The team behind Backstage has recently announced their plan to enroll the automatic buybacks of their native BKS token. The news has sparked a lot of excitement in the Backstage community, and for a good reason.
In this article, we will discuss the buyback mechanism and the role it plays in maintaining a long-term value of an asset, whether it is a stock or a cryptocurrency.
What is a buyback?
The term “buyback” originally comes from the stock market. A stock buyback occurs when the issuing company pays shareholders the market value per share and re-absorbs that portion of its ownership that was previously distributed among public and private investors. There are several reasons why it may be beneficial for a company to repurchase its shares, including reducing the cost of capital, ownership consolidation, preserving stock prices, undervaluation, and boosting its key financial ratios. 
To simplify: the company buys back its own shares from the open market, increasing its own equity in the asset and creating buying pressure. Typically, this reflects positively on the stock price, creating an incentive for the shareholders not to sell their stocks.
Naturally, the crypto market has inherited the buyback mechanism from the stock market, made a couple of adjustments, and applied it to the project’s tokenomics. The latest to do so is Backstage, with their plan to enroll the automatic buyback of their BKS token.
Before we get into the technical details, let’s first discuss more about buybacks and why companies do it.
Benefits of an Asset Buyback
There are three main reasons why companies buy back their stocks and/or crypto:
- Stock buybacks help companies consolidate the ownership of their assets.
- When there is not a lot of excitement in the current market, or the market is going through a natural downturn, buybacks are used to drive buying pressure, thus possibly increasing the equity value of the asset.
- Buybacks make companies look more financially healthy, which in turn could attract more buyers.
At Backstage, buybacks create demand for the platform’s native BKS token, driving buying pressure, and with it, potentially an increase in the token’s price. A potential increase in the price of the token will create a healthy environment for both the current token holders and potential token buyers.
How the Backstage buyback works
Let’s dig deeper into Backstage’s buyback mechanism.
At the core of Backstage’s business are the selling of tickets, NFTs, digital assets, VIP experiences, digital art, and other digital services. All of these sales create numerous revenue streams, with each stream consisting partially of fiat and partially of crypto. In order to establish a regular automatic token buyback, a certain portion of the profit from each revenue stream will be used to buy back some of the BKS tokens circulating in the open market. The percent of revenue used for the buyback will be determined in accordance with the event, venue, and partnership agreements.
Let’s demonstrate how the automatic BKS token buyback affects the buying pressure.
- Imagine a music festival, where the event organizer signed a partnership agreement with Backstage.
- A portion of revenue from every sold ticket is used to buy back BKS tokens automatically by the smart contract. The same is true for every other revenue stream, whether it is buying drinks at the bar, buying merchandise at the festival shop, collecting NFTs used for perks and benefits, or topping up your festival pass with a VIP entrance.
- All of the mentioned revenue streams will dedicate a percentage of the profit to the automatic buy of the BKS tokens.
With dozens of high-quality partnerships already signed and the first festival tickets already being sold via Backstage Marketplace, there is great potential in the buyback system.
The ultimate goal is to achieve a healthy, sustainable, long-term environment that incentivizes the use of the BKS tokens, creating constant buying pressure and potentially increasing the price of the tokens.
What Distinguishes BKS Token Buybacks
When discussing buybacks in the traditional stock market, there are some drawbacks that are often left unmentioned. One of the biggest drawbacks of traditional stock buybacks is that the process is typically financed with debt, which in turn drains cash reserves from the organization once the market conditions turn against the company.
At Backstage, we have thought about this drawback and carefully designed a system in which the buybacks are financed not by debt, but by positive cash flow coming from various revenue streams.
We are already working with our partners on organizing events where fans and event-goers will only be able to use the BKS tokens for event payments. In order to achieve this, we have developed a BiKos wallet, in which the payment interface will be integrated into a bracelet, barcode, or smartphone. Users will only need to swipe their device when paying for their drinks, merch, VIP goodies, or art. The process is entirely optimized for absolute ease of use and requires no advanced technical knowledge or complicated setup in order to work.
Each time a user swipes their device in order to make a payment, the system dedicates a portion of the made profit into an automatic BKS token buyback, which in turn creates increased trading volume and buying pressure. This could be beneficial for the token price and health in the short- and long-term.
Backstage is powering the crypto revolution in the events industry. Through the BKS token and our blockchain ecosystem, Backstage aims to solve the current challenges facing the events and entertainment sectors. From financing and payments to NFT ticketing and marketplaces, Backstage $BKS will take the events industry toward a more sustainable, profitable and fair future.
Backstage has a very strong and open community and everyone can join and contribute to the platform’s development by purchasing tokens and helping fund the entertainment industry.
Find out more about Backstage:
- Stock Buybacks: Why Do Companies Buy Back Shares?, Troy Segal, Investopedia, August 31, 2022. Available at: https://www.investopedia.com/ask/answers/042015/why-would-company-buyback-its-own-shares.asp