(In this article I am only expressing my personal views, the reason why I wrote this article is because I myself had a hard time to understand how the auction would work at first so I wanted to explain it in my own words in case this can be useful to someone)

In this crowd sale the amount of tokens for sale is fixed.

The sale runs as an auction, the initial price per token will be extremely high to ensure that no one can simply purchase the full amount immediately.

This doesn’t mean that people contributing immediately will actually end up paying a very high price, as everyone will pay the lowest price once all the tokens have been sold.

As time passes (if the total amount of tokens has not yet been sold) the price will drop. When the price drops there are 2 consequences:

– New contributors can make an offer at the new lower price

– The number of tokens of the previous contributions made before the drop in price will be recalculated and the number of tokens allocated to them will be increased to match the new lower price

So when a contributor makes an offer they don’t know the exact amount of tokens they would receive but they know the minimum amount of tokens they will receive; according to the behavior of future contributors that amount can increase but not to decrease.

As a theoretical example let’s say someone contributes $1 million in the 1st hour. They will know the minimum amount of tokens that they will have. According to how much other people contribute, the number of tokens can only increase. Let’s now say that for some reason no one else contributes, the price per token would slowly go down until the price per token allows that contributor to buy all the 5 million tokens for $1 million.

So what makes the auction stop is the point where the recalculation of the price of the tokens already paid for matches the total amount of tokens for sale.

Q&A:

Is there a risk in contributing right away?

The risk is that you may get a small amount of tokens. There is however no risk of paying more than anyone else as everyone will pay the same price per token.

Is there a risk or an advantage in waiting?

If you want to contribute only if you can receive in exchange for your contribution a specific amount of tokens and you’re not willing to go below that number of tokens then you should wait. By waiting you acquire more information about the behavior of the other contributors which might help you to make a decision. The risk however is that as soon as the price drops enough so that the previous contributions after the recalculation are enough to buy all the tokens you will be left out.

To summarize the price you’re paying to gather that extra information is the risk of being left out. People that contribute right away don’t incur the risk of being left out but may receive a lower amount of tokens than they wished for.

How is this different than GNO?

The main difference is that GNO had already decided a fixed amount they wanted to raise (30 millions). Since they knew the total capital they needed they started by putting for-sale only 5% of the tokens with the idea that over time they would increase that percentage if they couldn’t raise the money they wanted. Unfortunately everyone contributed right away without allowing the percentage of tokens for sale to increase which resulted in a 95% allocation for the developers which will compromise decentralization in the future.

In this case however the 50% amount is already decided. On top of that there will also be another sale for 20% in the future ensuring that 70% of the tokens are in the hands of the public to guarantee proper decentralization.

How is this different than no cap (Ethereum or Tezos)?

There is no difference for people that want to be in anyway. If your mindset is that what matters to you is that you receive tokens in proportion to the amount you contributed and you don’t care if you have a small percentage of something big or a big percentage of something small there is no difference. The difference is that if you want to be sure you don’t pay more than a certain amount per token you have the option to do so.

Disclaimer: Please refer exclusively to the official website for information about this. I’m just writing my own opinions based on my limited understanding and they may be wrong. The official website is: https://polkadot.network/