For many Australian cryptocurrency investors and traders, the thought of signing up to yet another local exchange—which involves being subject to, for the nth time, cumbersome know-your-customer (KYC) process—is enough to make them shudder. Realising this, one newly launched Melbourne-based cryptocurrency exchange has chosen to have away with KYC altogether.
That exchange is Blockbid. Boasting a matching system built from the ground up by a team of experienced engineers, Blockbid claims to be the only cryptocurrency exchange in Australia that offers instant signup—requiring nothing more than an email address and password—as well as no withdrawal limits. Perhaps most importantly for high-frequency traders, Blockbid also maintains that its trading fees are lower than all two hundred-plus cryptocurrency exchanges operating in Australia.
Hold up. Is this all kosher? Legally speaking? Apparently so. That’s because Blockbid’s team recently made the decision to drop its status as a bridge between fiat currencies and cryptocurrencies. By having become a crypto-to-crypto exchange, regulatory demands on Blockbid—particularly from the Australian Transaction Reports and Analysis Centre (AUSTRAC)—have eased significantly. “If you’re only dealing with crypto to crypto then AUSTRAC isn’t interested,” chief operating officer David Sapper reassured Micky in a recent interview.
With their exchange now up and running, the Blockbid team is preparing to launch its Blockbid Liquidity Token (BIDL)—which recently underwent a pre-launch name change from Blockbid Distribution Token (BDT)—an ERC20-compliant token that will run atop the Ethereum network. Holders of Blockbid’s eponymous utility token—which carries the ticker ‘BID’—are entitled to a one-to-one airdrop of BIDL, according to an August 16 post from chief executive Ben Sapper on Blockbid’s Telegram group.
For Blockbid, designing BIDL’s token mechanics took several months’ worth of close collaboration with what the team described in a June 1 blog post as “leading Australian crypto-economists.” What did they ultimately come up with? “A world-first liquidity incentive model that employs the power of token design to attract large market makers in the industry to ignite early adoption on [the Blockbid] platform.”
As detailed in its Blockbid: Token Based Liquidity Incentive paper, this liquidity incentive model was designed because of the chicken-and-egg problem associated with launching any cryptocurrency exchange: “Initially there is no liquidity. As a consequence nobody wants to trade on the exchange and therefore there is no liquidity.”
Here’s how it works: when the BIDL token launches, a fixed amount will be distributed each day. The daily rate at which BIDL is distributed (i.e., the daily token emission) will halve every 60 days. This happens until the token emission rate falls to zero on day number 360. A visual representation of BIDL’s token distribution schedule can be seen below.
How do you get some of these distributed BIDL tokens? By trading, of course! “Traders will be allocated tokens based on their pro-rata contribution to total platform volume on that day,” Blockbid’s paper states. For traders who execute market orders, they’ll share between them one-third of the daily token emision. The remaining two-thirds will go to those traders who on that day had their limit orders executed.
The value of BIDL stems from the fact that Blockbid has committed to administering a buyback-and-burn scheme every 30 days. These on-market buybacks will be made using 50 per cent of the trading fees Blockbid manages to accrue over the preceding 30-day period. Higher volumes begets more trading fees begets larger buybacks begets stronger buy-side pressure for BIDL. Capiche?
Blockbid will be kicking off its 360-day-long liquidity incentivisation scheme any day now. In the meantime, the team continues iterating on the user interface as well as listing altcoins in their exchange’s four available markets: bitcoin (BTC), ether (ETH), TrueUSD (TUSD), and tether (USDT). They are also working on adding support for a stablecoin that’s backed by the Australian dollar (AUD).