The EtherSportz / ESZPlay team has been working diligently to bring one of the first automated cash-based eSports platforms to the world of popular PC games. The ESZPlay Beta is scheduled to launch at the end of June 2018 with 2-3 popular competitive PC titles for skill-based competitions!
Recently the ESZCoin community has proposed that we look into a token buyback and burn program rather than a reward distribution model. After research, internal review and token holder feedback we have concluded that a buyback and burn program is a better path forward for multiple reasons. Lets review those reasons now.
The Problem with Reward Tokens (Dividends)
- Tokens with a dividend reward model are sometimes viewed by exchanges as a security token and they refuse to list it for that reason.
- The tax burden imposed by a dividend model creates a complex filing problem for token holders, who would now face a heavy tax burden on those profits because of the way dividends are treated.
- The transaction fees for sending out the rewards in ETH would be particularly expensive (especially since they must be conducted four times a year), and, until the platform generates sizeable returns, would likely wipe out most of the profits that the smaller token holders would see.
- The additional accounting and auditing required to regularly distribute the rewards would further cut into profitability.
- Dividend issuance would require additional KYC and AML from token holders who purchased ESZ post–ICO before they could receive their rewards. Simply communicating the need for this information post-ICO would prove difficult
- The ETH rewards sent as a dividend could be lost if sent to tokens held on an exchange address or if sent to dead addresses that users no longer have access to.
A Better Approach – the Buyback and Burn Model
A buyback happens when a company spends a portion of its own profits to buy its tokens back from its token holders. This strategy aims at driving the price of the token up and/or stabilizing the price during downturns.
A buyback and burn happens when a company not only buys its tokens back, but it then removes those tokens from circulation, effectively “burning” them. This means that the same market cap is continually divided among the ever shrinking supply of tokens in circulation, theoretically driving the price of each token up higher and higher over time.
How This Solves The Issues Raised By Dividends
- Exchange Listing – Solved
- Tax Situation – Substantially Improved
- Transaction Fees – Solved
- Additional Accounting / Auditing – Substantially Improved
- Continued KYC/AML Challenges – Solved
- Regulatory Classification – Improved
- Sending Rewards to Dead & Exchange Addresses – Solved
- Liquidity – Substantially Improved
🔥A Big Burn to Start Things Off🔥
Given the enormity of what we’re about to do, we wanted to show a sign of our commitment to the token holders. To that end, we have decided to start the burn ourselves, by permanently removing the team’s holdings – currently sitting at 3 million ESZCoins – from circulation. This will immediately reduce the circulating supply of ESZCoins by 30%, which should theoretically have an impact on the value of the remaining tokens. This has an added benefit when compared to the dividend model – if we had stayed with the reward plan, the rewards were split among all token holders. Since we had a sizeable portion of the tokens, a large percentage of the rewards would have been split with our own token holdings. Now, in the buyback and burn model, that much more of the company’s profitability will go directly towards buying back tokens from other people at a proportionally higher price. See the ESZCoin burn address 0xBdd13f084453908a7baF37D96ab32142C4368aC4 on .
Meet the ESZCoin Buyback & Burn Program
The buyback-burn method seems to solve many potential problems that dividends would have brought up, while still providing an equivalent (probably greater) value distribution solution to ESZCoin holders. We plan to officially start the buyback and burn program after the successful ESZPlay production launch. We will be taking 50% of the profits generated by the ESZPlay platform to buyback and burn ESZCoins monthly at a premium to the fair market rate.
ESZCoin Buyback & Burn Program Steps
The Buyback & Burn Program will be performed in a predetermined manner as follows:
- 50% of the profits generated will be used to re-purchase ESZCoins beginning after the production launch.
- ESZCoin buybacks will be made on a monthly basis.
- All ESZCoin buybacks will be performed on open markets.
- ESZCoin tokens will be repurchased at a price that does not exceed a 25% premium of the highest independent bid or the last quoted transaction price.
- Every purchased token is burned — removed from the outstanding balance of ESZCoins.
- ESZCoin purchases i.e. total number of tokens purchased and burned can be seen at the on EtherScan.
ESZCoin is an ERC-20 token on the Ethereum blockchain. Only 10 million ESZCoin were minted and the majority were sold during Q1 2018 to fund the development of the EtherSportz platform (ESZPlay.com). 50% of the profits generated from will go to repurchase and burn ESZCoins from token holders at a market price premium. ESZCoins will be regularly purchased on the open market, you can currently buy and sell ESZCoin on or token exchanges. Once ESZCoins are bought back and taken out of circulation forever.
Also published on Medium.