What are Batch Auctions?

Batch auctions are a method of trading common in both the traditional and cryptocurrency markets. Individual orders are grouped together into a batch and executed at the same time. The same clearing price is assigned to all orders within one batch. Trading in batch auctions helps guarantee fair price discovery.

Batch auctions are used in blockchain-based markets to prevent maximal extractable value (MEV) when dealing with initial token offerings, liquidations, or illiquid asset buybacks. MEVs can affect the additional fees of the transaction. Therefore, utilizing batch auctions reduces the vulnerability to MEV.

Normally, batch auctions only operate on a single token pair. However, multi-dimensional batch auctions create the possibility to batch together orders with multiple token pairs and execute them simultaneously. Stablecoins and token pairs that are not as liquid, such as insurance tokens, are commonly traded in multi-dimensional batch auctions.

Multi-dimensional batch auctions can occur in different formats. In some cases, the trade occurs between direct counterparties. In others, the batches can be traded in a ring formation.