BGT Market is focused on "effectively pricing the implied value of BGT in the market."

Written by: Sleeping in the Rain

Today, I would like to quickly introduce an interesting product on Berachain, @bgtmarket.

This is also part of a series I want to create: A Tour of the Berachain Ecosystem. The first article was about Puffpaw, and this is the second.

It all starts with the three-token model of Bear Chain (BGT, BERA, HONEY), specifically the $BGT.

$BGT is the governance token of Bear Chain, characterized by being non-transferable and non-tradable; users can only acquire it through methods like providing liquidity (LP). Users can convert BGT 1:1 into BERA, but cannot reverse the operation.

The speed at which LPs acquire BGT of the same scale depends on the validating nodes, and the governance power of the validating nodes is proportional to the amount of BGT users delegate to them relative to the total circulating BGT.

In short, validating nodes have the authority to decide which project's LP pool the BGT generated with each block will flow into, while users can delegate their BGT to the validating nodes that best align with their interests.

This is why we say that the norm in Bear Chain is the collaboration and game of interests between projects, validating nodes, and users.

However, this also raises a question: the "value brought by users delegating BGT" and the "value that projects are willing to pay for unit liquidity" may not be equal, meaning that the original consensus mechanism cannot adequately, effectively, and in real-time provide accurate judgments for both the demand and supply sides of BGT.

The original intention of BGT Market is to solve this problem—by launching a dedicated BGT market to provide accurate real-time market judgments on the supply and demand value of BGT for both demand and supply sides, and to price it through real-time market transactions.

In fact, what BGT Market is doing is "effectively pricing the implied value of BGT in the market" (the surface value of 1 BGT = 1 BERA).

P.S. The implied value of BGT superficially depends on the bribe that the project is willing to pay for unit liquidity. On a deeper level, the implied value of BGT is actually an external manifestation of the Bear Chain ecosystem.

BGT Market is a decentralized auction market for BGT. The market uses a Dutch auction format to auction BGT, where the initial auction price of BGT will quickly decrease, and the rate of decrease will slow over time. Buyers can purchase BGT when the price drops to their expected price and gain control over BGT.

You might wonder how BGT Market can auction BGT when BGT is non-transferable and non-tradable.

You can understand it this way: all BGT on BGT Market is held in one wallet. Buyers can see the BGT they purchased on the front end of BGT Market (but the BGT is not actually in the buyer's wallet) and can operate based on their needs, such as "delegating BGT to validating nodes," "cancelling delegation," "claiming BGT delegation rewards," "selling BGT," "converting to BERA," etc. Each operation is automatically executed by the BGT Market smart contract. In reality, BGT does not transfer or trade, but users have control over it.

In addition to the benefits mentioned above, I personally believe that BGT Market can also help new Bear Chain users quickly understand the implied value of BGT at the current time point, allowing them to formulate future strategies—if the implied value of BGT is high, they will be more inclined to delegate BGT to nodes for long-term value output; if the implied value of BGT is below expectations, they will be more inclined to convert BGT to BERA for mining and selling.

From another perspective, buyers can directly sell BGT through BGT Market, which indirectly reduces the tendency of Bear Chain users to convert BGT to BERA, thus decreasing the selling pressure on BERA.

That’s my introduction to BGT Market and the reason for introducing it.

Finally, it’s worth mentioning that the problem-solving approach of BGT Market regarding BGT liquidity has also inspired many BGT holders to establish a front-end method for the distribution and flow of BGT.

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