Optimal Bidding Strategy for Maker Auctions

Michael Darlin, Nikolaos Papadis and Leandros Tassiulas

Papers from arXiv.org

Abstract: The Maker Protocol is a decentralized finance application that enables collateralized lending. The application uses open-bid, second-price auctions to complete its loan liquidation process. In this paper, we develop a bidding function for these auctions, focusing on the costs incurred to participate in the auctions. We then optimize these costs using parameters from historical auction data, and compare our optimal bidding prices to the historical auction prices. We find that the majority of auctions end at higher prices than our recommended optimal prices, and we propose several theories for these results.

Date: 2020-09, Revised 2021-05
New Economics Papers: this item is included in nep-des
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2009.07086

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