Projects

Project Review: Bgogo

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Bgogo (BGG) | Coin Review

Overview

Bgogo is a digital asset trading platform that aims to differentiate itself as the first exchange to feature supernode self-governance. Supernodes are one of the critical features of Bgogo, as they have the authority to decide on new listings, which could ultimately lead to more of the much-needed transparency and decentralization in the exchange space. Bgogo’s mantra is  “the cryptocurrency exchange of the community, by the community for the community,” which becomes especially apparent when taking a look at their reward structure. Where other exchanges barely reward their users, Bgogo came up with an innovative model, which will be discussed in detail later on. To sum it up: Users will receive a rebate of their trading fees, paid in the native BGG token. Bgogo offers negative trading fees, commonly known as mining through trading. The trading fees charged by the exchange will be used to buy back BGG tokens which will then be burnt. Bgogo was established in 2017, initially under the name bitgogo, and began exchange operations in April 2018.

What Problem does Bgogo solve?

The lack of Transparency and fairness are two big issues, currently plaguing the crypto industry. Bgogo has based their exchange on a more decentralized model, without giving up crucial parts of their centralized nature. The implemented supernodes as their main feature, let’s have a look at how this works. Bgogo is privately funded by 21 reputable blockchain institutions from around the world. These Organisations will form the first generation of supernodes, to ensure fairnes, their contribution to receive the supernode status was limited to the maximum investment amount of any VC at 500 ETH. These supernodes are granted listing authority, to ensure, only the most high quality and promising digital assets will be listed on the exchange. Which sounds great in theory and takes a lot of centralized decision making power from the Bgogo team, but as it is with every innovative approach, we have to keep in mind, that this is an experiment in the first place.

However, it is an experiment backed by several very successful organizations, including DKB Capital, Node Capital, ICODROPS, Pantera Capital, DHVC,, Block Water Capital, Genesis Capital, IMO Ventures, Michael Arrington, just to name a few of the 21 nodes. Each supernode has an authority to vote for a token sale to be listed on Bgogo exchange during its 90-day tenure, this is called “One Vote, One Listing” authority. During the tenure, all Supernodes are required to lock up their BGG balance. The supernode must hold at least a number of 3,333,333 BGGs. Based on the daily weighed calculation of BGG positions held in each account, the team will obtain a ranking of total BGG holdings in one quarter. The top 21 accounts of that ranking who pass KYC verification will be eligible to earn supernode status in the following quarter.

Supernodes are incentivized to make sure they are doing their due diligence on the projects they are voting for as they will earn 20% of the fees generated from the trading of the coin they nominated. In addition to that, the holdings of Supernodes are locked throughout the whole quarter in which they act on their right as a Supernode. The Transparency aspect and utilization of supernodes have been the main innovation for me here. The first generation supernodes have paid a token price higher than the public, so there’s no dumping pressure from large holders due to different pricing tiers. This pricing strategy alone is very unique in the space.

The same goes for transparency in terms of top token holders, as the team will update and post BGG token holding positions of all supernodes on the website. This means that any change in supernode positions will be seen by all platform users, which is unprecedented in the space but could also lead to unpredictable risks and conflicts of interest in the future. However, overall this is an excellent step for promoting transparency. Other interesting aspects like the reward system for traders don’t really fall in the problem-solving category and will be discussed in the next section of this report.

Product and Vision

Bgogo utilizes transaction mining, a new feature that is not used by many exchanges yet. In transaction mining, a portion of commission revenue is distributed back to token holders. Every 24 hours, Bgogo will use 100% of the accumulated trading fees to repurchase BGG tokens.  The buyback tokens will be sent to a public burn address and permanently burned. This process will generate further incentives for investors and BGG holders, as the supply is continuously shrinking.

Furthermore, Users then will be able to earn double transaction fees in BGG rebates. These rebates will appear in the user’s balance within 30 minutes. The exact token allocation for trading rewards and also the supernodes will be discussed under the token economics section of this report.

It is important to note, that similar to the supernode structure, transaction mining is a highly controversial approach with no proven track record over a long period of time. The biggest concern I have here is that using all the transaction fees for buybacks will result in the exchange having to seek other sources of cash flow to maintain their operations. This surely isn’t a problem the team should be able to overcome, but investors and users should be aware of possible changes to the current design of the platform. Right now the positive effects of this model are surely outweighing the downsides, as there are no trading fees for users. Bgogo has been able to gain traction quickly, which keeps liquidity at a high level. The company said their trading volume surpassed $420 million with over 5,000 users online simultaneously within the first 24 hours of BGG trading pairs going live, which is a remarkable achievement.

Team

The Bgogo core team consists of 35 members, with experience from leading Internet companies such as Facebook, Twitter, IBM, Alibaba, etc. The core engineering team consists of several world champions of the ACM International Collegiate Programming Contest. The following information on the Palo-Alto-based team is retrieved from their whitepaper and confirmed through LinkedIn in other sources.

CEO, Maximilian Wang worked as a software engineer at Facebook, and also the former founder of Facebook’s crypto syndicate. He holds a Master’s degree in Computer Science from UCSD. He is also a senior blockchain researcher, influencer and advisor. He helped and directed several successful blockchain projects in Silicon Valley such as QuarkChain.

CTO, Nicolas Chen, formerly worked in Facebook’s U.S. headquarters and was responsible for maintaining the network security of 2 billion Facebook, WhatsApp, and Instagram users. He has won the ACM-ICPC International College Student Programming Competition Regional Champion. Nicolas holds a bachelor’s degree in computer science from Shanghai Jiaotong University.

COO, Oscar Song is the former operations chief of Huobi and founding team member of Gukebao. Oscar holds a Bachelor’s degree in Finance from the Renmin University of China.

CSO, Ciara Sun, has formerly worked at Boston Consulting Group, Deloitte Advisory, has rich work experiences in financial analysis, strategic consulting and corporate management experiences. She provided portfolio and asset management for billion scale hedge funds and private equity fund. She won the Championship for 2018 Blockchain Consensys without Borders Summit Project.

The Bgogo team seems well balanced in terms of experience from the business and technical side, including experience from operating other cryptocurrency exchanges in the past, which in a young industry and especially in a high-risk environment could become very valuable.

Token economics: What is the BGG Token?

BGG is Bgogo’s native token and serves as the proof of stake for the platform’s trading infrastructure. It is used to incentivize various Supernodes and users as we have discussed before.  BGG’s value will mainly increase in two different ways: First, increasing trading volume on the exchange will result in Bgogo collecting more commission revenue. This will enable them to buy back more tokens which are subsequently burned, resulting in an increased value of the remaining tokens. Second, given the possibility of growing popularity of the Bgogo platform as well as Crypto trading in general, the cost of being a supernode will increase. Those who wish to become a Bgogo supernode will be incentivized to lock more BGG tokens during their tenure. The Bgogo team say that the BGG token serves as the most critical mechanism for user growth.

In addition to that, Supernodes are unlikely to sell their tokens and give up their Supernode status unless there is something fundamentally wrong with the platform. Liquidity doesn’t seem to be a big problem for Crypto Funds at the moment, so I don’t expect the current supernodes are eager to reduce their BGG positions, which would ultimately have a positive effect on the price of BGG, but also holds some risks, in case one of them decides to sell their position after all.

There is a total fixed supply of 10,000,000,000 BGG that will ever be created. 10% of the total supply (1 billion BGG tokens) were sold for 15,000 ETH to the first generation of supernodes as well as strategic partners during the private sale. 50% of the total BGG token supply is reserved for rewards through trading over a period of 4 years. The maximum amount of rewards per is capped, providing more fairness to the system over the long term. Additionally, 20% of the supply is reserved for ecosystem developments and Bgogo daily operations. Tokens distributed to the team will be vested over 4 years, with 25% unlocking at the end of each year.

Growth potential and Roadmap

Given the extreme lucrativeness of crypto exchanges, there is and always will be fierce competition. On the other hand, we are seeing a growing demand for exchanges, which is interlinked with the overall demand for digital assets. Bgogo is already making moves in their attempt to catch a larger market share, their implementation of trade mining and their community-driven approach has performed very well as reflected by BGG’s steady growth rate.

The whitepaper is 10 pages in length. It is mostly jargon-free and very accessible. It introduces the Bgogo platform and explains every important aspect, such as Supernodes and Trading rewards in a simple, yet sufficient way. In general, the whitepaper is easy to understand, even for those unfamiliar with the technology. Several aspects of the business model are missing from the whitepaper, including technical details and governance. I can’t seem to find a public roadmap at this point, but the team is relatively active in providing updates through the news section on their website.

Conclusion

I view Bgogo as a promising new exchange, primarily because of its commitment to transparency, and, of course, its wide array of working, innovative products and services in a growing and lucrative space. It remains to be seen if they will be able to maintain their community-driven principles and fair commission sharing models in the future, but the large backing by various top tier investors undoubtedly plays a role in the legitimacy of Bgogo. And could play an even more significant role in, the long-term outlook, which for me is still uncertain as governance may be a concern and there will always be competition from similar platforms. Given the team’s strong background and commitment to the community, I believe Bgogo has fair chance to succeed.

BGG scored 57 out of 76 Points in our evaluation program.

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