by 0x89a1d730aa1e78a0ede8dea988acecff0a6e99a9 (Szjanko)
Linked Draft Proposal
Add GBM Auctions dApp as a stand-alone Decentraland auction house
Summary
Implement GBM Auctions dApp as a stand-alone auction house for the Decentraland marketplace, where users can utilize Bid-to-Earn auctions to list and purchase their assets while earning $MANA whenever they are outbid.
Abstract
The Decentraland marketplace currently does not offer any type of auctioning. Auctions are a great price discovery tool for rarer items, ensuring sellers get the best market price. GBM Auctions is an incentivized auction mechanism where bidders make money when they are outbid- itâs a battle-tested product with over 70,000 auctions completed and over $200m in bidding volume. We believe the outcome of adding GBM will mean more activity on the marketplace, both for the buy and sell side and also better sales prices â all while members get a more rewarding experience earning $MANA.
Motivation
Currently, users can only sell for a fixed price using the Decentraland marketplace. This is not ideal, especially for rarer, more hard-to-value items- as it is difficult to come up with a starting price. Members either end up overpricing and not getting any traction, or under-pricing and leaving money on the table.
A price discovery system like an auction fixes this, allowing the market to dictate the price. We propose utilizing GBM Auctions which is a gamified version for web3 assets specifically where bidders make money when they are outbid- introducing not only auctions into Decentraland but a Bid-to-Earn component too.
The game theory rockets activity as bidders are now incentivized to participate. Itâs proven to generate more traffic and much higher sale prices- GBMâs existing partners have seen a 200% increase in sales price. For the bidders it also makes the experience more rewarding where they either win the item or earn $MANA.
Specification
We propose to use GBM Auctionâs dApp as a stand-alone auction house. They can still sell via fixed price through the existing marketplace but now they also have a choice to use the separate auction house.
The dApp has the Bid-to-Earn bidding mechanism back end but also a front template which can be Decentraland branded to make it a more seamless experience. The fact that the front end is done already means the dApp is light effort to deploy. It can also be hosted as a subdomain, something like auctions.decentraland.org.
Incentives are paid out in real time and in $MANA (or whichever currency the auction is listed in). Ultimately the incentives come out of the final sales price, however there is a degree of control a seller can have in deciding the maximum incentive they are willing to give.
You can see a full video demo specifically for Decentraland here
External MediaThere is no upfront investment required. No fixed costs or monthly running fees. GBM charges a 2% fee only on sales made through GBM auctions. Fixed-price sales and other non-GBM transaction methods are exempt from this fee. Full project management support is also included.
Impacts
We envision the impact of utilizing the auction house dApp will be more activity both on the buy and sell side, as well as users simply having fun with the mechanic -keeping them returning. It can also serve as a new revenue stream for the Dao as well.
First of all, it will be adding an auction feature which is currently missing from the marketplace, this in itself should get more people involved. The pitfalls of only having fixed price have already been described above.
GBM takes this a step further, as it gamifies the bidding process where bidders make money when they are outbid. People are now incentivized to participate. Furthermore, the way the mechanism calculates the incentive payout is based on how much price discovery is being done- the higher a bidder places their bid from the current point, the higher their reward would be. This way it attracts more people into the auction as well nets better prices.
We can point to an empirical study that proved how the GBM auction system has a higher first bid, higher bids overall, a higher selling price, a higher revenue for the seller, fewer bids and takes less time to reach its final bid than an English auction. You can find it here:
There are also case studies with GBMâs previous clients:
Songaday increased their revenues by 200%
https://www.gbm.auction/case-studies/song-a-day
Aavegotchi increased their revenues by 160%
https://www.gbm.auction/case-studies/aavegotchi
Cryptograph was able to price unpriceable assets created by major celebs/influencers like Vitalik Buterin and Paris Hilton
https://www.gbm.auction/case-studies/cryptograph
Another positive impact is this becoming a new revenue stream for the DAO as they can add in their own transaction fee on the auction house. As more items are being listed for sale and being sold for a higher price, the DCL DAO can earn a % as well.
The worst case scenario in any auction, although unlikely with GBM due to their incentivization, is that a seller is not happy with the final price and does not want to part with their asset. The GBM dApp however has a solution- a cancellation feature. After an auction ends there is a grace period where the seller can cancel the auction if they are not happy with the price. They will have to pay out the accrued incentive costs, as well as any transaction fees â so there is an element of penalization as you would not want sellers to cancel too often leaving disgruntled buyers. Itâs also a way of finding the market value of their item at any given time, so there is a small cost associated- but does allow them to keep their asset if they are not happy with the final price.
An undesirable scenario could also be that the auction house is simply not used, however, this is again unlikely due to the reasons listed above and also would not be impactful as the community still has the choice to keep using the existing marketplace. Furthermore, there is no upfront investment required to set up the auction house so we canât see a downside for this.
Implementation Pathways
Regarding implementation, firstly we would like to highlight that the GBM team is on hand to support. There are no extra charges for this.
For the implementation itself- we had initially begun this process by polling the community with 3 options.
Option 1 was a deeper whitelabel integration which had GBM integrated directly within the current marketplace infrastructure. Option 2 was utilizing the GBM dApp as a standalone auction house. Finally, option 3 was not to implement at all.
There were in total 8.5m votes between options 1 and 2 and zero votes for not implementing at all, showing support from the community for an integration of some sort. The second stage of the governance procedure also received zero votes to abstain completely. From the first stage poll, the lighter lift option 2 was the ultimate winner.
The exact steps if the proposal should pass would be to get the Foundation access to the GBM codebase after an agreement is signed off. GBM will also create a dedicated group with the relevant parties and include their CTO and wider tech team so there is ongoing communication. The dApp can be deployed and then hosted under a DCL subdomain.
Auctions can be listed and incentives can be paid out in $MANA. Everything is done on chain, and on Polygon, so gas costs will also be negligible.
There are no upfront set-up costs, GBM only takes a 2% fee on the final winning bid so this reduces risk further. GBMâs fee is paid automatically via smart contracts, so less admin is required.
The dApp route allows the quick pilot of a stand-alone DCL auction house and the process can also be done iteratively. If the results do end up being on par or better than GBMâs other clients then at that time we can look at a deeper white-label integration i.e. option1, and would have data by then to support this too.
Conclusion
We believe adding in the GBM Auction house dApp will make for a great addition to the existing marketplace, firstly by adding in an auction mechanism as well as a Bid-to-Earn gamified experience. This should have a big impact on activity, both on buying and selling and this has been proven from their existing clients and case studies already.
GBM has completed over 70,000 auctions and is working with The Sandbox, Rarible, Unstoppable Domains and Aavegotchi just to name a few. The founders are fully doxxed and have been working in the blockchain space since 2018, whilst being involved as early as 2013.
Hugo McDonaugh, CEO, DCL Username âObiWanKenobiâ - Hugo McDonaugh - GBM | LinkedIn
Edouard Bessire, COO
https://www.linkedin.com/in/edouardbessire/
Guillaume Gonnaud, CTO
https://www.linkedin.com/in/guillaume-gonnaud/
Throughout this governance process weâve had high engagement and voting. With this level of enthusiasm, we believe the dApp will be used by the community and be a value add to the whole Decentraland ecosystem by increasing volumes and floor prices.
There is no cost to implement, they are happy to support integration and it does not force people to choose only this method, so we cannot see any down side.