We are introducing a new way for protocols to launch tokens: Price Discovery Mode.
In Fixed-Price Mode, protocols often set a fixed token price based on market sentiment, product traction, and prior funding rounds. While Fixed-Price Mode presents significant benefits, teams may struggle to correctly value their tokens, leading to inefficiencies or missed opportunities.
This launch model allows participants to collectively set the true value of tokens: This helps protocols in removing pricing guesswork and provides users with a fairer, more efficient, and simpler experience.
Powered by Axis
We are proud to partner with Axis to deploy Sealed-Bid Auctions on Berachain as the mechanism behind Price Discovery Mode, directly accessible on the Ramen platform. As part of this collaboration, Axis will provide Ramen with exclusive product development and deployment support on Berachain.
Axis is a permissionless infrastructure layer that enables developers to build auction-driven applications, with Sealed-Bid Auctions as the flagship auction model. The Axis team has a proven track record, having contributed to reputable protocols such as Bond Protocol, OlympusDAO, Ankr, and Liquity.
How Price Discovery Mode Works
Price Discovery Mode uses Sealed-Bid Auctions, where participants place private bids for a specific number of tokens at their desired price. This guarantees fairness, as bidders are not influenced by the actions, bid information, or timing of other participants.
Process of a Price Discovery Mode Launch:
- Token Launch: The project initiates a token launch for a fixed number of tokens using Price Discovery Mode on Ramen. A price floor and minimum bid size are defined.
- Bidding Phase: Participants place bids, specifying the total allocation (in $BERA) that they wish to contribute to the launch and the maximum price they are willing to pay per token. There is no maximum token price or allocation limits, giving users the flexibility to bid for as many tokens at any price above the price floor. During this phase, bid price information remains completely encrypted and hidden from all parties, including all other participants, the project team, and Ramen.
- Auction Conclusion: Once the auction ends, bids are decrypted and sorted from highest to lowest price. Tokens are then allocated to bidders, starting with the highest bids, and continuing until all tokens have been distributed.
- Settlement Price: The final bid to receive tokens establishes the settlement price, which is the uniform price at which all winning bidders will pay. If a bidder’s bid exceeds the settlement price, they will receive more tokens than initially requested. If their bid is below the settlement price, they will not receive any tokens but can claim a refund.
Why Sealed-Bid Auctions Offer a Superior Solution
The Sealed-Bid Auction model proves to be a compatible solution to fulfil launch objectives defined as follows:
- Facilitating fair, on-chain price discovery process
Participants place bids freely at the price and implied valuation they consider fair, and since all bids are private, participants are not influenced by others’ bids and timing, ensuring that the price is determined solely by market demand - Minimizing excessive FOMO and buyer’s remorse
Users are not pressured to purchase tokens at inflated prices driven by fear of missing out. Such pressure often leads to overinflated valuations and unrealistic expectations on price performance in the short term, creating significant price volatility - Mitigating the risk of sandwich attacks, sniping, and other price manipulation tactics
While bids are on-chain, Sealed-Bid Auctions reduce the risk of price manipulation tactics that extract value from their participation because bid price is completely hidden from all other participants or bots, thus ensuring the process remains fair and efficient. - Maximizing user participation
With no allocation caps or token-gating, Price Discovery Mode encourages broad participation, ensuring an efficient and organic price discovery process.
How to Participate in Price Discovery Mode?
To participate in a Price Discovery Mode launch:
- Locate the ‘Place Your Bid’ Panel
Find the bidding panel near the top left section of the page. - Enter Spend Amount
In the ‘Spend Amount’ field, enter the amount of $BERA you wish to contribute to the launch. - Set Bid Price
In the ‘Bid Price per Token’ field, enter the maximum price you are willing to pay per token. For instance, if you bid 0.5, you are offering to pay 0.5 $BERA per token. Make sure your bid price exceeds the price floor. The higher your bid, the more likely your bid will be successful, but only bid what you are comfortable paying to avoid overpaying. - Verify Token Allocation
Double-check the minimum number of tokens you will receive if your bid is successful. You will receive more tokens if the final settlement price is lower than your bid price. We will display an estimated Fully Diluted Valuation (FDV) at your bid price for reference. - Confirm Your Bid
You will receive a prompt to approve the spend amount and submit your bid. This will require two transactions. - Track Your Bid
You can edit your bid anytime during the auction phase, but you may only submit one bid per auction. After the auction ends, visit the auction page to check if your bid was successful. You can claim your tokens or refund from this page, depending on the outcome.
Why Sealed-Bid Auctions?
Sealed-Bid Auctions offer a fairer and more reliable price discovery solution. Since all bids are encrypted, participants can place their orders without the fear of being outbid or sniped right before the auction ends. If their bid is successful, they get to acquire tokens at the most equitable price, thanks to the auction’s structured settlement process.
Deriving the optimal participation strategy is straightforward. As a participant, you first determine the highest price (and implied valuation) you are willing to pay for the tokens. There are two possible outcomes:
- Successful bid (Bid is above settlement price): You acquired more tokens at a price lower than your initial bid, which is a favorable outcome.
- Unsuccessful bid (Bid is below settlement price): You avoided overpaying for what you perceive as an overvalued deal, ensuring you don’t experience buyer’s remorse, which is also a favorable outcome.
Furthermore, unlike Liquidity Bootstrapping Pools (LBPs) where success often hinges on entering at the optimal moment, Sealed-Bid Auctions eliminate the timing-driven uncertainties. All winning bids placed before the auction closes are settled at the same uniform price, regardless of when the bid was placed. This ensures fairness for all participants, regardless of their timing.
Join Us on Berachain
Price Discovery Mode is now offered as a token launch mechanism to all protocols launching tokens on Berachain. If you’re interested in learning how your protocol can benefit from Price Discovery Mode, or about launching a token on Berachain, get in touch with us.
Stay tuned as we continue to share updates, tutorials, and best practices about Price Discovery Mode in the coming weeks. Alternatively, join us for our next Community Call in our community Discord server, where we will be discussing more about Price Discovery Mode.
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