What is the price per token?
The price will be determined in Dutch Auction. In a Nutshell it works like this: the price starts high and then lowers until all tokens are sold.
This is not a uncommon way to do it. The U.S. Treasury uses a Dutch auction to sell its securities. To help finance the USA’s debt, the US Treasury holds regular auctions to sell Treasury bills (T-bills), notes (T-notes), and bonds (T-bonds), collectively known as Treasuries. Prospective investors submit bids electronically through TreasuryDirect or the Treasury Automated Auction Processing System (TAAPS) which accepts bids up to 30 days in advance of the auction.
Google opted for a Dutch auction to earn a fair price on its public offering. Prospective buyers submitted bids based on the number of desired shares and what they were willing to pay for them. After the auction ended, underwriters sifted through bids to determine the minimum price they would accept and landed on an IPO of $85 per share.
To our mind, the Dutch auction is a straightforward way to establish the true fair market price for an ICOP, ensuring participants are aware of what they are getting in return.
Having looked into smart contracts used in Dutch auctions, we found the type used for Polkadot’s ICO to be the most suitable. It is tried and tested and the result speaks for itself, with a lower level of risk involved for us and potential contributors. As we are going to use smart contract, there is no need to wait for everyone to submit their offer. Bidders can see the price upfront. The sale will start with an initial 15% ETH bonus for the first hour. For example, a 100 ETH purchase in the first hour will cost 115 ETH a day later for the same number of ICOP tokens. For every period where 2 blocks are confirmed without new contributors, the early participation bonus will drop by 1 percentage point. After the 14th drop or 24 hours elapsed (whichever comes first), the early contribution bonus will end. The auction will start with a very high ICOP price and decrease, quickly at first and then more slowly. The initial price will be so high as to make it impossible for anyone to force the sale’s end by buying all the ICOPs immediately.
If bidders feel that the reached price is reasonable and they are ready to commit, they will send ETH to the bidding address, guaranteeing their tokens at the reached price or lower. If done during the bonus period, the smart contract will treat the amount as though it is up to 15% higher than the actual price and allocate ICOPs accordingly.
On each bid the smart contract checks if the total amount bid is enough to buy all ICOPs at the current price. The price will gradually go down from there, and the calculation redone for each bid.
When all ICOPs have sold or the time expires, the auction will end. The ICOP price will be the final price at this point. If all ICOPs were sold or the auction time expires, ICOP price will be calculated by dividing all ETHs transferred with total number of ICOPs available (20 million).
You can find more information with examples on the post we wrote:
https://medium.com/icopass/notakey-ico-approach-icop-becea0a6ff1d
