The Bidders Queue

NFT and metaNFT bids: TL;DR

Actors who want to either buy the underlying NFT of a PilgrimPair (therefore delisting it from Pilgrim Protocol), or the metaNFT (which represents ownership over a PilgrimPair), should submit a liquidation bid either from the Pilgrim Web App or through a direct contract call.

For NFT bids, one must submit a bid that is higher than the NFT's spot price at point of liquidation -- i.e. the spot price set by Pilgrim when the metaNFT owner accepts the buyout bid. The point of time the bid was made must be the earliest among other bids that has a bidding price higher than the current NFT spot price.

For metaNFT bids, everything else is the same with NFT bids, except that instead of the NFT's spot price, a separate metaNFT price value calculated by the protocol based on the NFT's current spot price is used. For details, refer to the Valuation & Trading Algorithm paper.

If you wish to reclaim an NFT you have listed on Pilgrim, you must submit an NFT buyout bid and accept it to buy it back from yourself -- same as anyone else.

Bid Status

A liquidation bid may have a combination of one of the following two states:

• Active: The offer didn’t pass the deadline

• Expired: The offer passed the deadline

and one of the following two states:

• Valid: The offer price is higher than the spot price

• Invalid: The offer price is lower than the spot price

For instance, a status of ACTIVE - VALID indicates that this bid did not pass the validity deadline, and is higher than the current spot price.

Once a bid is accepted by the metaNFT owner, it will have an ACCEPTED state.

• Accepted: The metaNFT holder has accepted the bid

LBP Liquidations on the Pilgrim Bidders Queue

As described with the Protocol Overview, the metaNFT owner has the right to approve one and only one bid that exists on the bidder queue for this Pilgrim pool that: (i) has a higher valuation than the current spot price set by the Pilgrim trading protocol, and (ii) has the lowest bid timestamp value.

Let there be a list of liquidation bids, defined as a tuple $(LiquidationPrice, BidTimestamp)$ for a particular PilgrimPair pool. The liquidation premium for this bid on point of execution may be defined as $\Delta LiquidationPremium = LiquidationPrice - SpotPrice$, of which:

• for liquidation bidders, the goal should be $min(\Delta LiquidationPremium)$ & $\Delta LiquidationPremium > 0$.
• for metaNFT holders and round holders, the goal should be $max(\Delta LiquidationPremium)$ and $\Delta LiquidationPremium > 0$.

Because $SpotPrice$ determined by Pilgrim Protocol is unpredictable, both parties should agree upon a single point for liquidation such that

• $max(CurrentTimestamp - BidTimestamp) \cdot \Delta LiquidationPremium$ is of optimal value.
• on point of liquidation, of which only the metaNFT owner has the right to execute, $max(CurrentTimestamp - BidTimestamp)$ for a particular liquidation bid should be substantially larger than other timestamp deltas of competing bids.
• at the same time, the bid must ideally satisfy $min(\Delta LiquidationPremium)$ such that this bid would be the only choice for the metaNFT owner to accept; think of Pilgrim NFT liquidation bids as a type of option without an expiry date.

Therefore, optimizing bids should involve

• being able to predict spot prices and liquidation points such that $\Delta LiquidationPremium$ would be of the best interest for either the liquidator or the metaNFT holder,
• and being able to do such as quickly as possible. Utilizing miner-extractable value (MEV) to avoid public blockspace prior to execution, such as Flashbots, may be useful for liquidation premium discovery on listed NFTs.