The Dutch auction is not a stranger to crypto space and many people have participated in Coinlist dutch auction sales. The Dutch auction, also a first-price auction, is descending. That is, the auctioneer begins at a high price, higher than he believes the item will fetch, then decreases the price until a bidder finally calls out, “Mine!” The bidder then receives the item at the price at which he made the call. If multiple items are offered, the process continues until all items are sold. One of the primary advantages of Dutch auctions is speed. Since there are never more bids than there are items being auctioned, the process takes relatively little time. This is one reason they are used in places such as flower markets in Holland (hence the name “Dutch”). We appreciate the original idea of Dutch Auction and use the core value of traditional Dutch Auction to build a completely smart-contract-oriented on-chain Dutch auction. After researching and experimenting, we carry out three forms of on-chain dutch auction:
Bounce Dutch Auction V1
In a Dutch auction V1, the price of a given token starts at an initial price (ceiling) and drops by a fixed amount periodically (eg., 0.1 ETH every 10 minutes). Participants place bids for the number of tokens they want to purchase and the price per token that they are willing to pay. As the auction price declines, bids placed at a price above the current auction price will be filled in the order that they were received. All successful bidders will pay the price per token they bid and tokens will be swapped immediately. The Dutch auction V1 ends when (a) current demand fills supply or (b) the reserve price is met.
Dutch Auction V1 pool creators need to decide the following things:
- Pool name and token information (Token contract address, token symbol, token decimals)
- Amount of tokens to put into the Dutch Auction pool.
- Starting price (Price ceiling)
- Reserve price (Price floor)
- Auction running time
- Auction price decreasing rate (eg 0.1 ETH every 10 minutes)
- Allocation per wallet
Dutch Auction V1 pool participants will see pool information when joining into a Dutch auction pool. The pool information page will show the current auction price, time left until the next price decrease, and the total allocation left in the pool. Participants place bids for the number of tokens they want to purchase and the price per token that they are willing to pay. When a participant makes a bid that is equal to higher than the auction price, his bid will be immediately filled and both the pool creator and participant will receive ETH and swapped tokens immediately so that V1 has an immediate settlement.
Bounce Dutch Auction V2
Dutch Auction V2 is similar to (But not the same) Coinlist’s Dutch auction form. The main differences between Dutch Auction V1 and V2 are execution price and settlement.
As the auction price declines, bids placed at a price above the current auction price will be accepted in the order that they were received. Dutch Auction V2 smart contracts will record the total amount of allocation for successful bids. The auction ends when (a) current bids allocation meets supply or (b) the reserve price is met.
All successful bidders pay the same final clearing price per token and the price is the lowest price of the bid. The final price may only be equal or lower than the price of a participant’s bid, but never higher. If your bid was higher than the final clearing price, you would receive tokens equivalent to the total amount token of your bid. Once a clearing price has been determined, bids at or above the clearing price will be executed. All successful bids will execute at the same price, and settlement is the same for every successful bidder.
Bounce NFT (Non-fungible Token) Dutch Auction
I think this is new to everyone. Personally I really like the idea of NFT and I believe this is one of the only assets that are most suitable for auction. We will carry out Dutch Auction and English Auction for NFT in the next few weeks.
In an NFT Dutch auction, the price of an NFT starts at an initial price (ceiling) and drops by a fixed amount periodically (eg 0.1 ETH every 10 minutes). Participants place bids for the price that they are willing to pay. As the auction price declines, bids placed at a price above the current auction price will be recorded in the order that they were received. The NFT Dutch auction V1 ends when a bid is highest during each period of time or (b) the reserve price is met.
Now imagine assets like digital art, music, sports memorabilia, and pets can be auctioned just like Sotheby’s and Christie’s. In my opinion, this is a huge leap for the entire space. DeFi suddenly goes beyond financial instruments, and ventures into real-life experiences.
We will release these three Dutch Auction types one by one in the near future and let's start the Bounce Dutch Auction Season. Together with the launch of dutch auctions, we will add a parameter to only allow BOT holders (having x amount of tokens in the wallet) to create complex pools such as sealed-bid auction and dutch auction, and this parameter can be adjusted by governance.