A Dutch auction is a popular type of auction used to sell unique or collectible assets such as NFTs and art. The auction starts with a higher price and allows anyone to bid on the asset over a specific period of time. The first bid made during that period wins the asset. As time passes, the price of the asset decreases until it reaches a reserve price, which on galley auctions is the price of the quote provided by the liquidity provider. The auction ends either when the reserve price is reached or when the set time period has elapsed.
One of the primary advantages of Dutch auctions is that they provide an efficient way for sellers to set a starting price while allowing the market to determine the fair value of the asset. The transparency of the Dutch auction process makes them popular among buyers and sellers alike. Additionally, for NFT transactions, Dutch auctions can offer lower gas fees compared to other auction types.
Overall, Dutch auctions are an effective and straightforward way to sell unique or collectible assets, with benefits for both sellers and buyers.