Last Revision: November 8, 2021

Article Status: Released

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The Nexus Expansion Program

Second Dutch Auction

Hello Sipherians! As you can probably tell from the title, we are going to take a different sales approach for the NEKO launch - a Dutch Auction! In this article, we shall discuss the following topics:

Note that this article goes hand-in-hand with the creation of our Community Wallet that will be used to fund community projects and initiatives, in addition to providing rewards to our most loyal and engaging members! For more details, please make sure to read all about our Community Building Program in the following link - The Nexus Expansion Program.

What is a "Dutch Auction"?

A Dutch Auction is a type of auction that has been traditionally used for buying or selling goods. This type of auction is characterized by starting with a higher asking price or bid, and then the price gets lower as time goes by until a buyer accepts the price. In the case of NFTs, the main difference is that there are multiple items for sale - typically the amount of public sale slots available for minting - but the core concept remains the same. The NFT minting cost starts out at a higher price, but as time goes by, the price will periodically get lowered at specific increments set by the NFT issuers, which provides buyers with opportunities to mint their NFTs at the price they are willing to pay.

When, Where and How will this be Implemented for the NEKO launch?

The minting for NEKOs will happen on November 7, 2021 1:30 AM, and will take place in the main website (https://sipher.xyz) - same as our previous Sipher INUs launch. However, the main difference is that instead of having a traditional launch in which buyers wait for the minting to start and then being pit against one another in a gas war, the Auction will start at the established launch time with a starting price will be 0.9 ETH. Afterwards, the price will programmatically drop every 10 minutes in decrements of 0.05, with the lowest price for the auction being 0.1 ETH.

Regardless of purchase price, each participant can purchase up to 5 NEKOs per transaction, with a maximum of 5 per wallet.

Do note that as a Dutch Auction with limited NFTs available for purchase, the sale will automatically end at the point of time in which all NEKO NFTs are sold out, regardless of the current price point.

There will be 17 different price points where buyers will have an opportunity to purchase the NFTs. refer to the chart below for a visual representation of all price points and their respective durations:

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At 10 minutes for each price point, the Dutch Auction will reach its lowest price of 0.1 ETH after a duration of approximately 2 hours and 40 minutes, assuming that there are still any available NEKOs for sale at that point.

Why Dutch Auction?

We decided to go with this sales mechanic after careful consideration and evaluation of different alternatives. In conclusion, we believe that for the NFT minting process there are certain benefits of having a Dutch Auction style rather than the traditional minting style. Some of these benefits are described below:

  1. Reducing the effects of GAS WARS - Depending on the hype of the project, these traditional "free-for-all" mint launches typically sell-out quickly. Additionally, participants can end up paying more than 2x of the original mint price many times due to gas wars.

    By leveraging a Dutch Auction sales mechanism, the NEKO launch will have 12 different price points and could last up to 2 hours, which could reduce the effects of gas wars. Keep in mind that if participants plan ahead of time, they could potentially find a price point they are comfortable paying to secure a NEKO "waifu".

    More information to help participants get prepared is included in the "Factors to Consider" and "Finding Ideal value or price point for NEKO mint" section below.

    Comparison: Gas Spent in Traditional Mint vs Dutch Auction Mint

    To validate that a Dutch Auction helps reduce the effects of gas wars, we've performed a small case study and gathered data of our Sipher INU launch (normal mint), and data from another NFT project, codenamed "Project X" for purposes of our comparison and documentation*,* which recently had a Dutch Auction Mint.

    Data from Project X was obtained and used as an example given they were one of the most recent Dutch Auction launches, currently have comparable trading volume on OpenSea, and the amount of NFTs available to mint in the public launch was around the same as our Sipher Inus (around 8K).

    Refer to the infographic below for the comparison of gas spent on each of the two launches.

    Infographic: Gas Comparison (Normal Mint - INUs vs. Dutch Auction - Project X)

    Infographic: Gas Comparison (Normal Mint - INUs vs. Dutch Auction - Project X)

    1. Total Gas Spent → As you can see, there was a lot more gas spent in our Sipher INU public launch as compared to Project X's launch, even though the amount of mintable NFTs were roughly the same (~8,000 NFTs). If we were to calculate the difference in Total Gas Spent between these two launches, there was approximately 1,884 ETH (≈$6.59 million)* MORE spent on gas from our Sipher INU launch, which went entirely to the Ethereum miners.

      Refer to the graph below for a visual representation of the amount of gas spent on each of these two launches.

      SIPHER Mint's Gas Spent is the Area in Blue, and Project X is the Area in Orange.

      Untitled

    2. Highest Gas Spent on one Transaction

      • The transaction that spent the most ETH in gas to purchase 5 Sipher INUs paid a total of 3 ETH (≈$10,500*) in gas costs - excluding the cost of the NFTs.
      • For Project X, the most ETH spent in gas for one transaction to purchase 5 NFTs was 0.89 ETH (≈$3,115*), which is a little over 3x in gas savings. Keep in mind that this transaction occurred nearing the end of the Project X Dutch Auction. Please make note of this because it should help with planning ahead for the NEKO launch.
    3. Highest Gas Spent on one NFT

      • The highest amount of gas paid for one Sipher INU was about 0.8 ETH (≈$2,800*), which is 8x the cost to mint that one Sipher INU (0.1 ETH).
      • For Project X, the highest amount of gas paid for one Project X NFT was approximately 0.18 ETH (≈$630*), which is about 1.8x of the cost to mint that NFT (purchase price at that moment of the Dutch Auction was 0.1 ETH). Similar to the transaction with the highest total amount of gas spent (above), please keep in mind that this transaction occurred nearing the end of the Dutch Auction.

    <aside> 🗒️ Note(s) & Resources

    *Note: We have included estimates in USD, assuming a price of $3,500 per 1 ETH as of October 11, 2021.

  2. Deter/Limit Botting - The use of bots to secure a high amount of NFTs is common practice in the NFT space.

    On the other hand, a Dutch Auction can help mitigate these areas of abuse given that it starts at a higher price where these individuals do not have a very strong incentive to purchase at the very start. However, it is not a fool-proof solution as they could possibly still attempt to purchase using their bots when lower price points are reached during the Dutch Auction.

  3. Funding a Community Wallet - Given that the majority of the funds and time of the Sipher Team is being spent on making the game a reality as soon as possible, we have created a system in which we will be promoting and incentivizing the development of our community and its amenities.

The goal is to have our community be built by the people, and for the people. As such, a quarter of the additional proceeds (anything sold over 0.1ETH) from the NEKO Dutch Auction will be going into the Community Wallet. The remainder will be allocated in different areas to help to speed up development of the game, such as continuing to expand our team (currently have over 50 employees now), speeding up the fully-fleshed 3D Dungeon-mode game (originally was going to be a 2D Idle Expeditions), and continued investment to further polish the quality of our 2D and 3D in-game assets.

You can learn more details about our plans for the Community Wallet and our Community Building Program here The Nexus Expansion Program

Factors to Consider Before Taking Part in the NEKO Dutch Auction

There are important factors to consider including, but not limited to:

  1. Your desire in securing your NEKO (how badly you want it)
  2. The maximum total cost you are willing to pay for a NEKO
  3. The amount of time you have available to participate
  4. Your interest in acquiring the Bonus Benefits from taking Part in the Dutch Auction
  5. Alternative option: there is always the secondary market (OpenSea) where you could purchase, but we can't guarantee the price you would need to pay.

We would love for everyone to get their hands on a Genesis Sipher NEKO, but unfortunately there's only 10,000 of them. As such, we hope that these considerations can assist you in your decision-making process. If you would like to participate in the Dutch Auction, we have included examples of different scenarios, which could potentially help you plan ahead. Refer to the section below for more details.

Finding the Ideal Value for NEKO

As part of our case studies on previous Dutch Auction, we've included our analysis of potential scenarios of a Dutch Auction:

  1. Participant attempts to purchase at the lower price points (more time spent waiting).

    1. Potential BENEFITS
      • Possibility of a lower purchase price → Depending on the amount of NFTs already purchased throughout the earlier stages, these participants could possibly purchase at a lower price if all stars are aligned in their favor.
      • More time to decide → Both a blessing and a curse, those who decide to wait can take an observant approach instead of "FOMOing" in. However they can run into the risks described below.
    2. RISKS
      • NFTs potentially selling out → If the participant takes too long to decide on whether to purchase at a specific price point, or waits to get the lowest price point, they take the risk that the other participants purchase all of the NFTs before that decision is made or before the price reaches the lowest point.
      • Getting caught in the middle of a gas war → If all or most participants wait too long, they are more prone to "fight" against everyone else who is also attempting to purchase at the lower price points. This increases the probability of gas wars given that, similar to a normal minting process, they begin "pumping up the gas" to attempt securing the NFT purchase.
  2. Participant decides to purchase at a higher price point (pays a "premium" and does not spend as much time waiting).

    1. Potential BENEFITS

      • They ensure that they can obtain their NFT → If these participants purchase their NFT at a higher price, it means that they purchased during the earlier stages of the Dutch Auction. They would pay a premium but get the benefit of ensuring that they obtain their NFTs.
      • Potential to avoid gas wars → If most participants wait for a lower price point, there is more likelihood for gas wars to take place. Participants that purchase on the earlier stages are more likely to purchase in a stress-free environment given the higher prices.
      • More funds for the Community Wallet → As mentioned previously, a quarter of profits above 0.1 ETH will go directly into the Community Wallet. An added bonus for paying the premium is that there are more funds available to spend on community projects or initiatives that benefit the community and NFT holders. Refer to the following page for more details related to this program - The Nexus Expansion Program.
    2. RISKS

      • They pay a higher price for the NFT in the earlier stages of the Dutch Auction, but the price could continue to go lower after their purchase if the NFTs do not sell out at that higher price. This means that the participant could have potentially obtained a lower price if they had waited.

      Refer to the graph below for a visual representation from Project X's Dutch Auction, which shows the Average Total Cost per Project X NFT - including Gas paid (first graph), and the Average Gas paid per Project X NFT (second graph) in relation to the different purchase prices set by the Dutch Auction. Note that it also shows how many NFTs were minted at each of those price intervals (represented by the red line).

      Untitled

      As you can see from the first chart above, the longer you wait (and the lower the price point), the total price of your mint roughly remains the same as those who purchased at a slightly higher prices. The main difference is that more of that cost is paid in gas which goes to the Ethereum miners, all while taking the risk that you will not be able to mint the NFT on time.

Dutch Auction Tier Rewards & Vessel Core Raffle

As a token of our appreciation for members who have decided to mint the NEKO NFTs at higher price points during the Dutch Auction, and therefore directly contributing to the acceleration of SIPHER's game development as well as funding the Community Wallet, the following benefits will be eligible to you.

4 Different Tier Rewards (Exclusive to Mints at and above 0.55 ETH)