Buyback and Burn programs support long-term price stability and value growth. That is why MetaPoo has included it into the MTP token’s smart contract.
What is Buyback and Burn?
Traditional companies typically buy back stock when they have extra cash that they would not reinvest otherwise. Share repurchases are great news for investors because they lift stock prices by limiting the supply of shares available for sale.
The buyback and burn program may be a terminology specific to digital assets, but the idea is the same as with traditional share repurchase programs: The issuer buys back previously issued tokens on the secondary market, to reduce supply and thus increase market prices.
Token Burns and Buybacks
The practice of token-burns is when a project permanently removes some of its tokens from circulation and sends them to a zero address, essentially eliminating them from existence. The tokens themselves are either repurchased from the community or simply extracted from existing pools to change demand and supply dynamics and affect the price.
As for buybacks, the practice is a direct derivation of the buybacks used in traditional finance. In essence, a buyback is when a project, or company, uses its own cash resources to repurchase some amount of its tokens or shares from holders at market price. The repurchased assets are then stored on the wallets of the entity, not destroyed, and neither are they released back into circulation immediately.
The practice of buybacks is an important instrument in the arsenal of companies seeking to stimulate the market and drive up the value of their share prices while retaining ownership of their own shares for later use. In the crypto world, the practice is identical with regards to tokens that projects buy from the community and store on their own wallets.
MetaPoo Buyback and Burn Program
There is currently no hard cap on the supply of MTP tokens, making it an inflationary token. Community members often point to this as a cause for concern.
MetaPoo notices this matter and certainly understands the wish for a hard cap. But there is a big reason why we do not expect to set one in the near future:
MTP’s primary function is to incentivize providing liquidity to the exchange. Without block rewards, there would be much less incentive to provide liquidity (LP fees, etc. would remain).
Still, we need another way to limit MTP’s supply, to counter inflation.
MetaPoo aims to make deflation higher than emission by building deflationary mechanisms into MetaPoo’s products. The goal is for more MTP to leave circulation than the amount of MTP that’s produced. And Buyback and Burn Program came as a solution.
Regular token burns are built into many of MetaPoo’s products (like a 25% of SOL income on Poo Series NFTs or 0.04% of every trade made on MetaPoo DEX). As we launch new features, more sources of the platform’s revenue will be added to the buyback of MTP.
All the token burn transactions will be recorded at MetaPoo documents. The burn will occur weekly on Sundays with the first burn starting on April 3rd, 2022.
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