Ditto Auction Mechanism & Heat

Auctions

When a Ditto clone is created it is up for auction at all times via SALSA.

A clone has a self-assessed value called its worth. When the clone is minted its auction price is calculated as 2 * worth with its price descending until it is equal to worth over a set dutch auction period. Once the dutch auction period has finished the minimum price to purchase the clone is its worth until it is sold via the auction.

After the clone is sold through the auction mechanism, the dutch auction period is then reset for the process to start over.

Heat

heat is a variable of each clone determining fee amounts, and dutch auction period lengths. The heat of a clone is increased by 1 anytime a larger position is opened on a clone, and decreases relative to how much time has elapsed during its dutch auction.

heat has a maximum value of 255.

If a clone's heat is 200 and half it's dutch auction period has elapsed when a larger position is opened on the underlying then its heat will become 100 + 1, halved because of the elapsed time and + 1 because a larger positioned was opened on top of it.

Fee Calculation

Fees are calculated as heat * 32 / 2**16-1. The minimum fee to be paid on an auction is %0.04882887 while the maximum fee is %12.451361868 as heat cannot exceed 255.

Dutch Auction Length Curve

Dutch auction length periods increase in time relative to heat according to this formula:

2^18 + (  (1 day) * 7 * log_2(cbrt(heat)) * sqrt(heat)  )

Dutch auction lengths can range between ~3 days to ~297 days. These auction lengths give a clone owner a reasonable assurance that they will own the position on the underlying until another outbids them for a higher value position.