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Dutch Auction
Dutch auctions are auctions in which issuers sell at declining prices. Algorand introduces the first well-known Dutch auction in the crypto world. The Dutch Auction is a powerful tool for discovering the price of a particular token. For tokens already trading on open markets like CEXs, locking parts with specific vesting terms usually have lower bids than the market price. There is still a challenge to get a consensus finance model on those forward trading assets. The Dutch Auction with enough participants demonstrates the consensus on pricing, which makes it the first choice for trading and pricing on Chemix Pad for illiquid tokens.
A graph of Dutch Auction duration and price. The Y-axis is the auction price and the X-axis is the duration.
Parameters such as auction quantity, starting price, and reserve price are set by the auction initiator. After the auction begins, the auction price decreases linearly over time. During the auction period, the auction will end early when the for-sale quantity is sold out. Under this rule, each auctioneer pays the same price for each token, which is determined at the end of the auction.
Items | Description |
|---|---|
Auction token | MTB |
Auction quantity | 1 million |
Starting time | 06/26/2021 00:00:00 GMT |
End Time | 06/27/2021 00:00:00 GMT |
Starting price | $1 |
Reserve price | $0.1 |
Minimum auction amount | 50 USD |
Then the slope formula applicable to this auction is: y = −kx + 1, then the price drop is: 0.00001042 USD/sec. Suppose Alice bids $0.5 and puts in $100, and after many bids, Bob bids $0.2 and puts in $500. At this point, the auction is over, and the final price is $0.2/MTB. Then Alice will actually get 100 ÷ 0.2 = 500 MTB and Bob will get 500 ÷ 0.2 = 2500 MTB
As the auction price decreases, the expected number of tokens that can be obtained corresponding to the funds invested by users in the auction contract will increase, which will affect the overall remaining auctionable amount. The calculation is as follows:
Suppose the current auction price is
and the funds invested in the auction contract are
, the total number of auction tokens is
, then the current remaining amount is:
Chemix Pad sets the [Minimum Expected Raise Rate]. At the end of the auction countdown, if the amount of funds invested in the auction is small, resulting in the number of auctioned tokens not meeting the value in this parameter, the auction will fail and the funds in the auction pool will be returned.