Not just for the highest bidder: ‘Mutant’ auction seeks to ensure everyone benefits

Bounce Finance has designed a unique decentralized auction model called the Mutant English Auction.

Incorporating elements of a classic English auction with DeFi techniques, this auction aims to provide more opportunities and benefits to participants and spur higher participation rates.

In an English auction, bidders publicly increase their offers to buy an item starting from a base price. The highest bidder wins. Losers go home with nothing.

The “Mutant” twist

In the modified auction method, both the auctioneer and the previous bidder benefit from a higher bid, unlike standard auctions where only the winner gains an advantage.

This encourages more people to participate  — in game theory terms, overcoming “entry deterrence” — since they won’t go home empty-handed even if they tap out.

In this auction, the highest bidder doesn’t always pay the final price. The sharing mechanism can lead to a higher actual price, potentially increasing revenue for the auctioneer. Thus, both bidders and the auction house have incentives to participate.

Encouraging more participation increases the final price for the auctioneer. It’s an enticing prospect inspired by DeFi’s yield optimization principles.

The math behind the mutant

The paper goes into detail about the mathematics, but in simple terms:

• The price of an item increases with each bid.
• The difference between the current and previous bid is the “price appreciation.”
• This appreciation is shared between the auctioneer and the previous bidder.
• Bidders earn rewards based on a set percentage from the difference in consecutive bids.

As the world of blockchain and DeFi grows, this auction format could become a game-changer in how decentralized auctions are conducted in various sectors.

Bounce Finance intends to present builders with a turnkey inventory of auctions formats suitable for a variety of applications — the “Yearn Finance for auctions,” CEO Jack Lu told Blockworks.

Different auction types can satisfy the objectives of the seller, whether they want to maximize participation, ensure a fair distribution or maximize money earned.

For example, fair token launch goals can be met more effectively by random selection with a shuffle no-loss lottery-like mechanism, better than a bonding curve, Lu said.

Bounce will be trialing the Mutant English Auction itself, with a physical-digital auction combining a real-life diamond necklace paired with an NFT, later this month.

---

Get the news in your inbox. Explore Blockworks newsletters:

• Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
• Empire: Start your morning with the top news and analysis to inform your day in crypto.
• Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
• 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
• Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
• The Drop: For crypto collectors and traders, covering apps, games, memes and more.
• Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.