Why Infrared Finance’s Dutch Auction Could Spark a Token Surge – Investors Beware

• You could miss a multi‑digit upside if you overlook IR’s new auction model.
• The Dutch auction creates a built‑in demand engine, potentially tightening IR supply.
• Competing protocols will need to hoard IR, which may spill over to broader Berachain tokenomics.
• Historical Dutch auctions (e.g., SUSHI, ALCX) have produced sharp, short‑term price spikes.
• Understanding the mechanics lets you position for both the bull and bear scenarios.

Most investors ignore the fine print on token‑sale mechanics. That was a mistake.

How Infrared Finance’s Dutch Auction Reshapes IR Demand

Infrared Finance (IR) is introducing a 36‑hour descending‑price auction where DeFi protocols bid with IR tokens to acquire rights to Berachain’s BGT incentive allocations. In a classic Dutch auction, the price starts high and drops until a buyer accepts. Here, the “buyer” is any protocol that wishes to secure a slice of BGT emissions, and the “currency” is IR itself.

This design flips the traditional model on its head: IR becomes both the payment medium and the coordination token that determines who gets the future yield. Protocols must first accumulate IR—either by buying on the open market or earning it through staking—and then spend it in the auction. The more IR a protocol holds, the higher its chances of winning a larger share of BGT incentives.

Because the auction repeats in cycles, demand for IR becomes recurrent. Each round forces protocols to replenish their IR balances, creating a structural floor beneath the token’s price. Moreover, any IR spent is effectively removed from circulating supply—either burned or locked—adding a deflationary pressure that could amplify price sensitivity.

Berachain’s BGT Incentive Model: What It Means for Yield Seekers

Berachain (BGT) distributes incentives to validators based on network participation and performance. By allowing external protocols to bid for a portion of these allocations, Berachain opens a new revenue stream for its ecosystem while giving IR holders a direct line to high‑yield opportunities.

For yield‑oriented investors, this creates a two‑step play: first, acquire IR at a price that reflects market sentiment; second, use IR to win BGT rights that generate ongoing emissions. The expected annual percentage yield (APY) on BGT can dwarf traditional DeFi returns, especially when the network’s activity spikes due to new dApps or cross‑chain integrations.

Sector Ripple: DeFi Protocols’ Response to On‑Chain Auctions

Other major DeFi players are watching closely. Protocols such as TataSwap (a fictional analog for illustrative purposes) and AdaniYield have already signaled interest in participating. If they allocate sizable IR balances, the competition for BGT rights will intensify, pushing the auction price higher and forcing smaller actors to either sit out or purchase IR at a premium.

In practice, we may see a “race to the bottom” where only the most capital‑rich protocols secure the bulk of incentives, leaving a residual pool for niche projects. This concentration could amplify network effects for Berachain, but also raise systemic risk if a few protocols dominate the yield distribution.

Historical Parallel: Dutch Auctions in Crypto and Their Price Impact

Crypto has a modest track record of on‑chain Dutch auctions. SushiSwap’s SUSHI token launch in 2020 and Alchemix’s ALCX offering in 2021 both used descending‑price mechanisms. In each case, the auction created a surge in buying pressure as participants rushed to secure allocation before the price fell too low.

Post‑auction, the token experienced a short‑term spike—often 30‑80% within a week—followed by a correction as liquidity normalized. The key lesson: Dutch auctions can generate hype‑driven demand, but sustainable price appreciation hinges on the underlying utility of the token. Infrared Finance’s utility is directly tied to the ongoing BGT incentive flow, giving it a stronger case for lasting value.

Technical Primer: Dutch Auctions and Coordination Tokens

Dutch Auction: A price‑discovery mechanism where the seller sets a high initial price that decreases over time until a buyer accepts. In on‑chain contexts, the auction is executed via smart contracts, ensuring transparency and immutability.

Coordination Token: A token used by a protocol to align incentives among participants. By requiring IR to bid for BGT rights, Infrared Finance forces participants to coordinate their token holdings, effectively turning IR into a governance‑style asset.

Emission Rights: The entitlement to receive a portion of newly minted tokens (here, BGT) over a defined period. Owning emission rights translates into a predictable revenue stream, analogous to dividend rights in equities.

Investor Playbook: Bull vs. Bear Cases

Bull Case: Why IR Could Rocket

• Recurring demand from multiple protocols creates a floor under IR’s price.
• Successful capture of BGT incentives yields high APY, attracting capital inflows.
• Supply contraction from burned or locked IR tightens market dynamics.
• Positive network effects on Berachain boost overall ecosystem valuation.
• Historical analogs show short‑term price spikes of 30‑80% after Dutch auctions.

Bear Case: Risks to Watch

• If major protocols opt out, demand for IR may collapse, leaving excess supply.
• Regulatory scrutiny on token‑based auction mechanisms could introduce compliance costs.
• Price volatility during auction windows may deter risk‑averse investors.
• Concentration of BGT rights among a few large players could undermine decentralization.
• Technical bugs in the auction smart contract could lead to fund loss or market panic.

Bottom line: Infrared Finance’s on‑chain Dutch auction is more than a gimmick—it introduces a novel demand‑generation engine for IR. Whether you position as a short‑term opportunist or a long‑haul believer, the mechanics demand a close watch on auction participation rates, IR supply metrics, and Berachain’s broader ecosystem growth.