Introduction to the WOM Dutch Auction
As a community manager, I get a lot of members asking us about our choice of TGE. Most Blockchain projects conduct their ICOs through a capped sale on a first-come, first-served basis, we chose a different approach. Our main inspiration came from Parity co-founder and WOM advisor, Björn Wagner, whose company built the second-price Dutch auction decentralised application that was used by the Web3 Foundation to conduct a token sale for the Polkadot project (polkadot.network) in 2017. Björn advised us to let the market decide the price of our token rather than setting an arbitrary price. This helps us minimise the risk of price fluctuation once WOM Tokens hit exchanges and give buyers confidence in the price they pay for their tokens -whilst guaranteeing a fair chance of participation. We aren’t alone in going down the Dutch auction route. Raiden Network, Gnosis, and Quadrant are some of the many popular projects that have successfully raised funds through this type of token distribution mechanism.
Difference between a regular auction and a Dutch Auction
Regular auction:
In a regular auction the price starts low and goes up until nobody wants to pay more than the current bidder. Although this is the most common practice, it can result in leaving money on the table because it is possible that the sold product had much more value to the eventual buyer. What if the buyer was willing to pay double the money than his eventual bid? You will never know, because there was no other buyer to challenge his bid.
Dutch auction:
The price starts intentionally high and keeps dropping until somebody says “This is the price I’m willing to pay!”. The buyer can keep waiting for a better deal but someone else might be the first to make the purchase and he can miss out on the deal.
Now this is where the comparisons between the two stops. It’s a little different for a token sale or an ICO, because we’re talking about multiple contributions and not just a single acquisition of a product.
WOM Token Dutch auction
The advantages
- Instead of pulling the token price out of thin air, the community decides it’s initial value by sending ETH as a bid.
- The token sale starts at intentionally high number ($1 = 1 WOM Token) to avoid an “immediate ending” of the sale.
- Everyone pays the lowest price per WOM Token, but early contributors get a bonus for their support.
How it works in a nutshell
Like most crypto projects, WOM Token has a cap which represents the maximum amount of ETH we want to raise. However, unlike other projects, the WOM Token cap declines over time. The cap is so high as to make it almost impossible for anyone to force the sale’s end by buying all of the WOM Tokens. Furthermore, the participants who really believe in the project are likely willing to pay the highest amount possible to not miss out on the purchase. If there are enough people who share this opinion on the first day, the project will sell out at the maximum price. This would result in a sale of 350 million tokens for $350 million in ETH, the current effective cap.
If not, the token price will drop every day (for 15 days) until it reaches the value of $0.03 for every WOM Token on the last day. This will result in a total of $10 million funds in ETH, being the soft cap. The price the token has reached on the day the sale stops is the price everybody pays. But the ones who contributed early will get a bonus according to their participation date:
Bonus structure:
Day 1: 20% ETH bonus
Day 2: 15% ETH bonus
Day 3: 10% ETH bonus
Day 4: 5% ETH bonus
If the soft cap is not reached on the 15th day, all the funds from the auction will be returned to the contributors.
We’ve also created short videos to further explain the different aspects of the Dutch auction. Make sure to check them out:
Video 1: Introducing the WOM Auction
Video 2: Are my contributions safe in a Dutch Auction?
Video 3: Is price all that matters in a Dutch Auction?
To learn more about the WOM Token, join our community:
Telegram — https://t.me/womtokenofficial
Medium — https://medium.com/wom-token
Reddit — reddit.com/r/WOMToken
Twitter — https://twitter.com/WOMToken
Instagram — https://www.instagram.com/womtoken
BitcoinTalk — https://bitcointalk.org/index.php?topic=4687559
