Eighth milestone — Auction
Greetings Lumenswap community!
Invest like the best — http://auction.lumenswap.io/
To build an ecosystem and fuel growth, companies and projects need to attract external funds from investors to become stakeholders in new ventures. Traditional fundraising methods rely on existing capital markets. For example, Coinbase floated their company as an Initial Public Offering (IPO), with their shares listed as the ticker $COIN on the NASDAQ.
Despite these successes, cryptocurrency projects have taken an entirely different, and innovative, approach to fundraising.
Tokens instead of shares!
In the cryptocurrency world, projects mostly rely on communities to generate initial revenue. Auctioning tokens, as a digital alternative to shares, has multiple advantages:
- Full transparency: Because users have complete access to all the data on the blockchain, it’s easy to track token transfers. Therefore, users are more likely to trust the fundraising event.
- Liquidity: Unlike traditional seed rounds, public token sales are often unlocked at launch. Coupled with AMM solutions, and day 1 trading liquidity gives fantastic flexibility and price appreciation potential for early investors.
- Open access: Most blockchain fundraising involves minimal identity checks, unlike traditional approaches which restrict access to only a small number of qualified participants. Some projects have no KYC requirements at all — only a wallet address is enough to take part in the event.
- Decentralization: Transparency is pointless if data can be manipulated. On the blockchain, token issuance, sale, and distribution are immutable and decentralized, which prevents fraud and manipulation.
- Utility: Because tokens and applications are on the same blockchain, projects can use their own tokens in their ecosystems, multiplying utility and inherent value.
Lumenswap’s Auction Client
Lumenswap’s auction client allows curated projects in the Stellar ecosystem to raise capital from their communities in a transparent and fair fashion. This allows them to evangelize early adopters through aligned ecosystem incentives; increasing early chances of success.
To put it briefly, the client can be described as a “decentralized Kickstarter on Stellar.” However, there are a few key differences between Kickstarter and Lumenswap:
- Lumenswap uses an English auction approach to distribute project tokens among buyers. As a result, everyone has an equal chance of winning the auction, thus removing the need for FCFS queues and other pointless activities.
- All transactions are recorded on the Stellar blockchain, allowing projects to conduct fully transparent tamper-proof auctions.
To participate in the auctions, users must exclusively use Stellar’s native token, XLM.
To take part in Lumenswap’s auctions you need a basic understanding of how English auctions work.
An English auction has three primary components:
- Base price: Participants must offer bids equal to or greater than the minimum acceptable price.
- Token supply: The number of tokens to be offered during the auction.
- Auction period: The period of time during which participants are allowed to place bids.
As soon as the auction kicks off, you can place your bids. Remember that all bids must be equal to or greater than the list price.
Once the auction ends, the bids are checked and the tokens are distributed starting from the highest bid price until there are no more tokens.
An important technique that will help you set optimal prices for your bids involves the volume-price chart:
Locate the number of tokens to be sold in the auction on the Y-axis. Then, draw a horizontal line and find the intersection point with the X-axis. Setting your bid price to a larger number than the intersection point will guarantee that you’ll be a winner. If you can’t find a point on the X-axis, the sum of bids is smaller than the supply, and you’ll win regardless of your bid price.
As an extra perk and thank you to our community, we will distribute an extra allocation of the auctioned token as a bonus to our most loyal $LSP holders.
How will that work? A few days before the auction, we’ll take a snapshot of all LSP holders addresses. Once the auction ends, users with over 10k LSP will receive a reward in proportion to their holdings.
Also, note that Lusi holders will also qualify for the reward and will receive the same allocation as 10k holders.
$LSP burning 🔥
Instead of retaining our platform fee, 7% of the total $XLM generated at auction will be used to buy $LSP and burned. This creates even more value and utility for Lumenswap’s native token and ecosystem.
Auction Client Sections
Here’s a brief description of the sections you’ll see in Lumenswap’s auction client:
Board: Shows a list of assets launched on Lumenswap’s auction client.
Send bid: Let’s you enter your bid details (i.e., amount and price) and send your request to the network.
Asset info: This box gives you asset information, including the code, asset issuer, and remaining tokens for sale.
Auction info: This box gives you information about the auction, including the period, base price, total amount of bids.
By clicking on the circle icon next to the period, the period will start counting down toward the end data. This way, it’ll be easier to see how long you have until the end of the auction.
By clicking on the circle icon next to the total bids, you can view the total volume of the bids.
Chart: This is the Volume/Price chart that will be displayed in full-screen mode by clicking on the expand icon.
Bids: Here, you can view the last bids for the asset. If you click on Show All Bids, you’ll be taken to another page where you’ll see all the bids placed for the asset.
Winners: Once the auction is over, you can head to this section to see the list of winners. You can also search for your wallet address to see if you’ve won.
My bids: This section lets you manage all your bids for different auctions and cancel any one of them if you like.
On a final note, Rabet will be the first auction on Lumenswap. The auction details will be published soon.
Thank you for reading this article.