How to create a simple smart contract to manage auctions ?

Paulina Lewandowska

07 Dec 2022
How to create a simple smart contract to manage auctions ?

In the previous tutorial you learned how to create a smart contract, which is a wallet. In this tutorial we will try to consolidate the knowledge from the previous tutorial, and expand it with new knowledge. 

So let's get to work. All the things you may not understand will be explained to you later in the text.

Defining variables

Let's start by defining the variables we'll need to make the smart contract work. We certainly need :

  • address of the person to whom the highest bid will be sent,
  • time when the auction in question will end,
  • address of the person who placed the highest bid,
  • why wei is the highest bid,
  • a table of addresses and the amount of money they transferred to the smart contract so that those who did not win the auction can withdraw their money,
  • variable whether the auction is completed or not.
pragma solidity 0.8.11;

contract Auction {

    address payable public beneficiary;

    uint public auctionEndTime;

    address public highestBidder;

    uint public highestBid;

    mapping(address => uint) pendingReturns;

    bool ended;

}

What can you not understand from the above code?

Mapping in solidity is a key-value array, equivalent to dictionary in other languages.

If you don't know why the auctionEndTime variable is given in plain uinta, it's because the time when the auction ends will be given in Unix time.

Let's create a constructor that will take the address to which the highest bid will be sent and how long the auction will last.

constructor(

        uint biddingTime,

        address payable beneficiaryAddress

    ) {

        beneficiary = beneficiaryAddress;

        auctionEndTime = block.timestamp + biddingTime;

    }

What is worth paying attention to ?

  • block.timestamp is a variable that simply means what time it is now given as Unix time of course ;)))

Function for making an offer

Now let's create a function that will be used to submit your bid. The function will return an error if :

  • The auction has ended
  • Our bid will be lower than the highest bid

At the end of the function execution, the function will emit an event that the highest bid has changed. The frontend application can listen to the emitted events on the smartcontest, so that as soon as the highest bid has changed, it can update it in the user interface.

event HighestBidIncreased(address bidder, uint amount);

    event AuctionEnded(address winner, uint amount);

    error AuctionAlreadyEnded();

    error BidNotHighEnough(uint highestBid);

    error AuctionNotYetEnded();

    error AuctionEndAlreadyCalled();

    function bid() external payable {

        if (block.timestamp > auctionEndTime)

            revert AuctionAlreadyEnded();

        if (msg.value <= highestBid)

            revert BidNotHighEnough(highestBid);

        if (highestBid != 0) {

            pendingReturns[highestBidder] += highestBid;

        }

        highestBidder = msg.sender;

        highestBid = msg.value;

        emit HighestBidIncreased(msg.sender, msg.value);

    }

As you can see in the code above, we define ourselves events with parameters that we can emit on the blockchain. To emit an event in solidity we type 

emit + event name and parameters

We have defined our own errors, which if we want to call them we type in revert + the name of our errror and parameters.

You have probably already guessed that instead of ifs and custom errors we could have used requier.

This function checks if the auction has already ended, if msg.value is higher than the highest bid, if so we update the mapping pendingReturns so that the person who placed the highest bid earlier can get his money back. We assign the highest bid to msg.value and the highestBidder to msg.sender, at the end of the function execution we emit an event that informs that the highest bid has been increased.

Function to end the auction, and transfer the highest bid to the benefactor

Now let's create a function so that after the auction ends, the beneficiary's address can send money to his wallet.

This function should:

  • Return an error if the auction has not yet ended,
  • return an error if this function has already been called,
  • change the ended variable to true,
  • emit an event indicating that the auction has ended,
  • transfer an amount of Ethereum equivalent to the highest bid to the benefactor.
function auctionEnd() external {

        if (block.timestamp < auctionEndTime)

            revert AuctionNotYetEnded();

        if (ended)

            revert AuctionEndAlreadyCalled();

        ended = true;

        emit AuctionEnded(highestBidder, highestBid);

        beneficiary.transfer(highestBid);

    }

Function for people who did not win the auction and want their money back

Now, the last function we need to make our contract ready! It will be for addresses that did not win the auction and want to get their money back. Let's consider what such a function should have in it :

  • it should check how much Ethereum you owe in the mapping pendingReturns and assign this value to a variable,
  • it should change how much you owe to 0,
  • it should send as much Ethereum as you have stored in the variable.

Well, let's get to work !

  function withdraw() external{

        uint amount = pendingReturns[msg.sender];

        pendingReturns[msg.sender] = 0;

        payable(msg.sender).transfer(amount);

    }

That's the end of today's tutorial ! Our smart contract is ready. In order to practice and consolidate your knowledge, as a task you can try to replace custom errors with requirs. However, if this is not enough for you, you can also improve this contract so that it can be used to conduct several auctions at once.

Tagi

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Aethir Tokenomics – Case Study

Kajetan Olas

22 Nov 2024
Aethir Tokenomics – Case Study

Authors of the contents are not affiliated to the reviewed project in any way and none of the information presented should be taken as financial advice.

In this article we analyze tokenomics of Aethir - a project providing on-demand cloud compute resources for the AI, Gaming, and virtualized compute sectors.
Aethir aims to aggregate enterprise-grade GPUs from multiple providers into a DePIN (Decentralized Physical Infrastructure Network). Its competitive edge comes from utlizing the GPUs for very specific use-cases, such as low-latency rendering for online games.
Due to decentralized nature of its infrastructure Aethir can meet the demands of online-gaming in any region. This is especially important for some gamer-abundant regions in Asia with underdeveloped cloud infrastructure that causes high latency ("lags").
We will analyze Aethir's tokenomics, give our opinion on what was done well, and provide specific recommendations on how to improve it.

Evaluation Summary

Aethir Tokenomics Structure

The total supply of ATH tokens is capped at 42 billion ATH. This fixed cap provides a predictable supply environment, and the complete emissions schedule is listed here. As of November 2024 there are approximately 5.2 Billion ATH in circulation. In a year from now (November 2025), the circulating supply will almost triple, and will amount to approximately 15 Billion ATH. By November 2028, today's circulating supply will be diluted by around 86%.

From an investor standpoint the rational decision would be to stake their tokens and hope for rewards that will balance the inflation. Currently the estimated APR for 3-year staking is 195% and for 4-year staking APR is 261%. The rewards are paid out weekly. Furthermore, stakers can expect to get additional rewards from partnered AI projects.

Staking Incentives

Rewards are calculated based on the staking duration and staked amount. These factors are equally important and they linearly influence weekly rewards. This means that someone who stakes 100 ATH for 2 weeks will have the same weekly rewards as someone who stakes 200 ATH for 1 week. This mechanism greatly emphasizes long-term holding. That's because holding a token makes sense only if you go for long-term staking. E.g. a whale staking $200k with 1 week lockup. will have the same weekly rewards as person staking $1k with 4 year lockup. Furthermore the ATH staking rewards are fixed and divided among stakers. Therefore Increase of user base is likely to come with decrease in rewards.
We believe the main weak-point of Aethirs staking is the lack of equivalency between rewards paid out to the users and value generated for the protocol as a result of staking.

Token Distribution

The token distribution of $ATH is well designed and comes with long vesting time-frames. 18-month cliff and 36-moths subsequent linear vesting is applied to team's allocation. This is higher than industry standard and is a sign of long-term commitment.

  • Checkers and Compute Providers: 50%
  • Ecosystem: 15%
  • Team: 12.5%
  • Investors: 11.5%
  • Airdrop: 6%
  • Advisors: 5%

Aethir's airdrop is divided into 3 phases to ensure that only loyal users get rewarded. This mechanism is very-well thought and we rate it highly. It fosters high community engagement within the first months of the project and sets the ground for potentially giving more-control to the DAO.

Governance and Community-Led Development

Aethir’s governance model promotes community-led decision-making in a very practical way. Instead of rushing with creation of a DAO for PR and marketing purposes Aethir is trying to make it the right way. They support projects building on their infrastructure and regularly share updates with their community in the most professional manner.

We believe Aethir would benefit from implementing reputation boosted voting. An example of such system is described here. The core assumption is to abandon the simplistic: 1 token = 1 vote and go towards: Votes = tokens * reputation_based_multiplication_factor.

In the attached example, reputation_based_multiplication_factor rises exponentially with the number of standard deviations above norm, with regard to user's rating. For compute compute providers at Aethir, user's rating could be replaced by provider's uptime.

Perspectives for the future

While it's important to analyze aspects such as supply-side tokenomics, or governance, we must keep in mind that 95% of project's success depends on demand-side. In this regard the outlook for Aethir may be very bright. The project declares $36M annual reccuring revenue. Revenue like this is very rare in the web3 space. Many projects are not able to generate any revenue after succesfull ICO event, due to lack fo product-market-fit.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to contact@nextrope.com. Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.

Quadratic Voting in Web3

Kajetan Olas

04 Dec 2024
Quadratic Voting in Web3

Decentralized systems are reshaping how we interact, conduct transactions, and govern online communities. As Web3 continues to advance, the necessity for effective and fair voting mechanisms becomes apparent. Traditional voting systems, such as the one-token-one-vote model, often fall short in capturing the intensity of individual preferences, which can result in centralization. Quadratic Voting (QV) addresses this challenge by enabling individuals to express not only their choices but also the strength of their preferences.

In QV, voters are allocated a budget of credits that they can spend to cast votes on various issues. The cost of casting multiple votes on a single issue increases quadratically, meaning that each additional vote costs more than the last. This system allows for a more precise expression of preferences, as individuals can invest more heavily in issues they care deeply about while conserving credits on matters of lesser importance.

Understanding Quadratic Voting

Quadratic Voting (QV) is a voting system designed to capture not only the choices of individuals but also the strength of their preferences. In most DAO voting mechanisms, each person typically has one vote per token, which limits the ability to express how strongly they feel about a particular matter. Furthermore, QV limits the power of whales and founding team who typically have large token allocations. These problems are adressed by making the cost of each additional vote increase quadratically.

In QV, each voter is given a budget of credits or tokens that they can spend to cast votes on various issues. The key principle is that the cost to cast n votes on a single issue is proportional to the square of n. This quadratic cost function ensures that while voters can express stronger preferences, doing so requires a disproportionately higher expenditure of their voting credits. This mechanism discourages voters from concentrating all their influence on a single issue unless they feel very strongly about it. In the context of DAOs, it means that large holders will have a hard-time pushing through with a proposal if they'll try to do it on their own.

Practical Example

Consider a voter who has been allocated 25 voting credits to spend on several proposals. The voter has varying degrees of interest in three proposals: Proposal A, Proposal B, and Proposal C.

  • Proposal A: High interest.
  • Proposal B: Moderate interest.
  • Proposal C: Low interest.

The voter might allocate their credits as follows:

Proposal A:

  • Votes cast: 3
  • Cost: 9 delegated tokens

Proposal B:

  • Votes cast: 2
  • Cost: 4 delegated tokens

Proposal C:

  • Votes cast: 1
  • Cost: 1 delegated token

Total delegated tokens: 14
Remaining tokens: 11

With the remaining tokens, the voter can choose to allocate additional votes to the proposals based on their preferences or save for future proposals. If they feel particularly strong about Proposal A, they might decide to cast one more vote:

Additional vote on Proposal A:

  • New total votes: 4
  • New cost: 16 delegated tokens
  • Additional cost: 16−9 = 7 delegated tokens

Updated total delegated tokens: 14+7 = 21

Updated remaining tokens: 25−21 = 425 - 21 = 4

This additional vote on Proposal A costs 7 credits, significantly more than the previous vote, illustrating how the quadratic cost discourages excessive influence on a single issue without strong conviction.

Benefits of Implementing Quadratic Voting

Key Characteristics of the Quadratic Cost Function

  • Marginal Cost Increases Linearly: The marginal cost of each additional vote increases linearly. The cost difference between casting n and n−1 votes is 2n−1.
  • Total Cost Increases Quadratically: The total cost to cast multiple votes rises steeply, discouraging voters from concentrating too many votes on a single issue without significant reason.
  • Promotes Egalitarian Voting: Small voters are encouraged to participate, because relatively they have a much higher impact.

Advantages Over Traditional Voting Systems

Quadratic Voting offers several benefits compared to traditional one-person-one-vote systems:

  • Captures Preference Intensity: By allowing voters to express how strongly they feel about an issue, QV leads to outcomes that better reflect the collective welfare.
  • Reduces Majority Domination: The quadratic cost makes it costly for majority groups to overpower minority interests on every issue.
  • Encourages Honest Voting: Voters are incentivized to allocate votes in proportion to their true preferences, reducing manipulation.

By understanding the foundation of Quadratic Voting, stakeholders in Web3 communities can appreciate how this system supports more representative governance.

Conclusion

Quadratic voting is a novel voting system that may be used within DAOs to foster decentralization. The key idea is to make the cost of voting on a certain issue increase quadratically. The leading player that makes use of this mechanism is Optimism. If you're pondering about the design of your DAO, we highly recommend taking a look at their research on quadratic funding.

If you're looking to create a robust governance model and go through institutional-grade testing please reach out to contact@nextrope.com. Our team is ready to help you with the token engineering process and ensure that your DAO will stand out as a beacon of innovation and resilience in the long term.