Token Auction Mechanism

The Token Auction Mechanism of the Avareum protocol enables the system to liquidate NAV tokens in Management Fee Vaults (MFV) to Stablecoin Surplus Auction Vaults (SSAV). At the point of liquidation, the Avareum protocol takes the NAV tokens in MFV and consequently liquidates them back to stablecoins and keeps them in SSAV.

If the stablecoins' value in SSAV surpasses the Avareum Buffer limit, they are sold through a Token Auction Mechanism. During a Token Auction, bidders compete by bidding increasing amounts of AVAR to receive a fixed amount of stablecoins. Once the Token Auction has ended, the Avareum protocol automatically burns the AVAR obtained, reducing the total AVAR supply.