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Unlocking Value: Cardano-Based Smart Contracts for Tangible Asset Auctions

Problem

Most Auction Houses in the world currently rely on Web 2.0 technology for their online auction platforms. This dependence on human intervention in managing the system can lead to vulnerabilities.

Total to date

This is the total amount allocated to Unlocking Value: Cardano-Based Smart Contracts for Tangible Asset Auctions.

₳111,500

Total funds requested

198

Total votes cast

₳39.8M

Votes yes

₳43.3M

Votes abstain

About this idea

[GENERAL] Name and surname of main applicant

Le Minh Tuan

[GENERAL] Are you delivering this project as an individual or as an entity (whether formally incorporated or not)

Entity (Not Incorporated)

[GENERAL] Co-proposers and additional applicants

1) Do Thi Hong Hanh, CEO & Co-Founder of Lac Viet Auction House / hanh.do@lacviet.io, https://www.facebook.com/hong.hanh.16547

[GENERAL] Please specify how many months you expect your project to last (from 2-12 months)

[GENERAL] Please indicate if your proposal has been auto-translated into English from another language

[GENERAL] Summarize your solution to the problem (200-character limit including spaces)

By integrating smart contracts and eliminating auctioneers, the auction platform can enhance trust and transparency
Motivate user migration to Web3 by offering incentives that accelerate adoption.

[GENERAL] Does your project have any dependencies on other organizations, technical or otherwise?

[GENERAL] If YES, please describe what the dependency is and why you believe it is essential for your project’s delivery. If NO, please write “No dependencies.”

[GENERAL] Will your project’s output/s be fully open source?

Yes

[GENERAL] Please provide here more information on the open source status of your project outputs

Yes, it works under the GNU General Public License (GPL) v3.0 License.

[SOLUTION] 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

Business's point of view

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.

b. System's point of view

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.

3.1. System solution

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.

3.2. Business solution

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.

[IMPACT] Please define the positive impact your project will have on the wider Cardano community

Here are the key metrics we will use to evaluate project success.

1) Product Development and Quality

Go live on time ( 5 months).
CSAT target: 4.45/5. Bidder satisfaction will be measured monthly via surveys starting 3 months after launch.

2) Product Marketing ( Brand Focus)

At least 10 articles about Cardano and the auction platform have reached at least 500,000 views.
All transactions will be transparently shown on the Cardano blockchain. In the next 6 months, we expect to see at least 30+ tangible assets successfully auctioned.
Target: 3,000 unique monthly visits to the responsive web (3 months after go-live).

3) Drive Cardano Adoption through Platform Usage (Improves network security)

According to our data below.

We aim to convert 80% of our 12,000 Web2 platform users to the new Web3 platform.
At least 9,600 Cardano addresses will be newly created within three months after the platform goes live.

At least 2,000,000 ADA will be staked in our stake pool within six months of the platform launch. The platform collects and holds bidding escrow from bidders.

[CAPABILITY & FEASIBILITY] What is your capability to deliver your project with high levels of trust and accountability? How do you intend to validate if your approach is feasible?

1) Experiences

An experienced core team with expertise in digital transformation, Cardano blockchain, the auction industry, public relations, software development, and fund management has a proven track record of success.

On August 8, 2023, we tested the adoption of blockchain in the auction market by launching a blockchain-inspired solution ( BSC-based) for auctioning tangible assets in partnership with Lac Viet Auction House. It made a buzz and was widely broadcast on VTV1, the most popular channel in Vietnam, operated by VTV, the national broadcaster.

The two apartment buildings have successfully been sold via the system.
The two Vietnam state-owned used cars have successfully been sold via the blockchain system. Pls, refer to the Reference section for detail.
Press release: https://lacvietauction.vn/chi-tiet-tin-tuc/1162725-Press-Release-Blockchain
In an internal survey, 90% of our existing users expressed interest in the blockchain-based solution for auctioning tangible assets. Inspired by these positive signals, we propose a complete-blockchain solution based on Cardano.

2) Long-Term Growth Through Strong Partnerships

Local partnership: Since 2019, our centralized platform has served as a trusted partner of 22 Auction Houses, including Lac Viet Auction House, the government-authorized auction house in Vietnam. We have assisted them in selling state-owned assets through our online auction platform, acting on behalf of the Vietnamese government.
International partnership: We've just signed a partnership with Millon Auction House, a well-known global auction house from France, for auctioning rare and extraordinary tangible items on our platform.

3) Long-Term Vision with a clear roadmap

References:

[PROJECT MILESTONES] What are the key milestones you need to achieve in order to complete your project successfully?

1) Requirements Gathering - 1 month

Main tasks:

All elements of the scope will be clarified and we will gather the data required to start the design and build. This will include processes, data requirements, and much more.

Agreed on sales commission and incentive with the strategic partner ( Lac Viet auction house).
Acceptance criteria: Signed commercial contract with Lac Viet Auction House
Partnership with Samsung on co-marketing
Acceptance criteria:
Signed commercial contract with Samsung Vietnam.
Success story on Cardano-based smart contracts auction platform for auctioning tangible assets. The story is to be added to Samsung R&D Center's official slides in South East Asia ( Samsung R&D Center in Indonesia, 3 months after go-live).

2) Design & Requirements Sign Off - 1 month

Main tasks:

Getting the look and feel right ensures the most important information is where we need it & requirements sign-off with software vendors.

Build a co-marketing & reciprocal marketing plan with the strategic partner in detail
Acceptance criteria: Signed co-marketing plan in detail with partners ( Samsung Vietnam B2B team & Lac Viet Auction House).
Design user journeys in detail
Acceptance criteria: Blueprint for user journeys
Establishing good governance for project build in detail:
Identified roles, responsibilities, and accountabilities
Meeting & reports
An agreed way of working together
Raising issues & managing change
Risk management
Acceptance criteria: Governance Document
A design data model for customer 360-degree view
Acceptance criteria: Signed Business Requirement Document

3) Front-end build - 1 month

This is one of the largest parts of the project getting front-end work.

02 mobile apps on iOS & Android
01 responsive project website
Acceptance criteria: 02 mobile apps ( Android & iOS) & 01 responsive website.

4) Back-end build - 1 month

Main Tasks:

Creating or partnership with a Cardano Stake Pool
Acceptance criteria: A working Cardano Stake Pool.

Back-end:

Smart contracts & transaction data are on-chain code on the Cardano blockchain network.
Acceptance criteria: Source Code on GitHub & video demo.

Integration:

Integrate user data model & onboarding process to the auction platform.
Integrate & audit smart contracts
ADA staking pool & DEX integration
Integrate back-end & front-ends.
Acceptance criteria:
Report from smart contracts auditing company ( ex: CertiK, Hacken,..)
Platform demo

5). QA/UAT Testing, Fixing, Training & Go live - 1 month

Main Tasks:

Published 02 front-end mobile apps on Apple Store and Google Play
System testing and bug fixing.
Getting user's & community's feedback and making changes
Build training documents & user guides
Go live event
Acceptance criteria:
Reports from security & smart contracts auditing companies ( ex: CertiK, Hacken,..)
02 mobile apps on Google Play and Apple app stores
Publish 01 responsive website
Publish documents for training & guide
Publish testing report
Press conference: 10 newspaper articles.

[RESOURCES] Who is in the project team and what are their roles?

Tuan Le completed his Ph.D. with numerous international publications. He has worked with Microsoft, Nokia, Samsung, and MediaMonks. Currently, he serves as the CEO & Co-Founder for KOET, a Web 3 start-up.
Hanh is a government-authorized Auctioneer & CEO of Lac Viet Auction House for 15+ years.
Hung Nguyen is a blockchain developer with 8 years of experience. Who built successfully the largest government-authorized auction platform. This is his patent https://bit.ly/3HVEMhs

[BUDGET & COSTS] Please provide a cost breakdown of the proposed work and resources

We are requesting a total of 111,500 ADA. See below for a detailed estimate.

Rate card is optimized at low cost as we are using local developers

40$/hour for backend & database developer
45$/ hour for a mobile application developer
45$/hour for a smart contracts developer
30$/hour for QA/QC, UI, UX designer
50$/hour for solution architecture
40$/hour for Project Manager

Cost breakdown of the proposed work

[VALUE FOR MONEY] How does the cost of the project represent value for money for the Cardano ecosystem?

High Value, Low Cost

Integrating Cardano blockchain technology into an auction platform is expected to be a game-changer in the auction industry. This enables the creation of decentralized auction platforms, fostering a more inclusive and accessible marketplace where users can participate globally without relying on central authorities like auction houses. It offers several benefits:

Enhanced Trust and Transparency: Smart contracts can automate the auction process, eliminating the need for intermediaries like auctioneers. This creates a tamper-proof record of bids and transactions, fostering trust among participants.
Increased Security: Utilizing Cardano’s core features makes it highly secure. This reduces the risk of fraud or manipulation in the bidding process. It serves as a great real-life use case for Cardano adoption.
Streamlined Efficiency: Cardano’s smart contracts automate tasks such as bid verification and payment settlements, resulting in a faster and more efficient auction experience. Additionally, it incentivizes participants to stake ADA, thereby enhancing network security and Total Value Locked (TVL).
Simplified Cross-Border Transactions: This facilitates secure and efficient international transactions, making global participation in auctions easier. Anyone, anywhere, can bid anonymously on tangible assets using ADA and stablecoin. These assets are sold by our local partner, Lac Viet Auction House, and international partners like Million Auction House, all accessible from any device. This will increase the number of transactions on the Cardano network, potentially boosting ADA's popularity.

*/ Cloud infrastructure & Data Design: (Sever system, network, security, cloud services, customer data, customers 360 profiles ..)

~ 1 year = $5,000 ( No fund, We are supported by Microsoft Azure).

*/License Tool & Resources: (Salesforce license for Sales Cloud and Marketing Cloud for user engagement, Art tools, Dev tools, …)

~ $5,000 ( No fund, We are supported by Salesforce).

/*Hardware: (Server, storage, cloud services ..)

~ $4,500 -> no fund (We had the initial investment)

/* Tax(10%) now 0% by support from our government for IT StartUp.

Team

Minh Tuan Le

Website:https://lacvietauction.vn

All funds