Purpose: Figure out the simplest way to handle the issuance of impact certs for the upcoming round of ACX grants
Solution / TLDR: Sealed-bid auction (USD) + derivative markets (M$)
- For each of the pre-approved ACX grants, users can placed a sealed bid on impact.
- Suppose 10k shares are issued for each grant.
- Users then submit a bid of the form (1,500 shares; $20 / share) to Manifold
- Bids are sealed, ie not publicly visible
- The auction clearing price is the maximum price per share that results in all 10k shares being sold.
- Auction venue (USD)
- Easiest / no code solutions: Email OR Google form
- Users submit their bids to firstname.lastname@example.org along with a signed legal document saying they will pay up if they win
- More sophisticated: Manifold webpage
- We build a custom landing page showing all the different grants
- Users can place bids directly from the site
- Optionally allow users to link their bank accounts to pay if they win
- Trading venue (M$)
- We set up a series of markets on Manifold denominated in M$ to track the total market cap of each grant (# shares * resulting auction clearing price)
- No code solution: One of our pre-exisiting market types (numeric, FR with buckets, binary with threshold amounts, etc.)
- More ambitious version: Futures markets
Why an auction?
- Sealed bid auctions are a time-tested method of price discovery for newly listed / created assets
- Bookkeeping is easy
- Auctions don’t require outside capital from Manifold or someone else to work
- Unlike operating a trading venue, which would require someone to subsidize liquidity
Why not an impact cert trading platform?
- It’s a massive amount of eng effort to build a new market type
- Non-dischargeable technical debt
- If we promise users they can trade real-money impact certs, we will never be able to remove the feature
- Huge ongoing cost in eng, UX resources forever
- Limits our flexibility going forward
- Might want to list impact certs on someone else’s trading platform, or split Manifund into a new legal entity, etc.
- Legal risk
- If you build a trading platform for impact certs, good luck convincing the SEC you don’t have a security on your hands
- Opens the door to lawsuits, regulatory actions
- Operational risk
- It’s one thing to make a mistake in paying out users in M$, it’s quite another if millions of dollars are on the line
- Lawsuits, lost sleep, etc.