Types of auctions
I think things are becoming so complicated in defi space. First, people copy and repeat each other: dex, derivative dex, lending and borrowing (It is all about M). Second, people start to think so hard like if they are building another US stock exchange. Not everything needs complicated mathematical equations. Third, I still can not find the real economic output from the crypto lending and borrowing, which are the foundation of most defi products. That being said, I think we should build something that are easy to understand.For me, auctions are more fun and less complicated. Many can be applied and operated in a decentralized environment.
Below are copies from other sources:
William Vickrey first established the taxonomy of auctions based on the order in which the auctioneer quotes prices and the bidders tender their bids. He established four major (one-sided) auction types: (1) the ascending-bid (open, oral, or English) auction; (2) the descending-bid (Dutch) auction; (3) the first-price, sealed-bid auction; and (4) the second-price, sealed-bid (Vickrey) auction.
The most common type of auction, the English auction, is often used to sell art, wine, antiques, and other goods. In it, the auctioneer opens the bidding at a reserve price (which may be zero), the lowest price he is willing to accept for the item. Once a bidder has announced interest at that price, the auctioneer solicits further bids, usually raising the price by a predetermined bid increment. This continues until no one is willing to increase the bid any further, at which point the auction is closed and the final bidder receives the item at his bid price. Because the winner pays his bid, this type of auction is known as a first-price auction.
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”).
In the English and Dutch auctions, bidders receive information as others bid (or refrain from bidding). However, in the third type of auction, known as the first-price, sealed-bid auction, this is not the case. In this mechanism, each bidder submits a single bid in a sealed envelope. Then, all of the envelopes are opened and the highest bidder is announced, and he receives the item at his bid price. This type of auction is most often used for refinancing credit and foreign exchange, among other (primarily financial) venues.
The fourth type is the second-price, sealed-bid auction, otherwise known as the Vickrey auction. As in the first-price, sealed-bid auction, bidders submit sealed envelopes in one round of bid submission. The highest bidder wins the item, but at the price offered by the second-highest bidder (or, in a multiple-item case, the highest unsuccessful bid). This type of auction is rarely used aside from setting the foreign exchange rates in some African countries.
My goal is to cover all types in the near future.
