Jack Lu: CEO at Bounce.Finance Explains How DeFi May Bring Transparency to Auction Space

As the world becomes more digitized, auction houses are turning towards decentralized technology to improve the auction process.

Decentralized Finance (DeFi) technology is one such innovation that could transform the auction industry, bringing transparency, security, and accessibility to the table. With the rise of blockchain and smart contracts, DeFi technology allows anyone to initiate or participate in auctions in a permissionless and trustless environment.

Traditional online auctions have long suffered from issues such as lack of transparency, problems with payment and delivery, and technical glitches. DeFi auction technology also has the potential to bring transparency to the auction space, as well as many other benefits for auctioneers and participants alike.

To realize the full benefits of DeFi, however, users need to know how to identify what a trustworthy DeFi auction platform looks like. Some of the features of a trustworthy auction platform include being entirely on-chain, and without centralized interference, which will ultimately provide users with greater freedom of creation and participation.

Recently, Crowdfund Insider caught up with Jack Lu, CEO of the decentralized Auction-as-a-Service platform Bounce.Finance, to talk about how decentralized auctions have the potential to transform the auction industry.

Lu explains how decentralized technology addresses the risks associated with traditional auction platforms, including improved transparency, security, and accessibility.

Our conversation with Jack Lu is shared below.

Crowdfund Insider: Christie’s – one of the top auction houses in the world – has been operating an auction platform dedicated to NFT art for about a year. How has this entrance into Web3 impacted the auction space?

Jack Lu: An onchain auction is a technological innovation in which the auction logic is deployed, hosted, and executed on a smart contract. This creates a transparent, trustless environment for the auction to take place – the smart contracts’ automatic execution and contingency capabilities benefit both the auctioneer and the participants.

We saw this technology being adopted more broadly last year when Christie’s announced Christie’s 3.0, a blockchain-based auction platform that they use to sell digital art. Users can bid on NFTs using their wallets and settle the payment using their onchain assets. This latter feature could also provide other types of auction houses with a new way to settle funds in the future.

Crowdfund Insider: What is a DeFi auction, and how does it work? How do you participate in a DeFi auction (what are the requirements)?

Jack Lu:  A DeFi auction is an on-chain technology that allows people to initiate and participate in auctions in a permissionless manner. This means that anyone can use the technology to buy or sell any type of on-chain assets without requiring the permission or oversight of any singular authority figure (like an auction house, for example.)

By eliminating the need for these kinds of authorities, Defi auctions eliminate counterparty risks. This, in turn, allows everyone to build and operate auction frameworks on their own terms. All auction logic and triggers are automatically executed on the blockchain.

Here’s how it works:

For auctioneers, the process of creating an auction involves selecting the type of auction and setting up the auction parameters based on their needs. Once set up, they can execute the framework on-chain, similar to filling in a form and submitting it.

Participants then can view live auctions and place bids using their web3 wallets. After a sale has been completed, the payment is settled with their on-chain assets. The great thing about decentralized auction technology is that it allows for a high level of composability, which means that people can make and run auctions with the parameters of their own choosing. For instance, while most auctions are open to everyone, some on-chain auctions may be limited to a specific list of participants.

Defi auctions eliminate counterparty risks. This, in turn, allows everyone to build and operate auction frameworks on their own terms Click to Tweet

Crowdfund Insider: What are the typical risks associated with participating in traditional auctions online?

Jack Lu: Participating in traditional auctions online can pose several risks. One of the most significant risks is the lack of transparency, as the bidding process may not be fully visible to all participants. This can lead to concerns over bid manipulation or collusion.

Additionally, participants may face issues with payment and delivery, as it can be challenging to verify the authenticity of buyers and sellers online and banking obstacles. Finally, there is a risk of technical glitches or cyber attacks that could disrupt the auction process and compromise sensitive information.

Crowdfund Insider: How does decentralized technology address these risks?

Jack Lu: One advantage of on-chain auctions is that they offer improved transparency compared to traditional auctions. Since the entire process, from auction creation to bidding to execution, is conducted on the blockchain, all auction information is available for anyone to verify.

Additionally, the use of cryptocurrency for bidding and settlement provides several benefits. Because crypto payments are decentralized and do not require a bank, they are one-time and authenticated, making them more secure. Once a payment is executed, it cannot be revoked.

Finally, the accessibility of on-chain auctions is a benefit. Anyone can access the auction bidding process, even without a web page, which reduces the risk of technical glitches disrupting the auction process.

Overall, the combination of transparency, security, and accessibility make on-chain auctions an attractive option for those looking to participate in auctions in a more efficient and trustworthy manner.

Crowdfund Insider: What should users look for when choosing a trustworthy DeFi auction platform?

Jack Lu: The first requirement of an ideal decentralized auction platform is that it should be permissionless. This means that there should be no control over the creators or participants, and the technology should be entirely on-chain without centralized interference.

The benefit of this is that it provides users with greater freedom of creation and participation, similar to the difference between eBay and Amazon. However, the downside is that it can be challenging to authenticate items in an open environment, which may lead to concerns over fraud or counterfeit items.

However, these kinds of concerns can be mitigated by introducing features that make it easier for users to conduct due diligence, such as identity verification and connection to social networks where people have established a strong online presence.


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