# 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.

#### Dutch auction rules

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.

#### Example

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

#### Calculation of the number of remaining auction tokens

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
$𝑃_{𝑐𝑢𝑟𝑟𝑒𝑛𝑡}$
and the funds invested in the auction contract are
$𝐶_{𝑐𝑜𝑛𝑡𝑖𝑏𝑢𝑡𝑒}$
, the total number of auction tokens is
$𝑄_{𝑇𝑜𝑘𝑒𝑛}$
, then the current remaining amount is:
$Current remaining amount = 𝑄_{𝑇𝑜𝑘𝑒𝑛}-\frac{C_{Contribute}}{P_{Current}}$
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.