Decentralised Auctions

Auctions play a crucial role in maintaining the stability of DGEL, especially in times of market volatility. Drawing inspiration from the proven DAI system, Trident Network's auctions are designed as decentralized mechanisms that facilitate the liquidation of collateralized assets to stabilize the value of DGEL. These auctions are initiated when the Collateralization Ratio falls below the predetermined threshold, ensuring that DGEL remains pegged to the Georgian Lari (GEL) and providing users with a stable digital currency.

Initiation of Auctions

When the Collateralization Ratio deteriorates due to a decline in the value of underlying assets, the system automatically triggers an auction. These auctions are initiated in response to the market conditions, ensuring that the stability of DGEL is preserved. Once triggered, an auction contract is created, and the collateralized assets are placed on auction for interested buyers to bid on.

Auction Participants

Auctions within Trident Network are open to all participants in a decentralized manner. Anyone from the community can participate as a bidder in these auctions. Bidders can place bids using DGEL, effectively offering to purchase the collateralized assets with the stablecoin. This open participation model ensures a fair and transparent process, allowing market dynamics to determine the final price of the assets.

Competitive Bidding and Auction Duration

The auction operates on a competitive bidding model. Bidders submit their offers in terms of DGEL, competing to secure the collateralized assets at the most favorable price. The auction has a predefined duration during which participants can place bids. During this time, multiple bids are accepted, fostering a competitive environment where bidders aim to submit bids that outmatch their competitors.

Determination of Winning Bid

At the end of the auction duration, the highest bid in terms of DGEL wins the auction. The bidder offering the highest price in DGEL tokens is considered the winning bidder. This bid determines the sale price for the collateralized assets. The winning bidder's DGEL is then transferred to the auction contract, and the collateralized assets are released to the winning bidder.

Utilization of Auction Proceeds

The DGEL received from the winning bidder is used to stabilize the DGEL system. These funds are utilized to repurchase DGEL tokens from the market, reducing the supply of DGEL in circulation. By decreasing the DGEL supply, the system effectively counteracts any excess liquidity and helps restore the Collateralization Ratio to its target level. This buyback mechanism is instrumental in maintaining the stability of DGEL, ensuring that the stablecoin remains resilient even in the face of market fluctuations.