The aim of the Quantum Project is to bring institutional grade liquidity to cryptocurrency and digital asset markets. This is achieved by creating a liquidity pool of funds and allowing the crypto-community to participate in increasing the depth of various order books. The liquidity pool is funded by issuing Quantum tokens that are then sold and traded on various cryptocurrency markets.
What are buybacks and destruction events?
A buyback, also known as a repurchase, is the acquisition by a company of its own shares for the purpose of reducing the number of these shares on the open market. Every month the Quantum Project conducts a buyback, purchasing QAU at the lowest available price, and follows it with a destruction event in which they send the purchased tokens to a ‘blackhole’ address (from which nobody has the ability to recover them). This raises the purchase price of the remaining tokens while also reducing the circulating supply. The funds necessary to fuel this process are generated from the operations of the liquidity pool, while the process itself is transparent and auditable in real time using the Ethereum blockchain.
An Example of a Buyback
A company’s stock has underperformed its competitors’ stocks even though it has had a relatively good financial year. To please long-term investors and provide a return to them, it announces a new share buyback program that will repurchase 10% of its outstanding shares at the current market price. The company had $1 million in earnings spread out over 1 million shares, equating to EPS of $1.00. With a P/E of 20, the shares traded at $20. All else equal, 100,000 shares would be repurchased and the new EPS would be $1.11, or $1 million in earnings spread out over 900,000 shares. At a P/E of 20, the shares would trade up 11% to $22.22.
An Example of a Destruction Event
Based on recent CoinMarketCap data, the market cap of Quantum was $21,697,374 on July 5th, 2017, with a circulating supply of 81,947,080 QAU. If you divide these two numbers you get a price of $0.2648 per QAU coin. Before the buyback or destruction event there was circulating supply of 82,454,023 QAU, thus valuing one QAU coin at $0.2631. This means there was around a 0.6148%price change as a result of just one (and the first ) destruction event!
Below is an estimation of the price that QAU could achieve following subsequent destruction events and the resulting reductions in available supply conducted by Quantum in the future.
It must also be kept in mind that as the market cap increases QAU will gain value in two factors – Lower Circulating Supply and Higher Market Cap. This is completely different approach when compared to other COINs on the market.
While deflation in the traditional financial ecosystem is a bad thing, Quantum has turned this process to their investors’ advantage!