What is Merkato?

Merkato is a unique way to obtain bandwidth, on demand, at fair and equitable prices.

There are two ways to purchase bandwidth in a Merkato system.

You can get a fixed amount of bandwidth, at a fixed price, for a fixed term
You can create a bidding strategy and contend for bandwidth with other buyers at frequent intervals

The first method is called the Reservation market. the second method is called the Spot market.

The spot market provides a true balanced supply-and-demand marketplace. The Merkato spot market uses a patent-pending Progressive Second Price Auction mechanism to collect bids from multiple buyers, analyze the bids to determine the natural market price for this bandwidth, and then automatically apportion that bandwidth to the successful bidders at the market price. The components of the Merkato system are illustrated below.

Buyers, Sellers, and Agents

Agents are programs within Merkato that interact on behalf of buyers and sellers. Buyers of bandwidth configure their agents with the price they are willing to pay for a range of available quantity. The seller configures an agent with a quantity of bandwidth for sale and a minimum price for that quantity. Buyer agents then express what they are willing to pay for bandwidth in the form of bids, consisting of a unit price and a quantity. The bids go to a third type of agent, the Resource agent.

Sellers create a price floor by offering to purchase all the available bandwidth at their lowest acceptable price.

The Resource agent responds to bids with proposed allocations and pricing. The buyer and seller agents can either accept the proposed allocation (by not bidding further), or reject the proposed allocation (by submitting another bid). When there is no more bidding, the auction closes, and the resource agent makes actual allocations.

The entire process takes no more than five minutes. The auction is completely open and fair, with all bidders seeing what the other bidders have offered. The Progressive Second Price auction mechanism ensures that all bidders receive their allocation at the fair market price, which is equal to or less than the price they offer.

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