US Blockchain Company Sells Out $1.76M Tokens at ‘Dutch Auctions’

Developers of crypto projects these days have been forced to innovate and find new ways to raise funds, mainly due to the seemingly increasing amount of regulatory scrutiny that has been put on some of their favorite fundraising methods. 

The latest – and one of the most promising – of these fundraising methods has been the Dutch auction, a form of auction where the price of a token is reduced until someone finally bids for it. 

The Solana Example 

The Dutch auction technique allows investors to bid on the number of tokens they would like to buy at a specific price until either the tokens are sold off completely, or its price reduces to a specific threshold that the issuer has set. While it might not be an industry constant just yet, there’s no reason why it can’t grow to become one.

The most notable Dutch auction in the crypto space so far has been that of Solana, a blockchain company based out of the United States. Last week, the firm successfully sold all of its tokens through a “Launch Action” on CoinList. CoinList’s Launch action token issuance model makes use of the Dutch auction technique, where Solana set the price floor at $0.04 per token.  

When it was all said and done, the firm had raised $25.6 million through the token sale, as it issued 186 million tokens on the day. The tokens sold represented about 37 percent of the total supply of SOL tokens available.

Solana raised $3.2 million in its seed funding round by selling 79. 4 million tokens at $0.04 per token. Then, it sold off another 63.2 million tokens at $0.02 per token and raised a further $12.6 million. The last round saw the firm issue 25.3 million tokens at $0.25 per token – thus raising $5.7 million. 

The firm is hoping to release another 10 million tokens in its forthcoming strategic round. 

Time for a New Fundraising Method to Take the Charge 

While Dutch auctions might not yet be as popular as Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs), they do pose some benefits for investors and fundraisers.  

The biggest benefit of this fundraising method is that it can help to democratize public offerings – something that the crypto and blockchain space hopes to achieve in the future. With a Dutch auction, small investors can take part in an offering as well. 

The fundraising method is also beneficial for its ability to minimize the difference between the listing process and offering prices. This means that investors can capitalize on that and maximize their profits by purchasing tokens at a discount price. Here, prices are set by a more transparent mechanism where several bids from multiple customers and investors are accommodated.

For crypto project developers looking to get funding for their companies, this could very well be the next big thing. Financial regulators have already begun to target ICO issuers, with Kik and Telegram being the most significant examples of these agencies’ apparent bias against the crypto space. As for IEOs, they’ve not particularly lived up to the promise of supplanting ICOs as the fundraising method of choice. Perhaps now is the time of the Dutch auction.