What is AIO (auction) and how does it work?
What is AIO?
AIO (Auction Initial Offering) is an auction-based initial token offering.
Its special feature is that the price of the tokens offered is set by the campaign participants (backers) themselves based on bids, just as it happens in auctions. This model makes it possible to achieve a balance between supply and demand.
In contrast to the traditional model, in which participants buy tokens at a fixed price, the AIO auction mechanics makes it possible to form the market price of a token in a natural way. Participants bid in an open manner, forming the price and ensuring the transparency of the whole process.
How does AIO work?
Auction-based fundraising works like this: the campaign author sets the number of tokens and the duration of the campaign, and then the bidding takes place automatically. Backers (buyers) bid to buy a certain number of tokens, indicating the price they are willing to pay. As soon as the first lot expires, the tokens are redeemed at the highest bid and the next lot's tokens go on sale. The lot with a price lower than the bid price (i.e., the lot is undervalued) will be adjusted upwards. The lot with a price higher than the demand price (i.e. overestimated) will fall in price. This approach will allow the market to regulate itself automatically and organically, without undervaluing or overvaluing the token.
The advantage of AIO is that this model helps restore trust in the token fundraising procedure. Because the token pricing process is clearer, participants gain more confidence that their tokens will not collapse in value after the campaign ends. Participating in projects becomes more attractive because the fear of an immediate price drop when a token is first listed on an exchange is gone. Projects that want to raise funds receive the necessary funding.