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Just about a year ago, Staxe showcased an unprecedented use case of Blockchain technology in the live music industry: tokenizing a music concert’s core assets to enable third parties to invest in or patronage a production under a Trustless environment governed by smart contracts.
But what is Staxe? Staxe is a Fintech / DeFi project whose mission is to generate economic opportunities in the live and creative industries by deploying Blockchain & Decentralized Finance technologies. The company was founded in 2018 and has since engaged in various R&D activities centered on exploring potential blockchain / DeFi applications in the the cultural and live music space.
The project’s idea was conceived from identifying one common issue many creative productions and live events (i.e. producers of concerts, festivals, performing arts, indie films, etc.) face: advance payments needed to produce their events and content (payments to artist/band, venue, suppliers). In short, the issue here is they can't launch ticket sales (ie. for a concert) to the public until they have a date secured for artist, venue, etc. But that costs money that will only arrive later once ticket sales perform (Catch 22).
On the other hand, companies and business owners are frequently willing to invest in or support these creative productions, but they lack the trust and transparency necessary to engage in such partnerships. An outdated solution would be to purchase into the production’s equity, but purchasing into an SME’s equity for a single event is typically not feasible for neither party or in many cases the creative simply does not have an active SME with equity to offer.
We solved this by deploying Asset Tokenization. Staxe coordinates, structures and tokenizes the core productive assets of a creative / live production and sells these tokens to businesses and qualified investors who wish to invest (ie. own a stake or lend money at a fixed rate) or support (ie. patronage) one or more creative productions.
Our blockchain deployments range from Asset Tokenization to DeFi Applications with the mission of:
1. facilitating a trustless environment to coordinate and govern a predetermined value flow and guarantee its expected outcome,
2. maximizing money efficiency and potential profitability; and
3. enabling investing at the production level (ie. stake in a standalone concert) instead of investing at the equity level (ie. shares of SME).
Our solutions serve both live and creative professionals as a new and efficient financing source, as well as businesses and qualified investors who wish to have direct investment exposure or patronage to a specific or a group of live/creative productions (ie. live concerts, cultural events & festivals, performing arts, ESports, Virtual Events & more).
Too technical/confusing? Let’s explore how this applies to a real event. The use-case began close to a year ago in one of Madrid’s most iconic venues: Café Berlin Madrid. The production was planned July 25th, 2019, and Staxe undertook the mission of structuring, assembling and financing the capital for a small-scale live concert by deploying Asset Tokenization under staging environment on the Ethereum Ropsten Testnet as a private-Beta pilot.
To do so, Staxe teamed up with an emerging artist that sought financing for her concert, with a local NGO that supports social equality causes, and with private investors interested in supporting the showcased artist: MICHI and/or the NGO: Fundación Eddy-G.
Taking Blockchain On-Stage:
MICHI Live @ Cafe Berlin
July 30, 2020 - 5 min read
StaxeApp Event Card
Next, a €1.500 fundraising target was defined by the artist/producer of the event. This target represented the amount required by the production AHEAD of being able to sell tickets. (MICHI couldn’t print tickets until she had her band, a sound technician and a venue with a date confirmed, nevermind selling them!)
Then, the production’s potential revenue was tokenized. (ie. 200 tickets x €10 = €2.000 revenue capacity). Keep in mind that for this use-case pilot, the artist did not have any form of legal status (ie a company with equity) to support a transfer of ownership of her event. It is also worth mentioning that if the artist had owned an active SME with equity to offer to her investors, she would still not be willing to give up her company’s equity (long-term asset) for financing a single concert (short-term/temporary asset). This is one of the problems mentioned above that Staxe solved.
The resulting event-specific tokens (ie. MICHI concert tokens) were sold to different investors at 75% discount of its max potential value (capped by venue capacity) to match our fundraise target/hardcap.
A modified inverse exponential bonding curve was implemented into the event token to enable a dynamic price for the token and to incentivize early investment. For this use-case, we replaced the “token supply” variable in the curve with “tickets sold” from the event (see below):
Copyright 2020 Staxe AG | Silverblock SL
The crowdsale result was a ~€900 fundraise from 6 investors. Softcap was €600 for this event, so the event could go ahead and Staxe’s mission was accomplished!
As a caveat, these €900 were invested in a Special Purpose Vehicle (Tax structure) in order to unlock a 20% tax credit offered by the Spanish government for live music productions. These unrealized tax credits could potentially be tokenized as well and sold at a discount to external or even foreign investors, as these credits are real assets are guaranteed by the Spanish government. Staxe is currently working in unlocking this feature.
The SPV pays all production costs (venue, band, staff, preps and some promotion expenses) on behalf of the artist. Idle funds in the SPV are staked or pooled into a DeFi protocol (ie. Uniswap Pool) to farm yield and further boost investor profitability.
On the event day, the artist had sold roughly 90 tickets for a ~€900 turnover, meaning the standalone concert was just below break-even. However, if we had materialized our additional profitability mentioned as simulated above, our calculations resulted in a 22% potential profitability boost!
Once proceeds were final, the smart contract was triggered to distribute profits as originally agreed. A trustless environment was successfully simulated (on testnet) for this event’s participants to transfer value throughout the event’s entire lifecycle, without requiring knowledge from the end-user on blockchain or for interacting with wallets.
In addition, Eddy-G received 10% of proceeds as a donation, as initially agreed and configured in the Smart Contract pooling the funds. The remaining proceeds were distributed to the event investors at nearly break-even. Luckily, all participants were happy with the result! Don’t believe us? Just look at everyone’s faces during the concert!