INCENTIVE THEORY
There are five key market participants in an ETO:
ETO participants
FOMO-driven traders
Arbitrage Traders
Fundamentals-driven traders
Project’s Buyback Treasury
All five participants, by the design of the ETO, are incentivized to generate on-going volume and liquidity for Enterprise Tokens issued through an ETO.
It’s important to understand that the Enterprise Tokens issued through the ETO framework are not stablecoins, but are instead security tokens, and therefore have (A) speculative value prior to product launch, (B) security value after product launch, and (C) utility value after product launch, in fact, NEPRI Enterprise Tokens can also be used in the NEPRI Community Account to obtain instant loan based on the Enterprise Tokens’ value.
Utilizing its experience, NEPRI FINANCE will work with businesses or projects accepted into the ETO framework to design robust Enterprise Token economies that take advantage of vital Enterprise Token value generation factors, including:
Revenue-driven cashflow to Enterprise token
Secondary market buybacks
Operational burns
Hodl incentives
Not a Stablecoin
It’s important to understand that the buyback value is not the only value of tokens issued under an ETO.
The token’s value is:
Speculative value is the expected security value of a token after product launch. Security value is the value of the token’s live security once the product has been launched linked to profits and revenue. Utility value is the value of the token’s live utility once the product has been launched, in fact, NEPRI Enterprise Tokens can also be used in the NEPRI FINANCE Account to obtain instant financing based on the Enterprise Tokens ’ value.
Both speculative, utility, and security values are greater than 0 as long as the community believes the project is heading in the right direction.
ETO Participants (ETPs)
In an ETO, blockchain addresses that participate in the Enterprise Token sale will be whitelisted for buyback claims. These are the only addresses allowed to claim a buyback.
They can buy Enterprise Tokens on an exchange and claim a buyback for those tokens too.
The whitelisting process gives ETO participants the exclusive right to take advantage of arbitrage opportunities if market price ever falls by more than 25% below the ETO price.
They have the ability to buy such tokens and claim buybacks for a risk-free profit and thereby become price validators. After each buyback, ETPs pull new capital into the secondary market.
Secondary Market Impact: Volume – Liquidity – Price Competition
Arbitrage Traders
ETOs create a price floor because ETO participants (ETPs) can claim a risk-free profit whenever price falls by more than 25% below ETO price.
However, anyone is allowed to buy an Enterprise Tokenon an exchange. This creates an opportunity for arbitrage traders to join the market.
Arbitrage traders can be expected to offer liquidity and generate volume at the same time as ETPs because they have an incentive to beat ETPs at scalping lower prices, and sell back to ETPs at prices much closer to the buyback price.
Secondary Market Impact: Volume – Liquidity – Price Competition
Fundamentals-Driven Traders
As a project advances in its development, and as announcements of milestone fulfillment are made, traders who would have been interested in the project or business but were not aware of the development at the time of the Enterprise Token sale, start to assess the business or project.
Prior to product launch, these traders take speculative positions on the belief that the live security and utility would increase the Enterprise token’s demand beyond its speculative demand.
Post-launch, these traders assess the project or business roadmap and the team’s biweekly updates to assess the growth potential of the Enterprise Token, and take positions if the growth has not been priced in.
Secondary Market Impact: Volume – Liquidity – Fresh Demand
FOMO-Driven Traders
By design, the ETO model has a high frequency of major events that change the metrics of the issued Enterprise Token, at the will of its holders.
Enterprise Tokens issued under an ETO model are supported by guaranteed buybacks.
Enterprise Tokens that are bought back are burned, thereby permanently reducing supply, while bringing fresh money into the hands of the community. Historically, all such factors have led to increased volume and speculative interest in a token from traders who FOMO into such events.
Based on their ability to bring speculative interest prior to buybacks, burns, and the reduction in Enterprise Token supply, the FOMO events create regular opportunities for generating news about the ETO , which can pull in new traders.
A portion of these traders may also be converted to holders if the project or business matches their interest.
Secondary Market Impact: Volume – Liquidity – Fresh Demand
Project’s Buyback Treasury
Under the ETO framework, the buyback treasury has a significant role in the secondary market. By giving the tokens a nYUSD-backing, the treasury creates a price floor that market participants can take advantage of.
The treasury also:
burns tokens, thereby reducing Enterprise Token supply and project valuation
introduces new money to the secondary market by placing fresh money, through buybacks, in the hands of ETO participants
Secondary Market Impact: Token supply reduction – Liquidity – Fresh Demand – Price Floor
Secondary Market Summary
The ETO framework is designed to create a healthy secondary market with a natural competition built-in for different market participants.
At any point, arbitrage traders and ETO participants are expected to be competing for Enterprise Tokens below the price floor.
Prior to buyback dates, FOMO traders are expected to be speculating on the impact of Enterprise Token burns and buybacks.
As the project progresses, new traders, who accumulate on the basis of fundamentals but were not aware of the project or business at the time of the token sale, are pulled in
The project’s or business’s buyback treasury adds a price-floor, giving holders a downside protection while still enabling them to speculate on the Enterprise token’s success
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