Token burning in Jarvis: why and how we will use token burns
A very important aspect of any company running a token sale, is planning and undertaking measures to support the token price and reduce its volatility . In our specific case, the JRT is also a revenue sharing mechanism, which gives us additional reasons for careful planning, to ensure each token holder is well rewarded. In this article we will describe some of the measures we designed to ensure this, with a particular focus on token burning.
Token burning is a simple mechanism used to reduce the total supply of a token. Most often, ERC20 tokens tend to call a burn function, which extracts a certain amount of token from a specific address and sends these to a public, proven inaccessible, ETH address, effectively making the tokens unusable, lost or, as it is most commonly known, burnt. Simultaneously to this action, the total token supply is also reduced, to ensure the prevention of double spend. This way, companies that run on a token, can ensure they have a safe way to reduce their token supply and maintain integrity and security, for everyone using their token.
Burning X amount of tokens in our ERC20 contract is implemented by simply subtracting X from our balance and from the total supply and then emitting а Transfer event (from our address to the 0 address). If you’re interested, you can verify our implementation by checking our contract code on Еtherscan.
By reducing the total supply, burning increases the scarcity of the token and therefore its value, if the token is intrinsically valuable of course. Of course, there is never any guarantee and the market is King, but it is a simple mechanism of raising a good’s price through scarcity.
Reducing the supply could also attract speculators who prefer trading tokens with lower token supply and market cap, as this means the market is more likely to create demand.
Nonetheless, these two arguments are only related to speculation. In our case, we have a much more tangible reason for burning: as part of the ecosystem revenues are shared with token holders — thus, the less tokens there are, the greater the revenue per JRT will be. Even if the revenues are decreasing a bit or are static, the revenue that each token holder will receive can be pushed higher. Simple maths!
Which tokens will be burnt?
Burn unsold tokens after the Token Sale ends
All the unsold tokens during the ICO will be burned. It is important to note that we will not burn the tokens allocated to the bonuses (50M tokens are currently allocated to the bonuses). All the undistributed bonuses tokens will be share between the DAO and the Jarvis Strategic Funds. For example, we have already burnt 36,4 million unsold tokens from the private sale, lowering the total supply of JRT to 383M tokens (you can check here the JRT token contract). You will also see that we have already sent the JRT tokens to the private sale participants. A bit more than 16M tokens that were allocated to the bonuses will be added to the DAO and Strategic Funds pools.
Burn tokens bought back from the open market
After the ICO, when the token would be listed on exchanges, the company will use part of its revenue to buy JRT on the open market, and will then burn them. The buying program is the second mechanism for increasing the token demand…
Buy back program
Buy back programmes are very famous in both crypto and traditional world (Buffet is famous for buying back the shares of its own company, Berkshire Hathaway); buying back shares from the open market is often considered as a strong buying signals; it often means the company knows their shares are under evaluated compared to their intrinsic value. In the crypto world the reasons are different, but the result is the same.
The cryptocurrency exchange Binance employs this burn of BNB tokens every quarter and has paved the way of more exchanges copying its token economic (read more about Binance token-economics of coin burn here).
In the case of Jarvis, there will be two different buying back programs.
The first one will basically be a copycat of Buffet strategies; every time we see our token priced significantly lower than it should be (according to us), and have the financial capacity to do so, we will buy back our JRT and will hold it for a few months before burning them (the reason why we would keep them for a few months is pretty straightforward: as token holders, our hold wallets will receive revenues too…).
The second one is more automated and a little bit more interesting, as it will happen through two strategic bodies in Jarvis: the Jarvis DAO and the Jarvis Strategic Fund (it will be the subject of our next article but you can read more about both in the White Paper). The DAO is composed of all JRT token holders, whereas the SF is the centralized strategic body of the company. Both entities will have to manage their own JRT pool amounting 30M and 55M tokens respectively, and as token holders, they will also receive their ow proportional part of the revenue in stable coin. Both can only spend their earnings to design and enact strategic campaigns for the growth of the ecosytem. Again, we will highlight the role of the DAO and the Strategic Funds in our next article), but one of theor responsibilities is to buy back tokens on decentralized exchanges (for the DAO) and centralized ones (for the strategic fund).
Hopefully, this article has been able to shed some light on part of our token economics and to make you feel more excited about buying JRT here! These buy back and burn programmes will be done periodically, as well as when markets and financials conditions allow it, to ensure support for the JRT. This is a small part of our token economy to enable scarcity but we hope it will highlight two main things about how our strategies are formed. That the only fundamental rule we follow, as a company is making our best so our users, community and token holders are as safe and satisfied as we can keep them!
If you have any questions about any of these processes, find us on Telegram, here.