Clear DefinitionsDutch Auction (for token sales)
1 min read
Pronunciation
[duch awk-shun]
Analogy
Like a flower auction where the auctioneer lowers the price until a buyer accepts the offer.
Definition
A sale mechanism where the price of tokens starts high and decreases at set intervals until all tokens are sold or a reserve price is reached, encouraging price discovery and fair allocation.
Key Points Intro
Dutch auctions enable decentralized price discovery for token offerings.
Key Points
Descending price: Price falls over time in predefined steps.
Buyer choice: Participants decide when price is acceptable.
Fairness: Reduces front‑running compared to fixed‑price sales.
Time limits: Auction ends when supply is exhausted or time expires.
Example
A project mints 1 million tokens at 5 USD starting price, reducing by 0.50 USD every hour until buyers purchase all tokens.
Technical Deep Dive
Smart contract tracks `startPrice`, `endPrice`, `duration`, and computes `currentPrice = startPrice - ((block.timestamp - startTime) * (startPrice - endPrice) / duration)`. Buyers call `buy()` which transfers tokens at `currentPrice`.
Security Warning
Large bids late in auction can front‑run smaller participants; consider bid caps or randomization.
Caveat
Price step size and interval selection critically affect allocation fairness and revenue.
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