VELIC IAO Service UX

What is VELIC’s IAO (Initial Auction Offering)?

IEO (Initial Exchange Offering) is similar to the widely known ICO token sales method, but the biggest difference is that the exchange offers a platform on which exchange users can participate in token sales while relying on the exchange’s credibility. That is, in a typical IEO and ICO token sales method, token issuers (or suppliers) set a price for their respective tokens as well as a bonus allocation rate which rewards incentivizes potential buyers to make purchases as early as possible (ex. 1ETH = xxx token +15%). However, VELIC’s Initial Auction Offering (IAO) suggests a differentiated pricing model from the typical IEO method. It is an auction method balancing the interests of both the seller and the buyer, uniquely designed by VELIC, settling token price of the regarding project by the market participants based on more transparency and rationality instead of having buyers race to buy tokens.

What is a Call Auction?

A call auction refers to an auction before or after the trading hours as in many traditional stock markets (Korea, Hong Kong, Japan, Australia, Germany, United Kingdom, etc.), which determines the opening price and the closing price. VELIC would like to adopt this method for the first time in the initial offering involving crypto assets.

IAO is designed to fill all orders in one price, starting with orders from the highest bid as for buying. Every participant who is eligible to purchase will buy at the same price point.

*(Please refer to IAO features for detailed examples)

Then, why do we adopt a call auction? In the stock market generally, mass orders are submitted at once prior to the start or the close of the market. This often leads to unstable trading and imperfect price discovery. Thus, the call auction, leaves out the principle of priority in time and applies the principle of 1) price and 2) quantity. By focusing on the latter two aspects, the call auction system can determine the opening and closing quote efficiently and reasonably and effectively address a heightened level of trading volume which is typical in initial offerings.

Features of VELIC IAO

The features of an IAO offered by VELIC are as below.

1) Unlike typical stock market auction principles, VELIC’s IAO focuses on the principles of 1) price and 2) time (instead of quantity). This is possible due to VELIC’s trading system which can quickly respond to a sudden fluctuation of the market thanks to its matching engine speed of 10,000TPS per pairing.

2) The price and bonus rate (ex. 1ETH = xxx token +15%) of token sales will be suggested by project, and VELIC will review and set a reasonable initial price. Hence, investors can suggest their bidding price freely according to their needs (between the initial price of IAO and highest price limit (50%) for each round) and reach the reasonable token sales price through supply and demand.

3) The singular trading price determined at the end of the 1st round would be the minimum price of the next round of IAO and the highest price limit (50%) will be reset correspondingly. This is to provide advantages for buyers who bid in advance considering the price fluctuation risk of base coins (ex: BTC, ICX) during the remaining rounds of IAO.

4) Since other IEOs typically execute purchase on a first-come first-served basis, they tend to experience technical difficulties when a large volume of trading requests come through. Also, you can lose the opportunity to purchase if other buyers make the orders first. VELIC would like to address these issues through its IAO. Orders are not executed on first-come first-served basis and tokens are distributed to users who express more interest in tokens (by way of their bidding prices). Any buyer who puts in the bid within the IAO period will be eligible for the purchase, even if he or she was not the first to click the order button. Moreover, a buyer will never pay more than the overall market sentiment, since all successful buyers will buy at a single, identical price. Conversely, if there is lackluster interest, the tokens will be sold at an initial price or not sell at all. Thanks to its design, IAO allows tokens to be distributed to those who put more value on the tokens, at a price that is determined in the market.

“Example

1. VELIC reviews token sales of project “X” and determines that the initial price of $10 would be appropriate, it creates 1,000 sell orders on $10.

2. Once the IAO begins, user “D” connects to the site before anyone else and places a 1,000 buy orders at $10 per token. Next, user “B” places 650 buy orders at $13 per token. User “C” subsequently bids on the same amount and price (650 buy orders at $10 per token). User “A”, places the bid last before the end of the IAO, wants the token so badly that he places 200 buy orders at $15 per token, which is also the highest price limit of the applicable round

“After the end of this IAO round, what shall be the set price and how much would it be distributed to whom? According to the principles of IAO mechanism (Price priority followed by time), A, B, C will respectively take 200, 650 and 150 with the single price of $13.

By introducing an innovative IAO model for the first time in crypto trading, VELIC seeks to revolutionize the way crypto assets are offered. We aim to act as a bridge between the crypto space and the real world finance, ensuring better user experience and a fair price discovery without relying on artificial incentives to push tokens to be sold as quickly as possible.

In conjunction with the launch of VELIC Exchange, we are excited to introduce VELIC token (VELT) as the first case of IAO.