Introducing GBM Auctions on Singular

What Are GBM Auctions?

GBM stands for Gonnaud-Bessire-McDonaugh, the names of the individuals who developed this novel auction model. In a GBM auction, each bidder is financially compensated when they are outbid in real-time during the auction. This incentivized bidding system is unique in the world of auctions and can only be achieved on the blockchain.

Why Were GBM Auctions Formulated?

GBM auctions were created to make ascending auctions work on the blockchain. Running a traditional open ascending auction (like an English auction) on the blockchain is expensive, and the dominant strategy for bidders is to keep bidding the minimum to stay the highest bidder until it reaches their value of the item, which maximizes the number of bids per auction and thus the costs.

How Do GBM Auctions Work?

image by — RMRK

GBM auctions are a time-limited, incentivized open ascending auction. Let’s break that down.

• Time-limited: A GBM auction runs for a set amount of time, which means that bidders need to act quickly to make their bids before the auction ends. This adds a level of excitement and urgency to the bidding process.
• Incentivized: Each bidder is financially compensated when they are outbid in real-time during the auction. This means that a person taking part in a GBM auction either wins the auction or leaves with more money than they started with. Here’s an example: Let’s say you place a bid of 100 RMRK on an NFT in a GBM auction. If someone outbids you with a bid of 120 RMRK, you will receive an incentive of 10 RMRK. This incentive is calculated as a percentage of your bid amount and depends on the ratio between the previous bid and your bid.
• Open ascending: A GBM auction is an open ascending auction, which means that each new bid needs to be higher than the previous bid by a minimum step, calculated as a percentage of the previous bid. For example, if the previous bid is 100 RMRK, the minimum step might be set to 5%, which means that the next bid needs to be at least 105 RMRK. This ensures that the price of the NFT increases with each bid and that the auction remains competitive.
• Fully-funded: In order to place a bid in a GBM auction, bidders need to fully fund their bid. This means that they commit the full amount when placing their bid, which ensures that they are serious about buying the NFT and that they have the necessary funds to do so.
• Real-time: GBM auctions are conducted in real-time, which means that bidders can see the current highest bid and can place their own bid immediately if they choose to do so. This creates a fast-paced, dynamic bidding environment where bidders can react quickly to changes in the auction.

By combining all of these elements, GBM auctions provide a fair, transparent, and exciting way for buyers to bid on NFTs. With GBM auctions, bidders know that they will either win the auction or receive a financial incentive if they are outbid, which provides a more fair and transparent system for everyone involved.

GBM vs Other Auction Types

GBM auctions differ from other auction types, such as Dutch auctions or centralised gasless English auctions. In a Dutch auction, the seller sets a high asking price, and the price decreases until one participant accepts the price. In centralised gasless English auctions, the platform takes buy orders, settles the payment at the end of the auction, and then transfers the item to the winner.

Benefits of Using GBM Auctions

image by — RMRK

• Transparency: GBM auctions promote transparency and trust between buyers and sellers as they are a fully-funded, incentivized system.
• Fairness: Each bidder is financially compensated when they are outbid in real-time during the auction, providing a more equitable system for bidding on NFTs.
• Increased price discovery: The GBM auction model encourages bidding beyond the minimum increment, leading to better price discovery.
• Reduced number of bids: Unlike in traditional auctions, the GBM auction model reduces the number of bids per auction as bidders are incentivized to bid higher than the minimum increment.
• Lower costs for bidders: The GBM auction model allows bidders to receive incentives when they are outbid, which can cover the cost of placing their bid.
• Incentivized secondary market dynamics: The GBM auction model can be extended to incentivize price discovery and curtail black market deals in secondary market dynamics.

Conclusion

GBM auctions are the future of NFT auctions on Singular. By incentivizing bidders to bid higher than the minimum increment, GBM auctions offer a fair, transparent, and efficient auction process. Whether you are a buyer looking for a unique NFT or a seller looking for a fair price, GBM auctions provide a level playing field for everyone.

About RMRK

RMRK is a next-generation NFT protocol that equips NFTs with superpowers, making it possible for NFTs to own other NFTs, change based on conditions, have multiple outputs depending on context, accept emojis, and more.