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“GBM auctions have transformed the way we distribute NFTs to our community. True price discovery for our assets and an incentivised selling process has made our drops wildly successful across all metrics.”
Jesse Johnson
Founder & COO, Aavegotchi
Overview
Aavegotchi is a DeFi-enabled NFT collectibles game with a vibrant community and developed by Pixelcraft Studios. Aavegotchi combines Decentralized Finance (DeFi) and NFTs to create a financially-incentivized gaming experience.
Challenge
Previously using a fixed price, first-come first-served solution, which gave an unfair advantage to bots and left their community frustrated, Aavegotchi needed an enjoyable, exciting and fair way of distributing their NFTs to their community.
Solution
GBM turns any Aavegotchi sale into a great experience where users either win the NFT or make money, making each drop a fair, fun and exciting experience for everyone and generating more revenue for Aavegotchi.
The Situation
Aavegotchi’s desire to provide fair and even NFT distribution to their users
In late 2020, as NFTs started to become more popular, various methods were tried by projects to distribute NFTs to their communities. Unfortunately, a lot of these methods have holes in their logic, resulting in many drops either being badly handled or exploited at the expense of their communities. As the NFT space is growing rapidly, these issues have been growing with it and not a week passes by without hearing of another NFT drop leaving their community frustrated and the project creators losing out on a lot of potential revenue.
Aavegotchi’s first NFT drop in March 2021 was initiated through the most common form of NFT distribution: The first-come, first served, fixed-price method. Although Aavegotchi saw great success as the drop sold out in only a few minutes, it gave an unfair advantage to tech-savvy users and bots: As a result, many in the community were left out as bots snatched items and users were forced to purchase these NFTs on the secondary market at inflated prices, which was also a big opportunity cost for Aavegotchi.The Aavegotchi team were therefore on the lookout for a better method of distributing NFTs, and one that would be popular and drive excitement around their drops within their community.
The issue with first-come first-served NFT drops
By far the most common form of NFT distribution, the first-come first-served method simply presents all available NFTs to users at a specific launch date and time, and at a fixed price. Eager buyers all try to buy the items at the same time, often with a limit on how many NFTs you can buy in one transaction to avoid one or two users purchasing the whole collection.
The first-come first-served method makes it hard to price items correctly, which always results in loss of revenue for the project.
It gives an unfair advantage to tech-savvy users and bots, many users cannot participate.
Users who were left out must buy on the secondary market for inflated prices, which is again a large opportunity cost for the project who doesn’t see any of that money.
The Challenge
The Challenge
Remove the advantage of speed so that everyone has a chance to participate and win an NFT
Turn the NFT distribution into an enjoyable experience that everyone wants and can be a part of
Sell NFTs for their true market value
Ensure that Aavegotchi captures the majority of the initial sale value, rather than market flippers
The limitations of the English Auction
Using a traditional English auction mechanic was explored by the Aavegotchi team, however it still has several key flaws:
In an English auction, only the highest bidder wins. Everyone else loses and leaves with nothing.
There is no incentive to participate, thus many auctions don’t attract enough bidders and items are undervalued. Some auctions have no bidders at all.
It is difficult to generate excitement, most of the action happens at the very end of the auction.
Bots and tech-savvy users can still snipe the auction by bidding in the last few seconds if no extension mechanism is in place.
GBM: The auction where everybody wins
GBM™ turns any sale into a great experience where users either win the auction or make money. You place a bid, and if someone outbids you, you get your refunded bid, plus an incentive. Every participant either makes money or wins the auction, making the auction fun and exciting for everyone!
More Activity
Bidders are rewarded for bidding early, making the start of every auction an event no one wants to miss.
Better Prices
The incentives lead to greater price discovery, meaning items sell for their true market value, even when the demand is low, and the project captures most of the value.
Fairer Drops
Bots lose their advantage as GBM™ eliminates the emphasis on speed, creating a fairer system where everybody can win.
How GBM Works
When a bid is placed, the GBM™ formula calculates how much money that bidder will earn if they are outbid. Every bidder that gets outbid earns an incentive, and the highest bidder at the end of the auction wins, with the seller receiving what is left in the pot.
Incentive Function
Instant Payout
Hammer Time
“
Working with GBM has been a fantastic experience and the impact their auction model has had on our community has been so much more than we ever could have imagined. The data analysis that GBM provides with each drop has also been incredibly helpful, and great for marketing! ”
CoderDan
Founder & CEO, Aavegotchi
Community
GBM™ turned every Aavegotchi drop into a celebratory, inclusive and shared experience with their community. Each new Aavegotchi auction announcement is met with a lot of excitement. Everyone wants to participate and GBM drops are when the Aavegotchi team sees the most activity on their Discord server.
Aavegotchi x GBM
158%
Price Discovery
The majority of the price discovery happens in the high-energy first hours of the auctions, where tens of thousands of bids come in for each drop. The items for sale find their market value quickly and bidders still have time to participate and ultimately acquire the NFTs they want.
Prices on the secondary market are not inflated after the auctions, meaning Aavegotchi is able to capture the current market value of the items they sell, leading to a sharp increase in revenue.
Aavegotchi x GBM
158%
52M
What they say
See what the Aavegotchi community has to say about GBM.
Aavegotchi: The first GBM
auctions on Polygon
The Aavegotchi team customised and deployed the GBM™ Solidity library as their own smart contract on the Polygon Network in a matter of days, and then created an intuitive UI for bidders to browse auctions, see their active bids and how much they have earned in GBM™ incentives.
Looking into the future
The huge success that Aavegotchi experienced after switching from a first-come first-served distribution model to using GBM has made waves, and Aavegotchi have decided to use GBM for all their future NFT sales. The Aavegotchi and GBM teams continue to work together to bring better and fairer drops to their community, so stay tuned!