Pricing Strategies

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Overview

When configuring a Sonar sale, you choose a pricing strategy that determines how your token price is set. This decision is independent of your settlement strategy.

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Fixed Price Sale

The simplest option. You set a fixed token price upfront, and participants commit funds at that price.

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How It Works

1. You announce the token price (e.g., $0.50 per token)
2. Participants commit funds during the sale window
3. If total commitments exceed the tokens available, the settlement strategy determines allocation
4. Participants receive tokens at the fixed price; any excess funds are refunded

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When to Use

• You want a simple, predictable experience for participants
• Price has already been determined through other means (e.g., prior funding rounds)
• You want to minimize complexity for your community

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English Auction

A competitive bidding mechanism where participants submit bids specifying both a price they’re willing to pay and an amount. Everyone that bid a price at or above the “clearing price” is successful and pays that same price at the end of the auction.

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How It Works

1. Participants submit bids with a price and amount (e.g., “I’ll pay up to $0.75/token for $10,000 worth of tokens”)
2. Bids can be revised upward during the auction (price and amount can only increase, not decrease)
3. During the auction, Sonar continuously computes and publishes the estimated clearing price based on current bids (see below for more details)
4. All bids at or above the clearing price are successful
5. Everyone pays the clearing price at the end, regardless of what they bid
6. Excess funds are refunded

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Clearing Price Calculation

The clearing price is determined by starting at the highest bid price and iterating downward in bid increment steps. At each price step, the total amount of USD committed at or above that price is determined. The highest price at which the combined commitments are sufficient to buy all available tokens becomes the clearing price.

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Example

Assume selling 1,000,000 TOK with a bid increment of $0.01/TOK. Four participants submit bids: To find the clearing price, start at the highest bid ($0.10/TOK) and iterate downward by $0.01/TOK:

1. $0.10/TOK — Only Alice qualifies. Total USD: $10,000. Tokens needed: $10,000 / $0.10/TOK = 100,000 TOK. Not enough demand (100,000 TOK < 1,000,000 TOK).
2. $0.09/TOK through $0.06/TOK — Still only Alice qualifies. Not enough demand at any of these prices.
3. $0.05/TOK — Alice, Bob, and Charlie all qualify. Total USD: $45,000. Tokens needed: $45,000 / $0.05/TOK = 900,000 TOK. Still not enough (900,000 TOK < 1,000,000 TOK).
4. $0.04/TOK — Alice, Bob, and Charlie still qualify. Total USD: $45,000. Tokens needed: $45,000 / $0.04/TOK = 1,125,000 TOK. This exceeds the supply, so the clearing price is $0.04/TOK.

Outcome: At $0.04, Alice, Bob, and Charlie together demand 1,125,000 TOK but only 1,000,000 are available. The sale is oversubscribed, so the settlement strategy determines how the 1,000,000 tokens are distributed among successful bidders. Excess funds are refunded. All successful participants pay the same clearing price of $0.04/TOK. Eve’s bid was below the clearing price, so she receives a full refund.

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Auction Parameters

The bid increment should strike a balance between flexibility and meaningfulness. If it’s too small, participants can outbid each other by trivial amounts without any practical difference in price. If it’s too large, price resolution suffers and the clearing price becomes imprecise. As a rule of thumb, we recommend setting increments so that there are roughly 100 steps between your minimum and maximum price. Setting a floor and ceiling creates competitive bidding within a defined range. If demand is strong enough that the clearing price would exceed your maximum, everyone pays the maximum price and the settlement strategy determines final allocations.

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When to Use

• You want the market to discover a fair price
• You’re comfortable with price uncertainty
• You want to reward participants who value the tokens most highly

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Next Steps