Gamified public sales on Archway — an introduction to Outbid:
Outbid cuts through the VC maze and enables teams to raise funds from their community, building greater economic alignment and a path to long-term liquidity.
What is Outbid?
Outbid is a gamified platform to enable protocols to raise funds. It is designed as a series of micro-sales that occur consequently with varying levels of pricing and vesting periods.
It aims to build a system that incentivises participants to contribute early to benefit from the best pricing, while simultaneously creating long-term alignment with longer vesting periods.
By democratising the funding process, Outbid aims to restore harmony within the public blockchain space by reverting to community-led funding processes as opposed to insider-led, VC-funded protocols that distort the value of protocols and their governance systems.
How does Outbid work?
For this walkthrough, we will use information that has been made available with regards to Outbid’s first foray into the wild, for Astrovault’s public sale. The public sale is due to happen on 19 January 2024 and will accept a range of stablecoins and $ATOM for bids.
The auction will commence with the first micro-sale at an FDV of $15.0m. Should the round be filled, the next round will commence immediately at a higher valuation and apply an incremental one month to the vesting period for the prior round’s tokens.
This process will repeat for each auction. As each round completes, the next round will commence immediately and all tokens from prior rounds will have an additional vesting period of one month added to it.
The above is taken from a community exercise on Archway’s Testnet. It shows the completion of the first round of the public sale which shows information with regards to the round. Teams will also be able to add rewards to each round (and the total public sale) by incentivising participants who feature on the podium for tickets purchased.
Now the twist! How do you keep participants biting? Should the full allocation of tokens to a round not be sold, the Bonus Round will commence. This will start a final 30-minute timer for final bidding. Should there still be remaining tokens at the end of the Bonus Round, the final bidder of the Bonus Round will win all of the remaining tokens allocated to the round (which then results in the ending of the public sale). There are some caveats to the Bonus Round:
- To prevent “bid snipers” from being able to win potential jackpots, bids in the final 30 minutes will reset the auction clock to 30 minutes.
- To incentivise early contributors to a round to support the completion of a round, bidders comprising the first 10% (in value) of the round will receive a bonus of 10% in rewards should the round complete.
- The minimum bid for the round will increase per bid placed in the Bonus Round.
From a community exercise on Archway’s Testnet, the above image shows the bids placed by a user, including the final bid of a round that saw them win 10,538.5 tickets while only purchasing 3,000.0 tickets throughout the auction.
Note that each micro-sale will include a duration which is restricted to whitelisted parties only. In the first auction, this will be limited to liquidity providers on Astrovault and $JKL stakers. For each subsequent auction, it will also include any bidders within previous rounds.
Rather than extract a fee from teams in exchange for the sale, teams will be required to contribute 10% (in its token) of the value of the public sale to Astrovault DAO to support long-term liquidity for the asset, a mutually beneficial initiative. Upon the conclusion of the auction, a pool will be seeded on Astrovault with the price in the final round of the public sale.
What do I think of Outbid and where could it go?
Outbid presents a positive change in the Cosmos ecosystem that both democratises fundraising and provides flexibility not yet provided by existing platforms.
I remain conservative towards the adoption of this application primarily due to the lack of certainty around total proceeds from fundraising, and the associated value of the asset in the raise. Teams also lose finite control over the process with the potential to not be able to complete even the first round of sales and see the auction end, or see all rounds go to the Bonus Round and be completed, increasing the amount of tokens that have to be distributed.
While Outbid remains intrinsically connected with Astrovault, the long-term future of the application could see it grow further into its own beast. For that to happen, I would expect increased focus on shaping pricing and vesting periods per auction. In a similar way to how Trader Joe’s Liquidity Book lets users choose the shape of how their liquidity is distributed, teams should be able to choose and shape the curves of how they want pricing per round and vesting periods per round to be.
I am excited to see how Astrovault’s public sale plays out to understand how the dynamics will play out in practice. There are so many questions:
- When will participants shift their strategy from bidding early (for the 10% bonus) to trying to run away as the last-bid winner?
- Will participants decide to complete a round with minimal capacity left to prevent someone from being a last-bid winner? Or maybe even to create significant added capacity that could generate new hype and attention towards the sale?
Many questions, no answers — that is until we see it live!
