# cPoL Acquisition, Governance, Auction Gauges & Yield Harvesting.

As mentioned above, the goal is to absorb and extract value from a diverse range of liquidity on Sonic. In short, the ecosystem starts with our “Auction Gauges”. Here, governance participants can vote on which gauge will attract oSPHERE emissions to incentivise the auction being purchased. This system works on a reverse dutch auction model and the flow is as follows.

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## 1. Initialization of Auction Gauge

An Auction Gauge is deployed detailing which token (often but not exclusively, an LP token) the Auction Gauge will accept and parameters for pricing oSPHERE within the auction. Initially Gauges will be selected by the team, based on the strategic allocation of yield bearing assets we feel are best to initially acquire for the protocol, in future, Auction Gauges will be decided by governance, where gSPHERE holders will be able to determine which liquidity in yield bearing assets they want to accumulate and have exposure towards for the DAF moving forward.&#x20;

## 2. Governance Holders Vote on Emissions to the Auction Gauge

Once auction gauges are live, gSPHERE holders will have the right to vote on which Auction Gauges to direct the epochs scheduled emissions of oSPHERE towards. This is essentially the DAO voting on which LP & Yield bearing assets they want the DAO’s fund to incentivise with the protocols native “Options Token”, allowing for a collective say in the structure and exposure of the DAF.&#x20;

## 3. oSPHERE Accumulation Phase

As emissions arrive, the Auction Gauges' oSPHERE balance grows.

## 4.Reverse Dutch Auction

The Auction Gauge sets a starting price for oSPHERE in the chosen payment token (Be that LP or Yield Bearing), then reduces it over a set epoch period of 7 days. Once price equilibrium is found, a buyer purchases the accumulated oSPHERE in return for the tokens that the Auction Gauge is seeking to acquire for the DAF (Decentralized Autonomous Fund).&#x20;

## 5. Transaction Execution

The buyer sends the required payment token to the Auction Gauge and receives the oSPHERE in return, which they can then use to exercise the call option and arbitrage the price difference (see tokenomics for more details), burn the options token for perpetually locked voting power, or convert the options token into SPHERE, which can then be converted into gSPHERE and used for further governance, yield extraction & borrowing against.&#x20;

## 6. cPoL collection, use, value extraction and yield distribution

Once an auction is complete, the yield bearing assets to which that Auction Gauge supports, are then put to work by the Gauge Auction contract itself. When there are unallocated yield bearing assets sitting in the Gauge Auction Contract, any user can call the “Deposit” function on the contract, which will then execute the deposit path that has been uniquely curated for that specific asset.

{% hint style="info" %}
**For Example:**\
\&#xNAN;*If there is a specific Gauge Auction for a Shadow/Sonic LP, the contract will be hard coded to interact with Shadow Swaps Farms. Calling the “`Deposit`” function on this Gauge Auction Contract will automatically execute the contracts logic to interact with Shadow Swaps Shadow/Sonic Farm, deploying assets there for ongoing yield extraction.* \
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*This logic of deposit and interaction with any external protocols to which we are acquiring yield bearing assets from, will be coded and implemented with each and every gauge auction contract that gSPHERE holders vote to add to the cPoL farms.*\
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*From here, any user can call the “`Claim & Distribute`” function on any respective Gauge Auction Contract, that is actively farming yield. In doing this, outstanding yield from any Gauge Auction Farms, will automatically be harvested and sent to a “Yield Gauge Auction”.*
{% endhint %}

## 7. Reward Gauge Auctions

Yield gauge auctions are secondary auctions that are there to autonomously liquidate the fund farmed assets and distribute the value they extract back to the SonicSphere ecosystem. As Gauges accumulate Yield from their respective assets, users who call the “`Claim & Distribute`” on any given gauge, will trigger a “Reward Gauge Auction”.\
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A reward gauge auction is an auction gauge composed as an index of assets that have been generated by the yield bearing cPoL accumulated by the DAF (Decentralized Autonomous Fund).\
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Once a Reward Gauge Auction commences, the Gauge Logic works the same as that of the reverse dutch auction model, except, instead of reward asset being oSPHERE, its a combination of the reward assets being farmed by the protocol. Each time a user called the “`Claim & Distribute`” function on any given gauge, it injects more value into the existing Reward Gauge Auction. As more and more users call the “`Claim & Distribute`” function across gauges, the value of the Reward Auction grows, accelerating its price discovery equilibrium.&#x20;

{% hint style="info" %}
**HINT:** This introduces all kinds of game theory and financial engineering, where, an existing reward auction is just about to become profitable: \
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`Arbitrage = Value of Reward Index > SPHERE Strike price.` \
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In this scenario, an observant and active participant may realize that a gauge has not yet been “`Claimed and Distributed`”, and doing so would tip the balance on the price equilibrium on the Reward Auctions value. Calling this function at the right time could improve the value of the arbitrage in the Reward Auction, enabling a savvy and observant user to accumulate additional revenue for themselves by watching auctions closely and calling autonomous functions at the right time.
{% endhint %}

## 8.Resetting Auctions

### Standard Gauge Auction Resets&#x20;

After an auction is completed, the Gauge contract will spin up another auction automatically and start filling it with oSPHERE again. The process is repeated. This time, the auctions strike price will begin at 2X the value the previous auctions settled at.<br>

{% hint style="info" %}
**For example: sTS Gauge Auction**

*Previous auction closed at 100 oSPHERE / 80 sTS. In this scenario, the following gauge auction for sTS would start at 200 oSPHERE (2\*100) and follow the same reverse auction logic.*
{% endhint %}

### Reward Auction Resets&#x20;

In the case of reward auctions, upon the conclusion of a reward auction, these will automatically respawn as once a user calls the "`Claim & Distribute`” function on an existing Gauge Auction Contract, with pending yield, thus repeating the process in a clean, tidy and autonomous manner. <br>
