The flow of funds within the VeVe digital collectibles ecosystem is integral in maintaining the in-app token supply and liquidity. In order to maintain this pool and optimize fund flows, buy-back mechanisms have been included to facilitate the purchasing of tokens from exchanges. For the user, however, all of these transactions take place in the background, removing barriers to entry and keeping the mechanics of the system consumer-friendly.
VeVe Digital Collectibles
VeVe offers the world a new way to participate and interact with their favourite fandoms, with officially licensed digital collectibles across six fandom verticals: Pop Culture, Sports, Gaming, Film & TV, Anime & Animation, and Celebrities.
The experience is akin to the physical world of collecting, which fans already know and love, and moves the experience into the digital realm-right into the palm of your hand.
One of our earlier articles- Purchasing Mechanics Part 1: How the ECOMI Ecosystem Works- detailed the introduction and use of Gems as the in-app currency. If you haven’t seen it yet, it’s important to start there before diving into the fund-flow and buy-backs information below.
Purchasing Mechanics: How the ECOMI Ecosystem Works
The user sees nothing, the community understands everything!
Gems + OMI for the Ultimate Collectors Experience
The introduction of the Gem model serves a number of purposes:
- They provide a familiar in-app currency for non-crypto users and removes the steep learning curve required when entering the crypto-industry such as wallets, keys, exchanges etc… as well as removing any potential security issues with those steps.
- Gems can be converted to OMI tokens within the app and sent from your in-app wallet to exchanges if that is how you choose to use them. This feature will be exposed to non-crypto fans as they dive deeper into the app, and offers an option to take up that learning curve at a later date.
- The purchase of Gems via an in-app purchase generates an additional stream of revenue for the company (referred to here on out as ‘Gem revenue’), which is used in the buy-back mechanism discussed below in more detail.
Primary vs. Secondary Markets
It’s important to understand that within the VeVe app, there are two places collectibles can be purchased:
This is for primary sales. That is digital collectibles and artworks produced and listed by VeVe. Purchases in the Store can be made using fiat currencies and Gems. Regardless of the mode of purchase, any purchase within the Store triggers the same OMI mechanics, and token flows, detailed below.
This is for second-hand purchases. That is, the Market is where you can buy, trade and sell your collectibles with other users. Purchases in the Market are made with Gems.
Gems are available for purchase within the app as a standalone purchase or can be made at the point of sale using Apple or Google in-app purchases.
In-app Token Flow
Before we dive into the mechanics and funding mechanisms for buy-backs, it’s important to understand why they’re necessary. In order to create and ensure liquidity within the VeVe app, there is an in-app token reserve which will start with 40% of the total supply of OMI tokens or 300 bn OMI.
When a user purchases Gems using fiat, the equivalent amount of OMI tokens are taken from the Reserve Wallet and sent to a second wallet, the Vault Wallet.
When those Gems are spent on a collectible in the Store, they are debited from the user's account, and the OMI tokens that were being held in the Vault Wallet are taken permanently out of circulation. This is more simply illustrated in Flow Chart 1 below.
As those OMI tokens are moved from the Reserve Wallet> Vault Wallet > to the Out of Circulation wallet, it results in fewer tokens available in the Reserve.
To ensure there is liquidity for OMI holders and OMI is available to swap to Gems, a system of token buy-backs has been introduced to purchase OMI tokens back from exchanges in order to keep the in-app token reserve topped up.
Sources of Buy-Back Revenue
For the following section, we’ll be using an example that uses round numbers to make it easier to follow. It is based on $1000 worth of Gem sales, where $500 of those Gems are used to purchase new NFT’s from the VeVe Store.
The system is designed to capture revenue for buy-backs from two sources:
1. A percentage, starting around 10%, of new NFT sales purchased with in-app purchases.
When it comes to the revenue generated for the company from new NFT sales, the app store fees (30%) also need to be taken into account. Using the example below, a $1000 Gem purchase would equal $700 of revenue entering the ecosystem after app store fees. When 500 of those Gems are spent on new NFTs in the Store, it equals $350 in revenue to the company, of which 10%, or $35, goes towards token buy-backs.
2. Revenue generated from Gem sales, based on NFT purchases.
Gems are used primarily in the Market to facilitate peer-to-peer transactions. Using the above example, if the remainder of the $1000 Gem purchase ($500 worth) is not used in the Store, that Gem revenue ($500–30% app fees = $350) will be added to the buy-back fund.
Note: ‘Gem revenue’ is in reference to revenue generated by the sale of Gems, rather than the sale of new NFT’s.
Although $385 out of $700 going to the buy-back may seem excessive (55%), it is actually to offset $1000 worth of OMI tokens that are being held out of circulation. So in this example, the buy-back becomes 38.5% of the original Gem purchase.
To put it simply, the funds going towards buy-backs are equal to total revenue, less new NFT purchases and app fees.
Conversely, if all $1000 worth of Gems purchased is spent on new NFT’s in the Store, there would be no ‘Gem revenue’ generated by the Gem model for that month. Therefore only 10% of new NFT sales (shown in the Buy-Back Source 1 flowchart) would be contributed to the buy-back fund for that time period.
It is anticipated that the market for peer to peer transactions will be at least double the size of the primary market, although these numbers will vary based on use.
Point of Sale/Market Gem Purchases
Whilst users can indeed purchase Gems any time, it is more likely they will be purchased at the point of sale using Apple/Google in-app purchases, in order to facilitate the purchase of their favourite collectibles from other users.
Therefore the following example uses a more realistic and expected scenario and assumes the user has a Gem balance of 0 prior to the transaction.
Therefore, taking both sources of buy-back revenue into account:
the total buy-back fund = 10% of new NFT sales + revenue generated from the Gem sales (minus app fees).
These buy-back funds are then used to facilitate the purchase of OMI tokens from exchanges to resupply the in-app reserve and to preserve the integrity and value of the ecosystem.
Initially, the buy-backs will take place on a predetermined basis. This is to ensure liquidity in the early stages of adoption. The frequency of these buy-backs will be affected by the volume of transactions. If buy-backs are needed more frequently to keep the in-app reserve topped up, the system will be adjusted accordingly.
Impact of the Buy-Back Mechanisms
As a result of the buy-back mechanisms, the circulating supply of OMI tokens is deflationary by nature and will diminish over time as the Gems (OMI) used to facilitate new NFT sales will be permanently sent out of circulation.
The Reserve Wallet also ensures that a large number of OMI tokens- up to 40% of the total circulating supply- will always be held out of circulation. Moreover, as OMI tokens are sent to the Out of Circulation Wallet, the buy-back mechanisms are triggered to purchase tokens from exchanges, in order to keep the token reserve topped up.
The tokens held in the Reserve Wallet will not be removed at any time other than as a direct result of purchases. The team will not have access to these tokens and all movements will be via an audited smart contract.
For the more mathematically minded, the following details the formula and equation used for the buy-back mechanisms based on the same scenario mentioned in the above section Sources of Buy-Back Revenue. That is $1,000 of Gem sales, with $500 of that going towards new NFT purchases in the Store (company revenue).
B = buy-back
G = Gem Sales/Point of sale Market purchases
N = New NFT Purchases
F = App Fees (30%)
P = 10% of New NFT Purchases (may vary based on company performance and requirements)
Therefore the buy-back formula can be simplified in the following format
B = (G - F) - (N - F) + (P - F)
OR, as an equation:
Buy-back = ((Gem Sales/POS purchases — App Fees) — (New NFT Sales — App Fees)) + ((New NFT Sales — App Fees) *10% )
Inserting the values listed above this would be:
Buy-back = (($1,000 — $300) — ($500 — $150)) + (($500 — $150) * 10%)
Buy-back = ($700 — $350) + ($350 * 10%)
Buy-back = $350 + $35
Buy-back = $385
Smart Contracts and Addresses
The Vault Wallet represents all of the Gems currently circulating in the VeVe ecosystem. That is, any time OMI tokens are converted to Gems or Gems are purchased directly with FIAT, the equivalent amount of OMI will be moved from the Reserve Wallet to the Vault Wallet.
In the early stages of adoption, and to account for the fluctuating value of the OMI token, the Vault Wallet will be supplied with an initial buffer equal to 6% of total supply, or 45bn tokens. This will allow liquidity in the Vault Wallet, which will be added to as more Gem purchases are made.
Verifying the Tokenomic System
- Verification of the buy-back model and its integration can be calculated by observing the amount of OMI tokens sent to the Out of Circulation wallet.
- The USD value of these token transactions can also be used to calculate revenue from new NFT sales.
- Total revenue can be calculated by viewing transactions from the Reserve Wallet to the Vault Wallet, and
- The buy-back amount can then be verified as being accurate by calculating the USD value of OMI going into the Reserve Wallet.
As all transactions are managed through smart contracts, they will be able to be viewed using block explorers. However, a tracking site will also be provided at a later date, in order to easily collect and display this information, and allow users to track the ecosystem in one location.
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Information on this channel is subjective and should not be considered financial advice and is subject to change. See disclaimer
ECOMI is a technology company based in Singapore and is leading the way in the emerging digital collectibles space. ECOMI offers a one-stop-shop for digital collectibles through the VeVe app bringing pop culture and entertainment into the 21st century.
The VeVe app allows users to experience true ownership of premium digital collectibles. Through the app marketplace, users can obtain common, rare, or one-of-a-kind digital collectibles, share these across the social network service, and exchange them with the VeVe community, all from the palm of their hand.
ECOMI sees digital collectibles as a new asset class that offers intellectual property owners the opportunity for new revenue streams in the digital landscape. Digital streaming, gaming, and in-app purchasing have become a multibillion-dollar market and the next to join this digital trend is the pop culture and collectibles industry.
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