What BGT Market is doing is "effectively pricing the implied value of BGT in the market."
Written by: Sleeping in the Rain
Today I would like to quickly introduce to you a very interesting product on Berachain @bgtmarket.
This is also a series I want to do: A tour of the Berachain ecosystem. The first article is Puffpaw, and this is the second one.
It all starts with $BGT in BearChain’s three-token model (BGT, BERA, HONEY).
$BGT is the governance token of BearChain. It is non-transferable and non-tradable, and users can only obtain it by becoming LPs, etc. Users can convert BGT 1:1 to BERA, but cannot do the reverse operation.
The speed at which LPs of the same size obtain BGT depends on the verification nodes, and the proportion of the governance power of the verification nodes depends on the proportion of BGT entrusted to them by users to the total BGT circulation.
In short, the verification node has the power to decide which project's LP pool the BGT generated by the block will flow to, and users can entrust BGT to the verification node that best suits their own interests.
This is why we say that the norm of Bear Chain is the cooperation and game between projects, verification nodes and users.
But there is also a problem here. The "value brought by users entrusting BGT" and the "value that the project party is willing to pay for unit liquidity" may be unequal. In other words, the most original consensus mechanism cannot fully, effectively and in real time provide accurate judgments for BGT demanders and suppliers.
The original intention of BGT Market is to solve this problem - by launching a dedicated BGT market, providing demanders and suppliers with an accurate judgment of the supply and demand value of BGT in the real-time market, and pricing it through real-time market transactions.
In fact, what BGT Market is doing is "effectively pricing the implicit value of BGT in the market" (the face value of 1 BGT = 1 BERA).
P.S. The implicit value of BGT depends on the bribe that the project is willing to pay for unit liquidity. At a deeper level, the implicit value of BGT is actually the external manifestation of the BearChain ecosystem.
BGT Market is a decentralized auction market for BGT. The market auctions BGT in the form of a Dutch auction. The price of BGT at the initial auction will drop rapidly, and the rate of decline will decrease over time. Buyers can buy BGT when the price drops to their psychologically expected price and gain control of BGT.
Here, you may wonder, BGT cannot be transferred and traded, how does BGT Market auction BGT?
I think you can understand it this way: all BGT on BGT Market are placed in one wallet. Buyers can see the BGT they purchased on the front end of BGT Market (but BGT is not actually in the buyer's wallet) and perform operations according to their own needs, such as "delegating BGT to a verification node", "cancelling delegation", "claiming BGT delegation rewards", "selling BGT", "converting to BERA", etc. Each operation is automatically executed by the BGT Market smart contract. In fact, BGT is not transferred or traded, but users have control over it.
In addition to the benefits mentioned above, I personally think that BGT Market can also help new BearChain users quickly understand the implied value of BGT at the current time node so that they can formulate future strategies - if the implied value of BGT is high, they will be more inclined to entrust BGT to nodes to obtain long-term value output; if the implied value of BGT is lower than expected, they will be more inclined to exchange BGT for BERA, and mine, withdraw and sell.
From another perspective, buyers can sell BGT directly through the BGT Market, which indirectly reduces the tendency of BearChain users to convert BGT into BERA and reduces the selling pressure of BERA.
The above is my introduction to BGT Market and why I introduced it.
Finally, BGT Market’s solution to BGT liquidity has also inspired a large number of BGT holders, namely, to establish a front-end to distribute and direct the flow of BGT.