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The Auction

Energy Substantiation uses a daily auction to match supplier offers with investor demand.

Auction Schedule

The auction runs daily with these phases:

Phase What Happens
Pre-Auction Orders validated, balances checked
Token Buy-Backs Voluntary supplier buy-backs processed
Mint Tokens Offers matched with mint orders
Burn Tokens Burn orders processed against outstanding receipts
Post-Auction Day orders expire, state finalized

Offer Matching

When investors want to purchase tokens, their mint orders are matched against supplier offers.

How It Works

  1. You create an offer with your maximum acceptable discount
  2. The auction finds the clearing discount where supply meets demand
  3. All matched suppliers receive the clearing discount (or better)

Discount Discovery

The reference price is fixed (from the commodity market). What the auction discovers is the clearing discount.

  • Sorts offers by maximum acceptable discount (highest first)
  • Takes offers from suppliers willing to accept the largest discounts
  • The clearing discount is the lowest discount needed to fill all demand
  • All matched suppliers receive the clearing discount

Optimization Factors

The matching algorithm optimizes for:

Factor Purpose
Discount Maximize discount
Credit Risk Minimize credit risk
Concentration Prevent over-reliance on single suppliers

This means a supplier with better credit or more diversification value may be selected even if not offering the highest discount.

FIFO Within Price Level

When multiple offers exist at the same discount level the system will fill the orders:

  • partially in first-in, first-out order based on creation time.
  • partially in a pro-rata manner.

Clearing Discount Example

Three suppliers submit offers:

Supplier Max Discount Quantity
A 3% 100
B 5% 150
C 7% 200

Investor demand: 300 tokens

Result:

  • Clearing discount: 5%
  • Supplier A: Not matched (5% exceeds their 3% maximum)
  • Supplier B: Matched at 5% (150 tokens)
  • Supplier C: Matched at 5% (150 tokens, partial fill)

Supplier C benefits: their maximum was 7%, but they receive the better 5% rate.

What You Receive

When matched:

Spread = Reference Price × Clearing Discount × Years × Quantity
You Receive = Reference Price × (1 - Clearing Discount × Years) × Quantity

Burn Processing

When investors burn tokens, STRATA selects the receipts used for redemption.

Buy-Back Processing

Suppliers can voluntarily reduce their obligations through buy-backs.

Token Buy-Backs

  • Processed before the mint phase
  • Use tokens you own to retire obligations
  • Discount is forfeited (unearned spread goes to platform fees)

When to use: You acquired tokens through trading and want to reduce obligations.

USD Buy-Backs

  • Processed during the mint phase
  • Pay cash at reference price to retire obligations
  • Discount is forfeited

When to use: You want to retire obligations but don't hold tokens.

Buy-Back Allocation

When a buy-back covers only part of your outstanding obligations, the platform automatically determines which fills are reduced. The affected fills are reflected in the results after processing.

After the Auction

When your offer matches:

  • A fill is created recording the terms
  • Your reserve balance decreases (you now have obligations)
  • Payment is credited to your internal balance
  • Obligation is held separately and accrues over time

Auction Results

After each auction, you can review:

Information Description
Clearing discount The market-clearing rate
Your fills Which offers matched and at what quantity
Fill details Discount received, duration and other terms

Tips

  • Ladder your offers - Place offers at different discounts to increase match probability
  • Monitor clearing discounts - Track historical rates to calibrate offers
  • Consider timing - Market conditions affect demand and clearing rates
  • Review results - Check which offers matched and adjust strategy

Next Steps