Mechanism Series: Optimistic Buyouts
How Do Optimistic Buyouts Work?
Optimistic Buyouts are the primary way that NFTs within a Vault can be reconstituted (when the contents of the Vault are retrieved). For a reconstitution event to occur, the primary sale of all Raes must be complete (usually this is done in the form of a Last Price Dutch Auction).
If someone wants to buyout the contents vaulted NFT, they must first submit a bid. In this mechanism, the bidder names a price and puts up at least 1 Rae as collateral. All other users (whether they currently own a Rae or not) are able to reject this bid by purchasing all of the Raes used as collateral at the fixed price proposed by the buyer. Rae owners implicitly accept this bid UNLESS the rejection criteria is met.
Optimistic buyouts last for 4 days before being accepted.
If all Raes are purchased at the implied valuation before 4 days have passed, the buyout ends and is rejected. If all Raes are not purchased, the buyout succeeds.
Step 1: Create Buyout Offer
You must own a Rae in order to propose a buyout offer. The first step is inputting an offer (in ETH) for what you believe is a fair value for all the items inside a Vault. This offer amount will be used to calculate an implied value per Rae. You will need to put up ETH + Raes equivalent to the total offer amount. You can submit an offer by clicking “Offer to buy the Vault” on from the Vault page.
The implied value of the Raes offered reduce the amount of ETH needed for the offer. The more Raes you have, the less ETH you have to pay (and the harder it is for others to reject the offer).
Step 2: Buyout Review Period
After you submit a buyout, all other Rae have 4 days to review the proposal.
If anyone wants to reject the proposed buyout, they can purchase the Raes that were included as a part of the buyout at the proposed price per Rae.
They don’t need to reject the entire offer at once, individuals are able to help towards the rejection of the offer by purchasing a few Raes. Keep in mind that for a buyout to be fully rejected, all Raes from the offer must be purchased.
If a Rae owner wants to accept the offer, they do not need to take any action. If at least 1 Rae remains in the offer by the end of the time period, the offer is automatically accepted.
Step 3: Buyout Completes
Scenario A) Successful Buyout
If there any Raes remaining as part of the buyout at the end of the 4 day review period, the Vault accepts the buyout proposal. The first step is for the Vault to be closed, which anyone can do.
After the Vault is closed, the person who made the offer can claim the NFT(s) and their remaining Raes are burnt.
All other Rae owners can then burn their Raes and withdraw their respective amount of ETH from the buyout, minus a fee to Tessera.
If you are visiting the Vault page after a buyout is successful, then you can only view the details of the buyout.
Scenario B) Unsuccessful Buyout
If other buyers purchase all the Raes put up to initiate the buyout, the review period immediately ends. The proposer receives the ETH from their offer plus the ETH from the purchased Raes. The Vault then returns to normal.
The proposer of the buyout will then be able to claim the ETH from their purchased Raes from the Vault page.
