VELIC IAO

Fundraising is an essential process during which investors and potential users of the VELIC platform are becoming part of the network by purchasing digital tokens. It represents the actual launch of a blockchain project. While initial coin offerings (ICOs) have been the most popular approach, their reputation faded especially because of a high incidence of scams. Thus, the VELIC team decided to hold an Initial Auction offering (IAO), which involves a differentiated pricing model from the common IEO and ICO methods.

To understand how the IAO works, we should refer to the concept of a call auction first. The latter is an auction process, generally applied in traditional stock markets before or after trading hours, which determines the opening price and the closing price by matching multiple orders for the simultaneous execution of a trade. VELIC is the first project to introduce this methodology in the blockchain space. This approach will allow it to address an increased trading volume, which is typical for initial offerings.

VELIC transposed the call auction model to its IAO. Here are the essential steps during an IAO conducted on the VELIC platform and how they differ from an ICO:

- VELIC assesses the token sale of project “A” and figures out that the initial price of $20 per token is the most appropriate one, so it creates 1,000 sell orders on $20.

- Once the IAO event launches, John is the first one who enters the platform and places 1,000 buy orders at $20 per token. In a typical ICO, John would become the only owner of the project’s tokens, as he purchases all of the 1,000 units, leaving no room for others. However, this is not how the IAO model works. The final decision of who owns what is taken at the end of the IAO round. To continue with our example, David is the next buyer — he places 500 buy orders at $23 per token. Sarah is the third bidder — she sets the same amount of orders (500) at the same price ($23). Thomas is the last guy bidding during the IAO — he really wants to own some tokens, so he decides to place 200 buy orders at $25 per token, which is the highest price limit so far.

At the end of the round, what is the expected price-per-token and how much should each bidder get? The IAO pricing mechanism determines a single price by aggregating all the proposals. The VELIC system will match all orders at the price where the highest volume can be traded and the orders are matched according to price/time priority at the closing price. Thus, VELIC would sell the project A’s tokens for $25 (following the price/time priority mechanism). But how are the tokens distributed? VELIC’s IAO approach relies on price priority followed by time. Thus, Thomas would get 200 tokens as he offered the highest price. David would receive 500 tokens as he is the first one to offer the second highest price. Finally, Sarah would get 300 tokens because her offer came after David’s proposal. She could have received 500 tokens as she initially wanted, but no more tokens are left (the 1,000 token limit is reached). Note that all three of them — Thomas, David, and Sarah get the tokens at the same price of $23. And yes, John doesn’t get anything at all — that’s how much the IAO differs from the ICO.

VELIC wants to transform the way digital assets are distributed among adopters, and this IAO model seems to be the ideal approach. The largest stake goes to those who want it more.