Funding Round
Once the evaluation period has concluded with the required minimum evaluator backing, the funding round starts. It is structured around an auction, community and an optional remainder round if not all tokens have been sold. The allocations of contribution tokens available for the respective participant categories and rounds are set in the issuer specifications.
The participant contributes in the funding round with the participation currencies (e.g. stablecoins, DOT, KSM) and within the range of the eligible amounts. These funds are transferability-locked until the funding round ends. The funds are released to the issuer at the end of a successful funding round, and the protocol automatically issues and distributes the contribution tokens to the participants. The contribution tokens are transferability-locked and automatically converted to the issuer’s transferable mainnet tokens at launch. If the funding round is unsuccessful because the minimum threshold in relation to the target funding amount is not reached or the issuer rejects the funding, the funds are returned to the participants, and the contribution tokens are not issued.
Polimec cannot dispose of the funds at its discretion or interfere in the flow of funds. The protocol executes all token transfers according to the network rules and settles between the different network participants in a trustless and direct manner.
Auction Round
The auction round is designed with the primary objective of achieving price discovery. It is exclusively open to professional and institutional participants. The issuer uploads project-specific information to a data room, which is accessed by eligible participants to conduct their due diligence, and sets a minimum price per contribution token as the floor price for the auction round.
Participants in the auction round submit bids during either the opening or ending period. During the opening period (t=4d), eligible participants can submit their bids that are taken into account with certainty. During the ending period (t=1d), i.e. the candle auction, the auction round can conclude at any (unknown) moment. Bids submitted after this moment are not taken into account anymore, i.e. the candle has run out.
This mechanism incentivizes participants to bid during the opening period, since placing bids during the ending period leaves them uncertain whether the bids are submitted after the auction has already concluded.
Polimec’s auction round, divided into opening and ending period:
After the candle auction closes, eligible bids from professional and institutional participants with the highest price per contribution token win. If the total amount of contribution token bids is higher than the amount of contribution tokens allocated to the auction round, the protocol prioritizes bids from highest to lowest price. This process is called quota bidding. Quota bidding involves continuously reallocating a fixed amount, specifically 10% of the amount of contribution tokens allocated to the auction round (Q0), to higher bidding prices. This increase in the bidding price is also fixed at 10% of the minimum price per contribution token (P0). If participants submit bids at the same price, they are prioritized according to the time they were submitted. Consequently, the most recent bids with the lowest price are replaced first.
Following is a high-level illustration of the auction round mechanism. It demonstrates the amount of contribution tokens allocated to the auction round, symbolized by the genesis tranche (T0) which, in the example below, has already been surpassed in the opening period. A comparable scenario may also present itself during the closing period, depending on the bids and point in time in which the candle auction ultimately concludes.
Polimec’s high-level auction round mechanism:
Polimec’s quota bidding structure:
| Tranche | Amount of Contribution Tokens (Q) | Price per Contribution Token (P) |
|---|---|---|
| T0=Q0xP0 (genesis tranche) | Q0=fixed in funding application | P0=fixed in funding application |
| T1=Q1xP1 | Q1=Q0x0.1 | P1=P0x0.1 |
| T2=Q2xP2 | Q2=Q0x0.1 | P2=P1+(P0x0.1) |
| T3=Q3xP3 | Q3=Q0x0.1 | P3=P2+(P0x0.1) |
| T4=Q4xP4 | Q4=Q0x0.1 | P4=P3+(P0x0.1) |
| TN=QNxPN | QN=Q0x0.1 | PN=PN-1+(P0x0.1) |
The token price is determined ex-post as the weighted average of the winning bids that amount to the target funding (in contribution tokens). Winning bids are those submitted by participants on time and at the minimum price per contribution token (genesis tranche) or at a higher price when the genesis tranche is full. Thus, it might also be that, especially if demand is high, all winning bids fall at higher prices than the minimum price per contribution token. The weighted average token price also determines the token price for all participants in the community round, and - if there is any - for the remainder round.
The following rules apply for participants with winning bids:
- Winning bids below the weighted average price are executed at their bid
- Winning bids above the weighted average price are executed at the weighted average price
Example
Example funding specifications:
- Amount of contribution tokens allocated to the auction round (Q0): 50,000
- Minimum price per contribution token (P0): USDT 10
During the auction round, the issuer offers 50,000 contribution tokens with the minimum price set at USDT 10 per contribution token.
Following, an example is used to simulate the auction round, with the numbers being generated randomly.
Participants bidding in the auction round:
The protocol automatically defines the winning bids from the auction round, and consequently, the weighted average price, using the following procedure:
1. Identifies eligible bids (in retrospect)
2. Ranks bids from highest to lowest and sorts bids from latest to earliest
3. Calculates weighted average price
4. Adjusts bids that are above weighted average price
Example
1. Identifies eligible bids (in retrospect)
The auction round ends after 5 days. Thereafter, the verifiable random function (VRF) determines the specific block that marks the end of the auction round. The participants with the highest bids until that respective block is produced win the auction. This moment is depicted by the bright purple dot positioned at the beginning of the hatched area in the example above. As the candle auction had already concluded at the time of bidding, Eva’s bid was not taken into account, even though she placed the highest bid. In addition, the protocol promptly rejects bids that are below the minimum price per contribution token, without allowing them to be submitted.
Furthermore, the protocol establishes additional tranches for quota bidding based on the funding specifications, including the amount of contribution tokens allocated to the auction round and the minimum price per contribution token.
When the amount of contribution tokens for the auction round is reached, the protocol generates new tranches. In the example above, the threshold is reached when Sofia placed a bid of 20,000 contribution tokens at the minimum price of USDT 10 per contribution token. Until this point, participants can submit bids at the minimum price of USDT 10 per contribution token.
In quota bidding, the highest-ranked bids are accepted, while the lowest-ranked bids are excluded. Each tranche is allocated a fixed amount of 10% of Q0 which, in this example, is 5,000 contribution tokens. In addition, referring to the formula above, the price development for this example unfolds as follows:
- P0=USDT 10
- P1=P0+(P0x0.1)=USDT 10+(USDT 10x0.1)=USDT 10+USDT 1=USDT 11
- P2=P1+(P0x0.1)=USDT 11+(USDT 10x0.1)=USDT 11+USDT 1=USDT 12
- P3=P2+(P0x0.1)=USDT 12+(USDT 10x0.1)=USDT 12+USDT 1=USDT 13
- P4=P3+(P0x0.1)=USDT 13+(USDT 10x0.1)=USDT 13+USDT 1=USDT 14
For each new tranche, the price develops in a linear fashion, requiring the complete filling of the preceding tranche with bids at the corresponding price to advance to the next tranche.
Example of quota bidding tranches:
As evident from the graph, considering all the bids made during the auction round would have required the issuer to allocate 70,000 contribution tokens. However, since the issuer had allocated only 50,000 contribution tokens, a reduction of 20,000 contribution tokens is required. Considering the quota bidding structure, the highest-ranked bids must be accepted, while the lowest-ranked bids are excluded.
2. Ranks bids from highest to lowest and sorts bids from latest to earliest
As a next step, the eligible bids are ranked from highest to lowest bid price and also from latest to earliest:
| Participant | Bid Price | Contribution Tokens | USDT Bid |
|---|---|---|---|
| Damian | USDT 14 | 5,000 | USDT 70,000 |
| Anna | USDT 13 | 5,000 | USDT 65,000 |
| Fred | USDT 12 USDT 11 | 5,000 5,000 | USDT 60,000 USDT 55,000 |
| Crp VC | USDT 10 | 20,000 | USDT 200,000 |
| Adam | USDT 10 | 10,000 | USDT 100,000 |
As the total amount of contribution token bids exceeded the contribution tokens allocated to the auction round, there was an adjustment in the genesis tranche. Sofia’s contribution token amount was reduced to 0, resulting in the removal of her bid. This adjustment is due to the fact that she placed the most recent bid at the minimum price per contribution token. The difference of 20,000 contribution tokens is allocated to Damian, Anna, and Fred. Damian filled the most recent tranche of 5,000 contribution tokens at USDT 14, representing the highest price. Meanwhile, Fred’s bid was split into two tranches because his desired contribution token amount exceeded the available next 5,000-contribution token tranche. Consequently, he paid USDT 11 for the first 5,000 contribution tokens and USDT 12 for the second tranche of 5,000 contribution tokens.
3. Calculates weighted average price
Following the definitive bid prices must be established by defining the weighted average price, which is calculated by multiplying the winning bid prices by their respective bid weights:
| Participant | Bid Price | Weight | Weight USDT |
|---|---|---|---|
| Damian | USDT 14 | 0.13 | USDT 1.82 |
| Anna | USDT 13 | 0.12 | USDT 1.56 |
| Fred | USDT 12 USDT 11 | 0.11 0.10 | USDT 1.32 USDT 1.10 |
| Crp VC | USDT 10 | 0.36 | USDT 3.60 |
| Adam | USDT 10 | 0.18 | USDT 1.80 |
| Weighted Average Price | USDT 11.20 |
4. Adjusts bids that are above weighted average price
Participants whose bids meet or surpass the weighted average price, such as Damian, Anna, and Fred, take part in the auction round at a price below their bid. On the other hand, participants like Crp VC and Adam, whose bids fall below the weighted average price, participate at their initial bid price. This follows the rules that apply for participants with the winning bids:
- Winning bids below the weighted average price are executed at their bid
- Winning bids above the weighted average price are executed at the weighted average price
| Participant | Bid Price | Contribution Tokens | Funds Raised |
|---|---|---|---|
| Damian | USDT 11.20 | 5,000 | USDT 56,000 |
| Anna | USDT 11.20 | 5,000 | USDT 56,000 |
| Fred | USDT 11.20 USDT 11.00 | 5,000 5,000 | USDT 56,000 USDT 55,000 |
| Crp VC | USDT 10.00 | 20,000 | USDT 200,000 |
| Adam | USDT 10.00 | 10,000 | USDT 100,000 |
| Total Funds Raised | USDT 523,000 |
Summed up, the value of all bids stands at USDT 523,000 for the allocated 50,000 contribution tokens.
Participants can participate with any cryptocurrency accepted by the issuer. The conversion rate for the participation currency (e.g. DOT, KSM) to USD applies at the time of placing the bid. Similarly, when placing the bid, the PLMC/USDT conversion rate determines the USD equivalent amount the participant can contribute - in combination with the multiplier applied.
Community Round
In the community round, all participant types with no winning bid in the auction round are eligible to participate. The price of the community round is the weighted average price, which was determined in the auction round. The round concludes if the target funding amount is reached (i.e. all the allocated contribution tokens are purchased) or the 5-day period ends. Settlement of the participation amounts to the issuer account takes place 7 days after the end of the funding round.
If the target funding amount is not reached within the 5 days period, all participants have the opportunity to purchase the remaining contribution tokens, also at the weighted average price (remainder round).
Example
Example funding specifications:
- Amount of contribution tokens allocated to the community round: 50,000
- Weighted average price: USDT 11.20
The issuer intends to offer 50,000 tokens for participation in the community round, which is open to both retail and professional/institutional participants who were unsuccessful in securing a bid during the auction round.
Participants bidding in the community round (first come, first served):
The issuer successfully sold all 50,000 tokens allocated for the community round, with participations in the amount of USDT 560,000. In conjunction with the auction round, which accrued participations in the amount of USDT 523,000, the total funding amount raised by the issuer constitutes USDT 1,083,000.
Remainder Round
The remainder round is triggered only if the total amount of tokens allocated by the issuer for participation are not purchased in the auction and community round. In the remainder round, all participant types are eligible to submit fresh bids.
Multipliers and Vesting Periods
Participants can apply multipliers in funding rounds based on their credential type or, for retail, the number of past participations in funding rounds. The multiplier then defines the necessary PLMC amount to be bonded and, in turn, determines the duration of the vesting period of their PLMC and mainnet tokens.
The multipliers are implemented considering industry practices and different risk categories of the participant types. The higher the multiplier, the longer the vesting period. For all participants, the vesting period of the PLMC bonded to participate in the funding round starts 7 days after the funding round is completed. Contribution tokens are transferability-locked until mainnet launch of the respective project, at which time the contribution tokens are converted to mainnet tokens. For mainnet tokens, the vesting period starts 7 days after the project’s mainnet launch. For both PLMC and mainnet tokens, vesting periods are subject to individual linear unbonding illustrated below.
Linear vesting schedule:
Vesting Periods
Multipliers for retail participants, given the number of funding rounds they participated in:
| Number of Funding Round Participations on Polimec | Multiplier |
|---|---|
| <3 | 1x |
| 3-4 | 2x |
| 5-9 | 4x |
| 10-24 | 7x |
| ≥25 | 10x |
Retail participants can participate with 1x the value of PLMC bonded for a funding round without any vesting period. This multiplier increases up to 10x depending on the number of funding rounds they participated in. Depending on the applied multiplier, retail participants are subject to varying vesting periods on the PLMC, and any mainnet tokens received in return for their participation. The unbonding of the total amount varies between 0-20 weeks (with linear unbonding).
Professional participants can participate with up to 10x the value of PLMC bonded for a funding round. Professional participants determine which multiplier they want to apply when participating in a funding round. Depending on the applied multiplier, professional participants are subject to varying vesting periods on the PLMC, and any mainnet tokens received in return for their participation. The unbonding of the total amount varies between 0-20 weeks (with linear unbonding).
Institutional participants can participate with up to 25x the value of PLMC bonded for a funding round. Institutional participants determine which multiplier they want to apply when participating in a funding round. Depending on the applied multiplier, institutional participants are subject to varying vesting periods on the PLMC, and any mainnet tokens received as a result of their participation. The unbonding of the total amount varies between 0-52 weeks (with linear unbonding).
Multipliers, vesting periods, and vesting schedules for the different participation categories:
| Retail | Professional | Institutional | |
|---|---|---|---|
| Multiplier | 1x-10x | 1x-10x | 1x-25x |
| Vesting Period | 0-19.5 weeks | 0-19.5 weeks | 0-52 weeks |
| Vesting Schedule | Linear unbonding | Linear unbonding | Linear unbonding |
Auction Round - Multipliers and Vesting Periods
Participants that bidded during the auction round are either professional or institutional participants. Given distinct credential types, these participants have different maximum multipliers: professional participants can apply up to a 10x multiplier, while institutional participants can leverage up to a 25x multiplier. The participants’ selection of multipliers influences the PLMC to be bonded and the vesting period.
Community Round - Multipliers and Vesting Periods
Participants that bidded during the community round are either professional or institutional participants that were not successful in the auction round, or retail participants. In this context, with the weighted average price already established, the price remains fixed, eliminating the need for further adjustments. Nevertheless, a crucial point, especially for retail participants, is that the maximum multiplier they can apply depends on the funding round in which they participated.
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