million GET issued during the crowdsale) is currently valued at €22 million. To correct for this increase in the hard cap GUTS will lower the maximum amount of tokens available during the rest of the crowdsale (and thus lowering the hard cap by +/- 19k ETH). By burning yet unsold tokens in Tier II, III and IV our crowdsale hard cap will be back at the aimed €15 million. This will make the GET more scarce and will conserve the value of the token for intrinsic value-investors. The amount of tokens burned will depend on the value of Ether on 29 November at 13:00 CET. All tokens unsold after the 13th of December will be burned as well, there are no changes to the crowdsale in that regard.
NOTE 29 November 20:51 CET | The Ether price was locked at 13:00 CET today at €419.66/ETH. This meant a lowering of the hard cap to 35741 ETH and burning 12.5 million unsold GET in the crowdsale partition. The total supply sold in the crowdsale is now at 23,99 million GET instead of the initial 36.9 million GET.
If you have read the whitepaper or the the GET-protocol’s two-pager you'd be aware that we set out to maximally raise €15 million during the entire crowdsale. The majority of these funds would be raised during the general crowdsale period, lasting for four weeks starting 15 November until the 13th of December. As explained in the blog announcing this public sale the issuing price of GET during the complete general crowdsale would be set on the price of ETH on the 14th of November at 13:00 CET.
Reflecting on the price-lock for the general sale
On 14 November at 13:00 CET we locked the ETH price based upon an averaging of Ether over numerous exchanges at €275.44. We clearly communicated weeks beforehand the timing of the price-lock moment and the data source we would use. It was also clearly communicated that we would keep the EUR/ETH price-lock for the complete duration of the sale. Regardless of the movement of the Ether price after the moment of lock, we would have kept the price-lock in place. This meant that if Ether would have dropped in value after the lock the GET-protocol Foundation would have 'held the bag' and thus raised less. Vice versa, if Ether would increase in value the GET-protocol Foundation would have used the extra raised funds and put them to good use in making the event ticketing industry more fair, transparent and efficient.
While I am writing this blog Ether is trading at €403 per Ether, so obviously the latter of the two price movement scenarios played its course. The reason I am dedicating a whole blog on this scenario today is because the severity of the price change is starting to impact the value proposition of the GET-protocol and it’s crowdsale. Meaning that at this price-point we are issuing too many tokens than we initially deemed necessary to build this protocol. This isn't fair and we are going to fix that.
Long story short
In order to correct for the extreme price increase of Ethereum since the moment of the price-lock of our general sale (+31%). The GET-protocol Foundation is going to mint and burn, to ratio, unsold GET from Tier II, III and IV. By doing so the Foundation will reduce the max possible circulating supply. Similar ratios of GET will be burned in all partitions effecting circulating supply in any way (Team, UGF, Bounty).
This means there will be no 're-lock' of the Ether price at their current levels. Regardless of the Ether/FIAT pairing you'll be able to acquire GET until the 13th of December for the following rates:
Tier 1 price: 0.001524832994 ETH/GET
Tier 2 price: 0.001597444089 ETH/GET
Tier 3 price: 0.001706360732 ETH/GET
Tier 4 price: 0.001778971827 ETH/GET
More information about the token burn
If you want to know how much tokens will be burned, when this exactly will take place and why burning unsold tokens is more than just a symbolic move you'll have to soldier on and continue reading because we've quite some ground to cover!
Take note! Unsold token will at the end of the crowdsale period still be burned as previously communicated. The GET burn discussed in this blog is additional and concern tokens that are not sold yet and never will be offered for sale in the first place.
Long story long
Before getting into the details of the burn lets quickly recap how we got in this situation in the first place. The consistency of accepting both the pro's (ETH price going somewhat up) and the con's (ETH price going somewhat down) of the price-lock strategy is what made it a solid strategy from the get-go. Nobody can predict the future that far ahead of time (again if you have a time-machine, DM me). Therefore, this approach was the best course of action any way we looked at it. In the weeks leading up to the ICO Ether had been quite stable (at least for crypto standards) and other ICO projects in the space seemed to follow this same locking strategy. In hindsight we would have probably locked the price at €275 again. I say this while I the average price of Ether is at €403. Why? Do we like to screw our contributors? Laughing ourselves silly to the bank are we? No, that is not it. Locking the price for the full duration of the sale is a very common concept the ICO/crypto crowdsale space.
Security & Simplicity
A large part of why price locking is so common in ICO’s is the fact that it is the most secure choice contract-code wise. Hardcoding the price of your token in the contract will ensure you don't have to rely on any external data inputs for this crucial component of your contract, thereby removing a big security attack vector.
Locking your price will also allow a project to calculate the amount of tokens sold per price tier precisely, set the hard cap accurately and lastly it will ensure interested contributors participate as soon as they are able as there is no point in waiting speculating on Ether as the price in the crowdsale contract is static.
That last argument for a price lock at a certain moment in time is the fact that, making the GET\ETH ratio in the contract static/locked for the crowdsale period, will ensure nobody is waiting for ETH to rise. It puts the value proposition of the crowdsale at the center of attention. If you are analyzing this ICO from the perceptive of a value investor, the crowdsale can be seen as a window of opportunity to buy and asset in a protocol that will be processing at least 1 million tickets in 2019.
As we are not building a hype-train ICO here, we assume our contributors are looking at this proposition as a value investment. This burn, at the crowdsale’s halfway point, is therefore a gesture to these investors and will communicate clearly to them that this ICO is not a money grab but a long term utility adding token that will have a demand driven by more than just FOMO.
About value investing fundamentals
The fundamentals include the qualitative and quantitative information that contributes to the economic well-being and the subsequent financial valuation of a company, security or currency. Analysts and investors analyze these fundamentals to develop an estimate as to whether the underlying asset is considered a worthwhile investment. For businesses, information such as revenue, earnings, assets and growth are considered some of the fundamentals.
In business and economics, the fundamentals represent the basic qualities and reported information needed to analyze the health and stability of business or asset in question. For the GET-protocol these fundamentals are our operational ticketing product, our upcoming and running event stream and the present partnerships of GUTS Tickets that will generate demand for the token.
Our goals going into the crowdsale
As operational ticketing company with a fully working smart ticketing application built upon the blockchain and a few launching event organizers in the Netherlands, GUTS Tickets is perfectly positioned to build an open blockchain based smart ticketing backbone that will offer our smart ticketing solution to all ticketing companies under the sun.
The GET-protocol’s crowdsale soft cap was set at €2.3 million. After counting a total of 8876 Ether on our multisig-wallets at the beginning of November after the private and public pre-sale, we where happy to conclude the protocol was a go since the soft cap was reached. The GET-protocol will be become reality and ensure that there will be an open, transparent and efficient smart ticketing protocol for ticketing companies to build upon in the foreseeable future. In our roadmap blogpost we go into more detail about how our ideas will shape the ticketing reality in the near future.
The hard cap of €15 million amounted to a subtotal of 54,981 ETH when we locked the ETH price on the 14th of November at €275/ETH. To raise the hard cap we would have to sell all of our tokens issued in the public crowdsale; 36.9 million GET. But as most of you’ll be aware the value of Ether has increased to €403 (at the moment of writing) meaning that if we would hit our hard cap we would raise €22,267,374.79 this is an excess of €7,268,185.51 over our maximum cap. This is red-flag from a value investor perspective as this will mean that according to our own models, the project is overvalued from the start(we are possibly issuing too many tokens). To ensure this doesn't happen we are going to mint and burn unsold GET tokens. By burning we ensure the excess token can never come into circulation and therefore our hard cap will be re-calibrated to €15 million. With this we are thus reducing possible maximum circulating supply.
Correcting for over-valuation
At the end of the day the open market will determine the value of the GET in the long run. Traders will do this on the basis of supply and demand. The supply of the token is primarily dominated by the tokens sold during the crowdsale. By burning we are reducing the amount of tokens investors could acquire until the end of the crowdsale on 13 December.
When will this burn happen
The burn will take place on Wednesday 29 November in the afternoon. The amount of GET burned and the total reduction of the hard-cap in ETH will be based on the Ether locked on the same day at 13:00 CET using a market averaging of the Ether price.
How many tokens will be burned?
Depending on the Ether price on the date & time set above unsold tokens will be minted and burned, completely removing them from circulation. This will happen in the following tiers:
- 90% of the Tier IV allocation.
- 90 % if the Tier III allocation.
- Up until X*% of the Tier II allocation.
*This value depends on the value of Ether on Wednesday the 29th at 13:00 CET as this will determine the new ETH hard cap.
Proof of burn
For all three burning actions we will provide a proof of burn on the blockchain. This will guarantee that the tokens are indefinitely out of circulation and can't be sold or 'reactivated' at a later point in time.
Raising all boats
Burning the crowdsale tokens back to a level at which the maximum market capitalization will be €15 million will raise all boats in our eyes. It will reduce total circulating supply and keep ratios intact as the same amounts will be burned in the partitions effecting circulating supply.
What does this mean for a value investor
Participating in the ICO with Ether worth €403 on the open market but 'valued' at €275/ETH by the crowdsale contract seems like taking a loss. But looking at the FIAT value doesn't really make sense, the token we are distributing is given a FIAT value just because it is hard for a contributor to grapple what a token will be worth otherwise.
The eventual value of the token still has to be established, while it is of course somewhat correlated/influenced by the initial issuance price, in the end the value of the token on the long run will be determined by its utility value. The GET token has a fundamental role in the protocol as described in whitepaper and two pager, and by the burn:
- Old average price per GET token: €15 million/36.9 million GET = €0.41/GET
- New (estimate) price per GET token: €15 million/26.7 million GET= €0.57/GET (28% increase).
This increase in value/price roughly correlates with the increase in the Ether of about 31%. Meaning that value wise contributing Ether to the crowdsale contract and receiving GET in return at this moment won't mean you take any losses. As the token you are acquiring has a higher value (looking at the average value the token can be acquired at looking at the set hard cap).
Let's say that on Wednesday at the 29th of November at 13:00 CET the average price of Ether is €390/ETH. At this Ether valuation there will be an theoretical excess of €6,443,467.92 over the set hard cap. In order to re-calibrate the hardcap of 54,981 ETH will have to lowered with 16,521 ETH. This will mean that:
- In Tier IV : 90% of the 3,821,219 GET will be minted and burned. This means 3,439,097.1 GET will be burned. There will be 382,121.9 GET left in Tier IV.
- In Tier III: 90% of the 6077430 GET will be minted and burned. This means 5,469,687 GET will be burned. There will be 607743 GET left in Tier III.
- In Tier II: 6.05% of the 11070000 GET will be minted and burned. This means that 670068.3073 GET will be burned. There will be 10,399,931.69 GET left in Tier II.
In total 9,578,852.407 GET will be burned and removed from possible circulation(in this example). This is 25.96% of the total tokens sold in the general crowdsale (total minted was 41% of 90 million: 36,900,000). This directly reducing maximal circulating supply and thus the market capitalization of the protocol.
For the sake of efficiency and so that I will be able to refer to this blog for all the answers concerning the burn that will take place on the 29th of November.
Why would you burn twice? You’ll burn unsold tokens anyway right? Whats the point of burning now if you are going to burn unsold tokens anyway?
One could argue that this half-way burn is just a way to easily boost our progress bar and trying to create FOMO. This burn will only increase the progress bar by 10/15% — from 24% to approximately 36/41%-depending on the Ether price on the burn moment. Thus if creating FOMO would be the aim here I would call it a rather poor attempt at doing so. Creating FOMO isn’t the motivator of this burning. The main reason GUTS is doing this burn at the half way-point of the crowdsale is to make our proposition re-align with what we originally aimed for to maximally raise with the crowdsale. It is a gesture to the community that has already invested and shows that we are not greedy and willing to make sacrifices in the face of changing conditions.
This burn will significantly reduce the maximum circulating supply (by 33% approximately) with the underlying proposition staying constant. Showing we are not greedy and are willing to make sacrifices. If you have been following this project a bit longer you’d have noticed that we believe transparency, honesty and presenting the facts as they are values we hold in high regard.
Does this burn effect me if I already participated in the crowdsale?
No not in any way, we are burning unsold tokens not tokens of contributors.