A core tenet of the borderless economy is fairness. We believe that the market should determine the price of an algo rather than us. We find the Dutch Auction mechanism achieves this fairness for two main reasons. First, because at every auction everyone who buys an algo, buys it at the same price. And second, because the market determines that price. Algos will initially enter circulation via a sequence of periodic Dutch Auctions.
There are some important things to note regarding how algo auctions will work:
1) Duration, Supply & Price: At every auction, a fixed amount of algos are available for a fixed amount of time. During the auction the price of the algo starts at an initial price and continues to drop until it hits a reserve price or all algos for sale are sold at the auction’s clearing price. The price declines linearly over time.
2) Participants: Users come in and bid during this auction by specifying how much money (in USD) they are willing to spend at that auction.
The amount of money that all of these users are willing to spend are collectively referred to as commitments.
3) Arriving at a Fair Price: As the price drops, users commit money, the number of algos that are surely sold at the auction increases, and the number of remaining algos drops.
4) Demand: The number of algos demanded at any given time is given by
Because the amount of money committed never decreases and the price is always decreasing, the current demand increases with time (since prices drop, demand for algos always increases with time).
5) Auction Ending: The auction ends when (a) current demand meets or exceeds supply or (b) the reserve price is met.
Example: 500 algos are auctioned, with a start price of $10 and a reserve price of $0.1 per algo.
Before the first auction, the foundation will make available the precise mechanics of participating in the algo auctions including: account creation, identity verification, KYC/AML requirements, and depositing of USD, BTC, or ETH. Upcoming auction announcements shall further indicate the parameters of the auctions and other terms and conditions, including the amount of algos for sale, the time at which the auction starts, the duration of the auction, the initial price, and the reserve price.
We believe in the underlying value of the Algorand blockchain, the Algo, and the potential of the borderless economy. Our goal is to invest in the growth, sustainability and performance of that economy. We are committed to the quality and utility of our currency, and we want you to be happy with your purchase of algos at our auctions. As a result, every algo purchased in one of our auctions carries with it a refund policy. Should you be dissatisfied with your purchase for any reason you may return your algo one year post-purchase at up to 90% of the value paid. The details are as follows:
If the foundation sells an algo, then the refund policy allows the purchaser to return the algo back to the foundation during a 7-day window one year later at the following amounts:
The refund policy comes with a lock-up period of one year, and an expiration of one year and 7 days. This means that a buyer of x algos at an Algorand auction can sell back any number of algos up to x to the foundation after one year. Such buyers need not continually own any algos to take advantage of the refund policy, but must retain their original auction account. The refund offer expires 7 days after the lock-up period ends.
For instance, a buyer purchases 100 algos at auction (the auction purchaser) and then sells all 100 algos on an exchange. Subsequently, the auction purchaser purchases 50 algos in a secondary market. During the refund window associated with her original auction purchase, the auction purchaser can use the 50 algos that she bought in the secondary market to claim a refund for 50 algos.
Only buyers of algos purchased at an Algorand auction will be eligible for the refund policy.
All bids, including successful bids, are tracked on the Algorand blockchain and associated with an account that has satisfied KYC/AML requirements. Additionally, the auction settlements will be posted to the Algorand blockchain. Therefore, all addresses that successfully purchase algos will be recorded along with the amount of algos that they received.
During the open refund claim window, a user who purchased algos at auction can return their algos to the foundation by issuing a transaction on the Algorand blockchain. Once it receives the algos, the foundation will refund the buyer via their account
In order to fulfill its liabilities, the Algorand Foundation will partner with a third-party custodian to hold the funds needed to implement the refund policy for each auction. These funds will be held in a segregated account until the refund window for the corresponding auction expires.
All auction purchases and refunds are denominated in USD, regardless of the form of payment used. If refunds are issued via Bitcoin or Ethereum it will be priced to the USD exchange rate at the time of refund. The refund amount will be issued in the original form of payment used (whether USD or cryptocurrency) used for the original purchase, with any exchange rate determined on the date the refund is redeemed, and deposited into the user’s original wallet.
Anyone who does not reside in an excluded jurisdiction and successfully passes Know Your Customer(KYC) and Anti-Money Laundering (AML) checks may participate in the auctions. Excluded jurisdictions are defined in the Auction Terms and Conditions, which will be made available on the auction website.
The Algorand Foundation will soon be announcing the date and the parameters for the first of a series of auctions. In addition, after the launch of the Algorand MainNet, the specific parameters for each auction will be committed to the Algorand blockchain in advance of the corresponding auction. The parameters will contain, at a minimum, the following information:
Stay tuned to the official Algorand Foundation social channels for the latest updates on auction timing and details.
Qualified participants will be able to buy, sell, or trade algos on a variety of digital currency exchanges. Our list of exchange partnerships will be announced beginning at MainNet launch.
Ready to get started? Begin the auction on boarding process here.