Auction Type
Last updated
Last updated
For more technical information on auction types, view our developer docs.
Sequential Dutch Auctions (SDA), recommended for short-term bonds, operate using a Sequential Dutch Auction mechanism. This approach enables controlled issuance over time with regulated pricing and discount speed, offering adaptability and insight into demand.
Issuers establish the initial price that sets the bond market's starting exchange rate. The auction begins with a high starting price and progressively decays until a bid is received. This initial bid marks the "winning" bid, resulting in the sale of the bond.
Following each successful sale, the auction restarts with a new starting price set higher than the previous winning bid price. This new starting price then decays linearly until another bid is placed. This iterative process continues, dynamically adjusting the auction's starting point and price decay based on the supply and demand.
A minimum price is selected as an absolute hard floor, ideally with at least a 30% discount to the initial price to prevent auction stagnation.
Fixed-Price Auctions enable issuers to set a fixed price that bonders must pay to obtain payout tokens. This is best suited for trial runs with limited quantities of vested tokens and makes assessing demand for different vesting lengths easier. Because of this, it is similar to a limit order in an order book exchange. Unlike the SDA auction variants, it will not adjust the price to sell out the capacity over the duration.
Oracle-based auctions allow issuers to create bond markets that use external price feeds to stay in line with market prices. The two variants include:
Simplifies the SDA pricing approach by gradually selling out the market's capacity over the chosen duration. It achieves this by employing a linear price reduction based on the percent difference between expected and actual capacity (relative to the initial capacity) at each moment during the auction.
Oracle Fixed Discount Auctions (OFDA)
Allows issuers to sell tokens at a discount to a price provided by an oracle. A minimum total discount from the starting price is set at deployment, which creates a hard floor for the market price.
