Batch auction is a method of buying and selling used in both digital and traditional asset worlds. Batch auction groups individual orders and ensures that they are executed at the same time. All orders within these groups have the same trade price. Transactions carried out with batch auction are referred to as “batch trading”.
In batch auction, tokens are distributed to users based on the amount of contribution they provide to the pool. The price of the distributed token is determined based on the total amount at the end of the auction. In batch auctions, the trading of liquid tokens takes place, and transactions also take place in non-liquid tokens such as stablecoins and insurance tokens. Batch auction allows for the discovery of fair prices in both digital and traditional asset worlds, by utilizing bulk liquidity. Batch auctions are conducted in two ways. In some cases, buying and selling is directly between the parties involved, while in other cases, transactions are carried out within groups in a public formation.
What Is the Current Status of Batch Auction in the Cryptocurrency Market?
In the cryptocurrency market, batch auction plays an important role in the initial token and initial coin offerings (ICO). It also plays a significant role in the trading of illiquid tokens, also known as assets. Batch auction helps to prevent the problem known as Maximum Extractable Value, commonly known as MEV is a term used in the cryptocurrency world to describe a miner's ability to manipulate transactions within blocks to gain a profit. Batch auctions do not affect prices by sorting the group of transactions. This shows that batch auctions are resistant to Miner Extractable Value (MEV).
What Is Maximal Extractable Value (MEV)?
Maximal Extractable Value (MEV) measures the profit that can be made by miners or validators ranking transactions and determining which transactions should or should not be added to generated blocks.
The MEV method was originally based on the idea that miners would pull forward transfers with higher transaction fees by using bots that selected transactions with higher Gas fees. Users had to deal with the problem of knowing the transaction information. This problem is called front running.
Front running helps miners benefit from their transactions. Miners can profit by executing a particular transaction before users, or they can benefit themselves by executing their own transactions successfully and ensuring that subsequent transactions fail, i.e. with front running.
Miners can profit by placing certain trades behind users, taking advantage of the knowledge of how the market equilibrium will change after the execution of user trades. This method is called back running.
Miners are authorized to regulate the transactions within the block. Therefore, MEV methods are done by miners.
What Is Dutch Auction?
Dutch auctions work in the opposite way to auctions. An auction starts with a high price and gradually decreases in price until an offer is accepted and an agreement is reached.
In some auctions, there is a predetermined limit price, which is the minimum possible price for the asset, and the auctions do not go below this limit price. This is because there is a buyer bidding the limit price.
Companies can use open auctions for an initial public offering (IPO). If an open auction is used for an IPO, investors submit bids for the number of shares they wish to buy and the price they are willing to pay. After bids are submitted, shares are distributed to bidders, starting with the highest bid. The price paid by each bidder depends on the lowest price of all bidders or the last successful bid. For instance, an investor who bids $200 for 2,000 shares pays $90 for 2,000 shares if the last successful bid was $90.
