Algos will initially enter circulation via a sequence of periodic Dutch Auctions. A core tenet of the borderless economy is fairness. We believe that the market should determine the price of an Algo rather than us. The Dutch Auction mechanism achieves this fairness for two main reasons. First, at every auction everyone who buys an Algo buys it at the same price. Second, the market determines that price.
How Algo Auctions Work
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 is 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.
If current demand exceeds supply, then bids will be fulfilled on a first-come first-serve basis.
Upon auction completion, users can see how many Algos they received. Everyone who receives Algos will pay the same price per Algo, the “clearing price.”
The Algorand Refund Policy
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:
If the original auction clearing price is $1 or higher, the refund amount will be 90 percent of the original purchase price.
If the original auction clearing price is below $1, the refund amount will be the original purchase price minus $0.10.
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 details on the safekeeping measures put in place to fulfill commitments, please click here.
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.
Custody and Refund Process
In order to fulfill its liabilities, the Algorand Foundation will hold the funds needed to implement the refund policy for each auction in a segregated account until the refund window for the corresponding auction expires. For more information, please see these auction refund details.
All auction purchases and refunds are denominated in USD, regardless of the form of payment used. If refunds are issued via Bitcoin or Ethereum, they 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.
Who Can Participate
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.
Participation in auctions is not possible for the following excluded jurisdictions: United States of America and its territories, Canada, Democratic People's Republic of Korea, Cuba, Syria, Iran, Sudan, Republic of Crimea, People's Republic of China, and jurisdictions in which the auctions and/or trading of the tokens themselves are prohibited, restricted or unauthorized in any form or manner whether in full or in part under the laws, regulatory requirements or rules in such jurisdiction.
When Algo Auctions Happen
Stay tuned to the official Algorand Foundation social channels for the latest updates on auction dates, times, and details.
The specific parameters for each auction will be committed to the Algorand blockchain in advance of each auction. Upcoming auction announcements will indicate the parameters of the auctions, including:
Starting block number of the auction
Ending block number of the auction
Auction supply (with up to 600 million Algos auctioned per year)
Starting price (the highest price possible)
Reserve price (the minimum price possible)
Recent Auction Results
The first Algo auction was held on June 19, 2019. A total of 25,000,000 algos were sold at a clearing price of $2.40.
Qualified participants will be able to buy, sell, or trade Algos on a variety of digital currency exchanges.