The burn back report Q4 2019

Kasper Keunen
Jan 10, 2020 · 7 min read

It has been 3 months since the last buyback report, which means it is time for a new one! If you are interested in the mechanics and logic behind the buyback, I encourage you to read the blog linked below first.

2019 Q4 has been our most successfull quarter since the start of the protocol! Never before we have sold more tickets as we did in Q4 of 2019.

Summary Q4 the best quarter of the decade

In Q4 of 2019:

The GET Protocol processed a total of 350.332 state changes.

A record number of 62 215 tickets have been issued.

To fuel these state changes a total of 98 348 GET has been burned.

More details on the breakdown of this buy & burn back are provided in the body of this article.

Exchanges added to buyback mechanism

Instead of only using Liquid to acquire GET from the open market, the buyback mechanism is now active on the following markets:

This change will be effective from the buyback of Q1 2020 on forward. To track the progress of the buyback check out the status page.

The buybacks of the previous decade

The exact workings of the buyback evolve with our learnings, let’s take a look at the 6 buybacks conducted over the last 2 years. A brief overview linking the blogs, tickets sold and GET acquired is shown below.

Old economics (no burning):

Q3 2018 -> 51 500 tickets sold: 61.129 GET (etherscan)
Q4 2018 -> 5 164 tickets sold | 6 023 GET (etherscan)
Q1 2019 -> 59 214 ticket sold | 72 110.8 GET (etherscan)

No burning: Up until Q1'19 the GET bought back via buybacks would not be burned but partially reused by the event organizer for future events. This accumulation by the event organizer(EO) would lower the amount of GET needed in the future(effectively giving a future discount).

New economics (with burning):
Q2 2019
-> 44 468 tickets sold |20 839 GET burned (etherscan)
Q3 2019 -> 20 592 tickets sold | 12 293 GET burned (etherscan)
Q4 2019 ->62 215 tickets sold | 98 348 GET burned (etherscan)

Introducing scarcity: Starting from Q2'19 we added burning to the economics. In a nutshell, this meant that of the GET bought back a portion would be permanently destroyed. Creating scarcity in a immutable and transparent manner. This addition raised the effective cost-base for usage EOs, as no GET is accumulated. Partly because of this, discounting was introduced into the economics. This mechanism lowers costs for integrators by using internal GET inventory to subsidize usage. All GET issued as subsidy will be completely burned.

Read more about our growth trajectory in the blog linked below.

“With the currently signed deals for GUTS only, we’re growing by 182,9% next year. “ — Maarten Bloemers in Looking ahead 2020

Trivia question: 4 events ticketed in Q4 of 2019 were organized and hosted in a country that starts with a letter “K” and ends with on “orea”.

Changes to the buyback logic

We have decided to simplify the burn calculation logic. Instead of burning and discounting on a per-ticket basis as we did previously. We now use the more general burn per state change metric. This means that for every state change, a certain amount of GET needs to be burned.

In the previous 3 buybacks we burned a ratio of the bought back GET. As this allowed us to set the net price for acquired GET to €0.50 / GET. Moving forward we are simplifying this by burning all acquired GET if the open market price is below €0.50.

Buyback for what you burn

Event organizers pay for the total amount of state changes of their tickets. Of course, there are still differences in the complexity of a ticket. These are now reflected in the number of state changes needed to service the average ticket during an event cycle.

Besides being a far simpler mechanism to operate and secure from a technical perspective, we have found this model to also fit far better to business needs as ticket holder behavior. If a lot of people end up reselling tickets, something is hard to predict beforehand, this approach allows the protocol to account for that as it happens.

TLDR: Event organizers pay per state change. All GET used in a state change is burned. Meaning that all GET that is bought back is burned.

Input about Q4:
Total state changes: 350 332
Average discount rate per state change in Q4: 42%
Undiscounted rate per state change (averaged for Q4): €0.07
Total events: 220 (+159 more events as Q3'19)
Organizer accounts added: +17 new organizer accounts

Calculation burn exchange buyback

Average price state change = (€0.07 * 58%) = €0.041 per state change

Total funds for buyback Q4= (350 332 * €0.041) = €14 363

Amount GET bought from open market = 57 710 GET

Making the average buyback price of GET for Q4: +-€0.25 -> this result we will carry to the discount burn calculation in the paragraph below.

Calculation burn discount

Discounted per statechange: (€0.07 * 42%) = €0.029

Total funds for discount = (350 332 * €0.029) = €10 159

GET needed from internal pools = €10 159 / €0.25(carried) = 40 638 GET

Total allocated to buyback = €14 363 + €10 159 = €24 522

Total GET burned = 57 710 + 40 638 = 98 348 GET

  • As long as GET traded below €0.50 on the open market, all GET bought back is burned for 100%.
  • All GET that is provided as a discount, is priced at the average acquisition price of GET. This portion of GET is burned for 100%.

Dynamic tracking & burning

Currently, we are burning GET after the fact(hence this report still being important). This isn’t an ideal situation as this process is inherently centralized and opaque. We are working on making the usage of the token integral and necessary to register a transparent and honest ticket on the blockchain.

This means that just like with Ethereums Gas, that GET will eventually be burned in real-time as tickets are processed. If an event organizer(EO) does not present proof of burn-in GET, a proposed state change will not be picked up by the ticket explorer and thereby not be valid.

In short, combining the ticket explorer and GET burn-proof feature, it will be possible for the open market to check each state change (or the ticket history) and verify on the blockchain how much GET is burned.

The road to simplification

In the previous burn-back report we presented specification tables showing the exact breakdown of the tickets and the amount of GET needed per ticket. We have found that while these tables provide a meaningful context for a select few, the approach did a disservice to our eventual goal; building an open and transparent ticketing protocol.

The GET is a utility token there to fuel state changes of tickets and event services. In a similar manner as Ether is a means to interact with smart contracts. At the end of the day the focus should be on increasing the amount of state changes, as this is the eventual metric that will determine the success of the protocol and its native token in the open market.

Ticket complexity & state changes

In previous reports, we stated different amounts of GET per ticket (between theatre and concert for example). These came from the complexity of the ticket provided. However, as the number of organizers and venues we ticketed grew the price categories per event-type increasingly started to make less and less sense.

The amount of nuanced information I needed to press in a single figure resulted in numbers with very little actual meaning. Triggering confusion under people checking the math (understandably so). With international events on the short term horizon, this issue only seemed to scale to larger and larger proportions. Therefore we decided to shift to a 1-dimensional metric; state changes processed.

State change pricing

The net amount of GET per state determines the ‘FIAT’ price the integrator needs to pay to acquire GET from the open market. As for now, this required amount is set centrally by the GET Protocol Foundation (it averaged 0.28 GET/statechange in Q4). In the future, the dynamic burn ratio formula (as introduced in the blog linked below) will make this metric more transparent and decentrally determined. More information about this mechanism will be made public as soon as it is sufficiently developed.

More about GET Protocol

A blockchain-based honest ticketing solution for all.

Any questions or want to know more about what we do? Join our active Telegram community for any questions you might have, read our whitepaper, visit the website, join the discussion on the GET Protocol Reddit. Or get yourself a smart event ticket in our sandbox environment. Download the GUTS Tickets app on iOS or Android.

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