Mechanism Series: Last Price Dutch Auction
What is a Last Price Dutch Auction?
A Last Price Dutch Auction (LPDA) is a variant of the Dutch Auction format. Dutch Auctions start at an intentionally high price, which decreases over time until a buyer places a bid to end the auction. Traditional Dutch Auctions work well for single items, but when there are multiple items being auctioned off separately, early bidders pay a higher price than later bidders. LPDAs prevent this price disparity.
At the end of an LPDA, bidders are refunded the difference between the price they paid (their bid) and the price of the last Rae sold. This means everyone pays the same price — the Last Price of the Dutch Auction.
TL;DR Bidders bid at the highest price they’re willing to pay. When the auction ends, bidders are refunded the difference between what they paid and the lowest price (the last Rae sold).
How does it work?
Step 1: Set price target
To start, the auction curator works with Tessera to set the starting (maximum) and ending (minimum) price for the auction. They also set the length of the auction (typically ~2 hours), as well as the starting date and time.
Step 2: Auction starts, bids begin
Once the auction starts, the price to purchase a Rae begins decreasing until it reaches the minimum price.
So long as there is supply remaining, you can place a bid for Raes at the going auction price. You can also place multiple bids at different price points.
A good rule of thumb: bid at the soonest, highest price you’re willing to pay. Because LPDAs refund you the difference between your bid and the lowest price paid, it does not benefit you to wait.
From the Vault page you can also view previous bids for any on-going LPDA. Any bid that you have submitted will have a green outline.
Step 3 & 4 — Auction Ends
There are two potential scenarios for how an LPDA can end.
- Scenario (A) — all Raes in the auction sell out before the minimum price is reached.
- Scenario (B) — the auction expires (24 hours after minimum price is reached) before all the Raes have been sold.
…Step 3 — Scenario A: Auction Sells Out
Step 3A: The Final Rae is purchased
Once the last Rae is bid on, and won, the auction sells out. The price stops decreasing and the auction immediately ends.
Step 4A: Claim Raes + Refund
Once the auction ends, you should then visit the Vault to claim your Raes, as well as a refund from the auction. You can claim your Raes and ETH refund during any phase (even after a successful buyout).
(Your Refund = Purchase Price — Final Rae Price)
The curator will be able to claim the ETH from a successful LPDA from the Vault page as well. This will be available during any phase.
…Step 3 — Scenario B: Auction Expires
Step 3B: Auction reaches minimum price
Once the auction reaches the minimum price, it remains at this price for 24 hours before ending. If all remaining Raes are sold in those 24 hours, the Rae claim process begins (see Step 4A).
Step 4B: Auction is canceled
If remaining Raes are not sold after 24 hours, the auction is cancelled and the vault is closed.
Bidders should claim refunds for their bids (excluding gas costs) from the Vault page.
The original curator of the Vault can also withdraw the NFT from the vault.
