"One of Huobi's core values is giving our users maximum choice so putting this up to vote was a natural choice for us," said Huobi Group Vice President Livio Weng. "We feel our HT community should have a say in the overall future of this project."

Based on the proliferation of cryptocurrency buzzwords in the media, Cryptocurrencies seem to have existed for an entirety, yet most blockchain projects were conceived in the last couple of years. This is a testament to the rapid growth of the emerging blockchain ecosystem and signifies a fast maturing industry. Although most cryptocurrencies exist in a truly decentralized fashion, whereupon the supply in the market is left entirely to market forces, unprecedented price actions have led to remarkable volatility which makes cryptocurrencies almost impractical as a means of payment. In comparison, inflationary fiat currencies in well managed economies have outshone cryptocurrencies both as a unit of exchange and as a reliable medium for storing value. To remedy this situation, there has been community consensus to adopt economic policies that could manage token supply in the market or to share with the coin holders the economic benefits as their project progresses.

Buybacks as an Economic policy

The 2017 cryptocurrency boom brought to us an array of terms associated with cryptocurrencies including buybacks, token burns and airdrops. Buybacks are not isolated to cryptocurrencies; they exist in normal stock markets. Definitively, a buyback is the act of repurchasing stocks or shares from the company that issued them. Buybacks present a flexible mode of paying out returns to shareholders. According to Investopedia, there are three primary reasons why buybacks are logical in the traditional financial markets

• Buybacks can be used to consolidate resources and leadership around the vision of a company. This also helps to minimize the cost of paying dividends on unused cash.

• Buybacks are useful in supporting prices when markets take a downturn to avoid a sell-off.

• In the event that a company feels that their stocks are undervalued, they may buy back the shares when the general market sentiment is bearish and capitalize on the profits by reissuing them

Buybacks in the context of cryptocurrencies

As always, crypto is built on decentralization, the core belief that the individual as a unit can work collectively with others and instill community level responsibility in the governance of mutual funds. In the new assets class, cryptocurrencies, buybacks can be implemented as predetermined policies that exist from the formative stages of a project, or as an adaptive move to market conditions initiated by community-level concern or interest. A buyback can be implemented in three ways:

• Buyback and Reallocation -as seen in the investor protection fund example from the Huobi ecosystem, the bought back tokens can be allocated to fund other specific purposes or projects within the ecosystem.

The advantage is that unused funds can be purchased from holders and be diverted to a new purpose. When the tokens are locked for example in an insurance fund pool, they are removed from the circulating supply thereby creating scarcity.

• Buyback and airdrop –in this model, the issuing company uses a portion of its profits to buy back the token from the existing markets and sends the bought tokens free to token holders in proportion to the number of tokens held by them. The new free tokens are a way of redistributing returns to the investors.

The disadvantage to this model is an increased supply of the tokens in the market, which might trigger a price decline when holders offload free tokens.

• Buyback and burn - In this model, the issuing company or organization buys back the tokens from the markets and sends them to an eater address, removing them permanently from circulation. Removing the coins from circulation creates scarcity which moves prices up, creating a way of rewarding investors for their continued support in the project.

A disadvantage to token burning is that scarcity does not always interpret to a price increase. There are other market factors that collectively influence prices. Also since the tokens are permanently destroyed, the community cannot benefit from reissuing them into the market when the general market sentiments turn bullish.

HUOBI TOKEN FUTURE VOTE

The Huobi Token is an ERC 20 standard token that fuels the Huobi ecosystem and grants users access to services and certain privileges within the Huobi ecosystem. The first and most important benefit is reduced trading fees. With HTs, you can purchase different tiers of discount with up to 50% reduction in fees. For high volume traders, this fee structure is extremely convenient. Another privilege is that HT holders may receive random airdrops from time to time from new project tokens that are listed on Huobi's exchanges; Huobi Pro and Huobi Next. The Huobi Token also grants users a right to vote on community matters. These include the tokens to be listed in the Exchange like Huobi Next.

Initially, Huobi used 20% of the trading profits of every quarter to buy back HTs which decreases the circulating supply. In the initial arrangement, the HTs were used to form an Investor protection fund (a form of insurance pool against risks that traders might face by using the Huobi platform services, but after 2 quarters, there is belief that the investor protection fund is sufficiently funded (currently it has about 230,922,398 HT). Additionally, Huobi has a reserve fund of 20,000 BTC to cover losses in case its security system is breached.

In light of this, the buyback program shifted to redistributing the repurchased tokens to holders in airdrops. However, some members of the Huobi community have asked for an alternative program in which the repurchased tokens are burnt or reallocated for other purposes, which has necessitated a community vote.

The vote is based on a snapshot from 2nd December 11:59:59 PM Singapore time which determines how many Huobi tokens users had in their accounts on that specific time.

• The vote starts at 3 PM on Monday the 3rd of December and ends on Thursday 6th December 3 PM Singapore time

• Every HT holder has a right to vote with a minimum requirement of holding at least 1 HT. Every HT is equivalent to one vote and users may only vote once

• The vote results will be announced after 5 working days in which the winning decision must attain 50% of all votes cast.

MY TAKE

As a user of the Huobi trading platform, I believe a buyback and burn program currently is a better option in managing the existing supply of HTs in the market till a systematic equilibrium can be attained between total token supply and the market demand. Contextually, every community member is welcome to democratically contribute to the direction that the ecosystem will take. Register on Huobi here and let your voice be heard.

Disclaimer: This article is not intended as investment advice. It is for informational purposes. You should always do your own research.