Please describe your proposed solution
1). Related works
Vietnam has recently given the green light to the National Digital Transformation Programme, which aims to be fully implemented by 2025, with a forward-looking perspective extending to 2030. This comprehensive program prioritizes eight distinct sectors for digital transformation, and among them, the auction industry stands out as a particularly promising area within the e-commerce sector.
Digital transformation is no longer a mere option; it has become a critical battleground for auction houses. By embracing digital technologies, these institutions can effectively address the ever-evolving demands of their customers and ensure their survival in the face of an uncertain future.
Let’s delve into how two renowned auction houses are navigating this transformative landscape:
- Sotheby’s: This prestigious auction house is strategically adapting digital technologies to enhance their online art auctions. By leveraging digital platforms, Sotheby’s aims to reach a wider audience, streamline processes, and provide a seamless experience for art enthusiasts and collectors.
- Christie’s: Taking a different approach, Christie’s has ventured into the world of NFT artworks. Through their own marketplace called “Makersplace,” Christie’s auctions unique digital art pieces that exist exclusively in the digital realm. NFTs have gained immense popularity, and Christie’s is at the forefront of this innovative trend.
We are a tech startup named KOET. Currently, our Web 2.0 Auction platform serves 22 partners, including Lac Viet Auction House - the government-authorized auction house in Vietnam. Since 2019, we have served as a trusted partner of Lac Viet Auction House, helping them sell state-owned assets through our developed online auction platform on behalf of the Vietnamese government.
Below is a glance at the platform:
- Number of successful online auctions: 198
- 73%: Government's assets
- 17%: Rare and extraordinary assets
- No. of registered active users: 81,268
- An offline-to-online auction event in partnership with Lac Viet Auction House
The table presented below provides an overview of the evolution of our platform
2). Existing problems
- <u>Business's point of view</u>
- Auction industry's point of view
- According to scientific research, the main problems that need to be solved are:
- Auction fraud: 70% of bidders often worry that they aren’t paying a fair price, and the result was cheated.
- Auction results depend on the auctioneer and the auction house’s reputation.
- The acceptance of cryptocurrency in escrow and payments.
- Cardano ecosystem’s point of view
- Obstacles blocking mass adoption.
- There are no use cases that enable an environment for cryptocurrencies to be used in real life.
- The complexity of using cryptocurrency.
- According to dAppRadar, the ecosystem is lacking in both volume and quality of dApps and users.
- There is currently no dApp designed for auctioning rare & extraordinary tangible items and state-owned assets.
- The Bidder, the Seller ( government & individual), and the Auctioneer's point of view
- Transparency: Sellers are looking for a solution to restrict collusion and reduce price, especially for government properties being auctioned off.
- Regulation: The Law on asset auction mandates that tangible assets sold via auction include state-owned assets.
- Transparency: Sellers are looking for a solution to restrict collusion and reduce price, especially for government properties being auctioned off.
<u>b. System's point of view</u>
The identified business and system problems highlight the critical need for a next-generation auction platform. To address these challenges, we propose a Cardano smart contracts-based auction platform.
3). Proposed solution
The proposed next-generation auction platform comprises three pillars: (1) Business solution, (2) System solution, and (3) Solution for accelerating blockchain adoption. These pillars are explained in the following figure.
<u>3.1. System solution</u>
Leveraging Cardano's smart contracts within our existing platform ensures anonymity for bidders and winners. Transaction data is immutably stored on the blockchain, and smart contracts automatically determine the winner, eliminating the possibility of manipulation.
<u>3.2. Business solution</u>
The goal for this section is to bring more users to both the new auction platform and the Cardano blockchain space, and then keep them engaged in those spaces for a longer period.
Let's start with a simplified O2O (online to offline and offline to online) user journey, as shown in the figure below.
- New users can be acquired through both online marketing campaigns (e.g., Google search ads, Facebook ads, or downloading a mobile app via app stores) and offline events (e.g., visiting auction houses and the nearest auction coffee shops).
- Account registration and bidding escrow are mandatory for auctioning state-owned assets according to the Vietnam Law on Asset Auction.
- A Cardano-based wallet address is created during account registration. This address will then be used for receiving escrow or earning rewards.
- By law, bidders must escrow a significant sum (20% of the auction asset's price, 2-4 weeks in advance) to participate. To facilitate this, the platform accepts ADA escrow, which are then staked to earn interest. This staking mechanism not only benefits the platform through revenue generation alongside bidding transaction fees, but it also plays a crucial role in securing the Cardano network and boosting its TVL, especially considering the high value (millions of USD) of state-owned assets.
- Smart contracts automatically determine the winning bidder and securely store the bidding transaction on the blockchain for transparency. Additionally, they return escrow to the wallets of unsuccessful bidders.
- State-owned assets will be delivered to the winner by our partner, the auction house, following a traditional legal process.
We propose the Bid-to-Earn model with a B2E token to incentivize bidders to use ADA for bidding escrow instead of fiat currency. This model also aims to attract new users and convert existing non-crypto users into crypto users through a rewarding program, as illustrated in the following figure.
The Cardano blockchain-based smart contracts auction platform operates as a generator of sales for auction houses (partners). The partners pay a sales commission when the platform finds a successful bidder (winner). The auction platform takes a small portion of the sales commission (1% to 10%), while the remaining amount is converted to ADA and then rewarded to the winner’s wallet and newly registered users’ wallets. This approach encourages existing non-crypto users to create new Cardano-based wallets to receive ADA.
The platform, on behalf of the auction houses, collects and holds bidding escrow. One of the advantages of using ADA instead of FIAT for bidding The platform, on behalf of the auction houses, collects and holds bidding escrow is that bidders can earn interest via the platform’s staking pool. In the traditional approach, bidders were required to The platform, on behalf of the auction houses, collects and holds bidding escrow 20% in FIAT (2-4 weeks in advance) of the price of the auctioned assets into a locked bank account to become eligible for bidding. However, this method did not offer any interest, and the process to return the The platform, on behalf of the auction houses, collects and holds bidding escrow was time-consuming.
This innovative staking mechanism goes beyond benefiting bidders. It also plays a crucial role in securing the Cardano network and boosting its Total Value Locked (TVL), particularly given the high value (millions of USD) of state-owned assets.
4). Prototype reference
Here are the references for the prototype availability
- Homepage: https://lacvietauction.vn/
- Press release: <https://lacvietauction.vn/chi-tiet-tin-tuc/1162725-Press-Release-Blockchain>
- A video that shows the offline-to-online auction event in partnership with Lac Viet Auction House.
- On Aug 8, 2023, we've partnered with an Auction House to launched the simple MVP version ( blockchain-inspired solution) BSC-based smart contracts platform for auctioning tangible assets. It made a buzz and was widely broadcast on VTV1, the most popular channel in Vietnam, operated by VTV, the national broadcaster. Below are on-chain transactions:
- The 02 apartment buildings have successfully been sold via the system.
- The 02 Vietnam state-owned used cars have successfully been sold via the blockchain system. Pls, refer to the Reference section for detail.
References: The tangible & state-owned assets have successfully been sold via our BSC-based auctioning platform.
- <https://lacvietauction.vn/tai-san-dau-gia/1002398-lo-356—b1.2–khu-dan-cu-phan-lang-1,-phuong-an-khe,-quan-thanh-khe>
- <https://lacvietauction.vn/tai-san-dau-gia/1002378-xe-o-to-hieu-mercedez-benz-e240bks:-80b-2817-cua-van-phong-trung-uong-dang>
- <https://lacvietauction.vn/tai-san-dau-gia/1002372-xe-o-to-hieu-toyota-zace-1.8bks:-80b—3856-cua-van-phong-trung-uong-dang>
- <https://lacvietauction.vn/tai-san-dau-gia/1002281-qsh-can-ho-1904a—toa-nha-hh02—chung-cu-eco-lakeview>