Price Discovery Mode
Last updated
Last updated
TL;DR:
Price Discovery Mode allows participants to bid for token allocations, enabling protocols to find a fair token value efficiently, driven entirely by market demand
Price Discovery Mode Launches are 100% open to public participation with no token-gating, allocation caps, or vesting
Price Discovery Mode allows participants to collectively set the true value of tokens: This helps protocols to discover a fair market valuation for their tokens and provides users with a fairer, more efficient, and simpler experience to participate in token launches.
Price Discovery Mode uses Sealed-Bid Auctions, where participants place private bids for a specific number of tokens at their desired price.
Sealed-Bid Auctions offer a fairer and more reliable price discovery solution. Since all bids are encrypted, participants can place their orders without the fear of being outbid or sniped right before the auction ends. If their bid is successful, they get to acquire tokens at the most equitable price.
Deriving the optimal participation strategy is straightforward. As a participant, you first determine the highest price (and implied valuation) you are willing to pay for the tokens. There are two possible outcomes:
Successful bid (Bid is above settlement price): You acquired more tokens at a price lower than your initial bid, which is a favorable outcome.
Unsuccessful bid (Bid is below settlement price): You avoid overpaying for what you perceive as an overvalued deal, ensuring you don’t experience buyer’s remorse, which is also a favorable outcome.
Furthermore, Sealed-Bid Auctions eliminate the timing-driven uncertainties. All winning bids placed before the auction closes are settled at the same uniform price, regardless of when the bid was placed. (Note: This is usually true, but an edge case exists where if multiple bids are submitted at the exactly same price, the settlement will prioritize the bid made earlier, which gives a very slight advantage to participants who submitted their bids early in the auction)
Price Discovery Mode is powered by the Sealed-Bid Auction mechanism, developed by Axis. We are proud to partner with Axis to deploy this technology on Berachain, as part of Ramen's core offering.
Axis is a permissionless infrastructure layer that enables developers to build auction-driven applications. The Axis team has a proven track record, having contributed to reputable protocols such as Bond Protocol, OlympusDAO, Ankr, and Liquity.
Process of a Price Discovery Mode Launch:
Token Launch: The project initiates a token launch for a fixed number of tokens using Price Discovery Mode on Ramen. A price floor and minimum bid size are defined.
Bidding Phase: Participants place bids, specifying the total allocation (in $BERA) that they wish to contribute to the launch and the maximum price they are willing to pay per token. There is no maximum token price or allocation limits, giving users the flexibility to bid for as many tokens at any price above the price floor. During this phase, bid price information remains completely encrypted and hidden from all parties, including all other participants, the project team, and Ramen.
Auction Conclusion: Once the auction ends, bids are decrypted and sorted from highest to lowest price. Tokens are then allocated to bidders, starting with the highest bids, and continuing until all tokens have been distributed.
Settlement Price: The final bid to receive tokens establishes the settlement price, which is the uniform price at which all winning bidders will pay. If a bidder’s bid exceeds the settlement price, they will receive more tokens than initially requested. If their bid is below the settlement price, they will not receive any tokens but can claim a refund.
