Hugo McDonaugh co-founder of GBM Domains took the time to answer some questions about all things GBM and smart contracts.
Q1) What made you decide to get into the domain industry? What attracted you to it?
Hugo) GBM has been operating since 2018 when we initially invented our Bid-to-Earn auction model.
We launched our first auctions on the Cryptograph platform (https://www.cryptograph.com) to sell unique digital collectibles created by artists and celebrities with the goal of raising money for their chosen charities.
After several successful auctions, we started providing Bid-to-Earn auctions for multiple partners and platforms in the blockchain space. Since then, there have been over 75,000 GBM auctions with $6m earned by bidders who participated.
We have always been looking at other industries which could benefit from the presence of our auctions as a price discovery tool. We recognized that the domain ecosystem suffered from a few issues that we could address using blockchain, smart contracts and our auction model.
Domains, like many other unique assets, suffer from the lack of an effective pricing mechanism. We believe that our incentivized bidding model is the best price discovery tool for domains and so we felt confident in bringing it to the market via GBM Domains.
Beyond our auction model, we also see the potential in the tokenization of domains and how this can be used to address slow transfers of assets, reneged payments in sales or auctions and other issues that domain investors experience.
Q2) What does GBM Domains do that none of the other marketplaces do?
Hugo) We looked at the domain trading experience and how other marketplaces operate to identify the key issues that face domain traders. These include: high commission fees, partial or failed payments for sales, lack of incentive to participate in auctions and slow transfers of assets.
As a result, GBM Domains has been designed to deliver low fee trading (just 1% or 5% commission for sales), fully-funded payments with instant settlement (there is no reneged payments or bids), rapid transfers of assets and to give traders access to the best price discovery tool: the Bid-to-Earn auction which provides a rewarding and engaging experience for every participant regardless of whether they win the domain or are outbid.
Q3) How do you secure payments, are you a licensed escrow company?
Hugo) Utilising Smart Contracts means we do not need to operate an escrow model as we cut out the requirement to rely on a ‘middleman’ escrow service, saving users time and money.
The Smart Contract acts as an automated escrow system, whereby a seller places their domain into the contract and if a buyer pays the required amount, the domain will immediately go to the buyer and the seller will immediately get their funds. This is a trustless system as there is no way of abusing it from our side or by a trader.
Our Smart Contracts are fully audited and have been battle-tested over multiple years of running GBM Auctions for a variety of digital and physical assets.
Q4) Bid-to-Earn auctions are very interesting. No one else does it and I have had a few people ask me if this can be abused? What should readers know about the Bid-to-Earn feature and what safeguards are in place?
Hugo) Our Bid-to-Earn auction model is definitely unique, there is nothing else out there like it!
The auction model deters potential abuse by its structure. A seller can’t abuse the system by placing ‘fake’ bids, since all bids are fully-funded and the incentives for bidders will ultimately come from the seller as they receive the final highest bid minus the incentives paid out. Fully-funded bids also means that the winning bidder cannot pull out of the auction after they have won, something that is often seen in other domain auctions.
Since all bidding activity happens onchain, there is a transparent and immutable record of all auction activity that is publicly available. This further deters abuse by revealing which accounts are interacting with the auctions.
Q5) Explain why tokenization matters?
Hugo) Tokenization matters because it improves the efficiency of trading by reducing the time and cost involved.
Tokenizing a domain is the process of creating a token on a blockchain which represents and verifies ownership of the domain. This token allows the owner to manage all domain settings such as renewing the registration or setting nameservers whilst being able to instantly transfer the token with no restrictions or hold-times. The domain itself remains in a secure registrar account, whilst the tokenized form acts as a key to this account.
Q6) Will we see a day where all domain names are tokenized?
Hugo) It is possible, especially if the big players see potential in it and there is consumer demand.
A wide variety of assets have already been tokenized in recent years, enabling frictionless trading and greater access to investment opportunities. Given that domains were some of the first digital assets to exist, we wouldn’t be surprised if they are the first to see wider tokenization.
Q7) Some people might like to buy a domain name on GBM Domains but do not want to use crypto, will you eventually offer people the ability to buy and sell with cash?
Hugo) Yes, we are currently working on a payment layer which will allow users to trade domains with cash, and eventually this will include being able to bid in Bid-to-Earn auctions. This payment layer will be gradually rolled out in the coming months.
We completely understand that some people may not want to use cryptocurrency for payments, we have tried to make the process as easy as possible for those who want to learn how to use cryptocurrency and we’ll continue to improve this even after introducing cash payment options.