Author | Wang Ye
Editor | Lu Xiaoming
Produced | Odaily
Author | Wang Ye
Produced | Odaily
Algorand, a star public chain project endorsed by a Turing Award winner, will start pre-launch within this week. During this period, all nodes will be tested. About a week later, the main network will be officially launched, and the first round of auction will also be held It will start at 18:00 Beijing time on June 19.
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Traditional auctions, bidding auctions, final decision. A Dutch auction is a special type of auction. Also known as "reduced price auction", it refers to an auction method in which the bidding price of the "target" of the auction decreases from high to low until the first bidder answers (reaches or exceeds the reserve price), and the hammer is sold.
What is a Dutch auction?
At present, many ICO projects are gradually using the Dutch auction method for crowdfunding, including the initial gnosis, gonetwork, polkadot, and the Raiden Network (RDN). Many people do not understand what kind of Dutch auction is. First of all, Odaily will explain to you what is Dutch auction, the specific rules of Dutch auction, and cost accounting.
Traditional auctions, bidding auctions, final decision. A Dutch auction is a special type of auction. Also known as "reduced price auction", it refers to an auction method in which the bidding price of the "target" of the auction decreases from high to low until the first bidder answers (reaches or exceeds the reserve price), and the hammer is sold.
This auction method simply means that the auction price starts from a high level and decreases at a fixed rate. Participants bid at the price they think is appropriate. When the price drops to the total amount of the current auction pool, it is just enough to buy all the tokens of the day. The auction is over.
Take Algorand directly as an example, because Algorand uses this kind of Dutch auction until the hard cap, and the Dutch auction until the hard cap.
For example, suppose a total of 100 Algo tokens are sold on a certain day. The auction started at $10, and when Xiao Li bid $50, he bought 10. After that, the price continued to drop, Xiao Wang bid 40 dollars at 2 dollars, and bought 20. After that, the price continued to drop. When the price dropped to 1 dollar, Xiao Ming bid another 10 dollars to buy 10. At this time, there is already 100 US dollars in the auction pool, and the auction price has dropped to 1 US dollar, which is exactly the price of 100 Algos. At the end of the auction that day, Xiao Li got 50 Algos, Xiao Wang got 40 Algos, and Xiao Ming got 10 Algos. Although Xiao Li bid at $5, his final transaction price was actually $1.
In addition, Algorand also has a 90% capital preservation policy, as shown in the figure below:
What this picture means is:
If the final token price of the auction is ≥ 1 USD, you can sell it back to the project party with a 10% discount after one year;
If the final token price of the auction is <1USD, you can sell it back to the project party at the purchase price -0.1USD after one year.
For example, Xiao Ming bought 10 Algo tokens at a price of 1 USD in the auction, and spent a total of 10 USD. Two months later, the token has risen to $2, and Xiao Ming sells the token for $20. And 6 months later, Xiao Ming found that the price of the token had dropped to 0.5 US dollars, and he bought back 10 tokens for 5 US dollars in the secondary market. After the expiration date, Xiao Ming chooses to refund. The refund ratio corresponding to the auction price of 1 USD is 90%. Xiao Ming can return the tokens to get 9 USD.
Simply put, the capital preservation policy exists. If the token price is higher than 1USD, a 10% discount can be refunded after one year, which means:
From June 19, 2019 to June 19, 2020, investors don't have to think about a year of selling pressure.
Users who participate in the auction have one chance to get a refund after one year of the auction. Depending on the auction price, up to 90% of the original amount can be refunded. This special auction method makes the daily auction process full of games. The refund mechanism greatly guarantees the security of investment, and also creates a lot of potential arbitrage space in the secondary market.
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Algorand's Dutch auction is conducted on the compliance platform Coinlist, and users need to pass KYC to proceed.
Coinlist is a financing platform that provides initial coin offering (ICO) for certified investors and high-quality blockchain projects, jointly launched by AngelList and Protocol Labs. In April 2018, Coinlist announced the completion of a $9.2 million Series A round of financing, in which several well-known blockchain venture capital funds participated in the investment, including Polychain Capital, Digital Currency Group, FBG Capital, Libertus Capital, Blockchain Capital, CoinFund and Electric Capital.
The initial token offering projects on the CoinList platform fully comply with the requirements of securities laws, and its CoinList Capital is also a registered investment advisor with the US Securities and Exchange Commission. Not only that, but the company also launched the "ComplyAPI" service, which allows companies to conduct anti-money laundering and KYC checks on potential investors, and confirm the investor's certification status under US securities laws.
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Controversy caused by the team and the foundation not locking positions
Algo’s overall token distribution is shown in the figure below:
Circulating Supply is the freely tradable amount of Algo. During the first 5 years of the network, there will be a maximum supply of 10 billion Algos in circulation, with subsequent annual forecasts shown in the chart below:
Although the foundation & team's 2.5 billion tokens are not locked, the project party guarantees that the Algorand team will not participate in more than 49% of the current circulation (to prevent 51% double-spending attacks).
The Algorand team guarantees that the tokens held by the foundation and the team are only used to protect the ecology and will not be sold. Algorand will never represent (or participate in) more than 49% of the total circulating supply, explaining that this is because the team does not want to control the network. When the main network is launched, the activity and security of the network are very important, and the team's token needs to be Online to provide support. “Our founder token will be used in this way, and we will maintain the team token stake for at least the first few years. Algorand will actively seek to reduce the team’s influence on the network ecology as soon as possible, because we do not want to control the network.” Algorand official said.
[Example]: 25 million in the first round of Auction, then the circulation is 25 million. In order to ensure the security of the network, the Algorand team will take up to 49% of the tokens to participate in the network ecological protection, that is: 25 million * 0.49 = 12.25 million. So the current highest circulation is 2500+1225=37.25 million Algos.
Algorand also said, "Even if the team and the foundation cash out, they will re-inject the money into the Algorand community. So in theory, the money is reinvested in itself."
But in this process, there is no supervisory committee to supervise the behavior of the Algorand Foundation and the team to ensure that the team will not sell tokens for cash.
Regarding the question of whether the team locks or not, on June 9, Algorand founder Steven Kokinoszai posted on Medium again, making three clarifications and responses on how they use their tokens: 1. Algorand founders will hold tokens for a long time It will not be sold (correcting the previous statement of "locking" tokens); 2. The founders use tokens to participate in the consensus and help protect the network, but they will never represent more than 49% of the votes; 3. The founders use tokens to support The system does encourage development. Steven Kokinos also reiterated that Algorand is the first truly public, pure proof-of-stake platform.Algorand’s official WeChat community has seen a wave of early token private placement investors start advocating investors to take orders at 10USD. In fact, according to the Dutch auction method mentioned above, the difference between early entry and late entry is not the same. Not very big, the only difference is that those who enter the market late may not be able to get the token quota in the later stage, but the editor here feels that there is no need to worry too much about not being able to get the token quota at the moment, and the Algo private placement price is 0.05USD , the auction price in the Netherlands this time is 10USD, and the first auction price is 200 times higher than the private placement price. Investors who did not participate in the private placement may not necessarily buy in at 10USD (but the team does not rule out the auction at 10USD).
Therefore, Odaily is also here to remind those investors who do not understand the Dutch auction,https://auctions.algorand.foundation/algorand-registration
References:Algorand Official：Note: Algorand Dutch auction registration address:》
