NFTs are pieces of virtual property that can be bought, sold, and even collected. They exist on the blockchain, which means they’re digital assets that are unique and traceable. NFTs have become extremely popular recently due to their rarity and potential for high-value investments.
How NFT auctions work
NFT auctions are similar to other forms of auctions as they involve buyers bidding on items, the only difference being that the items for sale are digital. Specifically, instead of physical goods, NFT auctions involve the sale of Non-Fungible Tokens, which have become increasingly valuable over the last few years due to their applicability across various sectors from art, sports, and finance.
Their versatility has driven interest in understanding NFT auctions and how they differ from regular auctions.
NFT tokens exist solely on a blockchain network and possess unique verification codes that distinguish them from other tokens for added security. Given their high-value potential, as evidenced by million-dollar sales, hosting an auction is a plausible method of getting a reasonable price for these assets.
Types of NFT Auctions
Classic/ Timed NFT auction
Following the same principles as traditional auctions, classic auctions allow sellers to set a base price and duration, allowing prospective buyers to place bids, with the highest bidder winning at the end of the given timeframe.
However, if buyers place no bids, the original owner will not be obliged to sell and will retain the ownership of their NFT. This type of auction is becoming increasingly popular thanks to its easy user experience and trustless sale system.
Classic auctions potentially attract more participants, as auctions can be exciting. The need to gain the highest-valued items available drives buyers. At the same time, sellers benefit from the possibility of finding buyers with a deeper pocket or greater monetary value for their product.
On the flip side, unbidden auctions are common and can lead to less profitable outcomes for those involved. In addition, there is no guarantee that the items sellers auction will sell, leaving buyers and sellers in a precarious position.
Dutch auction NFT sale
A Dutch auction NFT sale starts at a high price and gradually decreases until someone is willing to purchase the item. Traders use these auctions for items with a lower value, such as digital tokens, game items, or other collectibles.
A Dutch auction is an auction style that offers distinct advantages to buyers and sellers. Rather than attempting to gauge an item’s actual value, buyers can pay what they think is fair due to the uncertainty. Winners can rest easy knowing they will almost definitely get their item at the end of the auction.
On the flip side, sellers benefit because prices tend to be pushed up, with buyers uncertain and eager to secure their purchase. However, this method also carries disadvantages; buyers often must overpay to avoid missing out on their desired items.
Reserve auctions are an excellent option for sellers who want to ensure they receive money that meets or exceeds their expectations. By setting a minimum price, sellers can remain confident that buyers won’t undervalue their items. Bidding typically starts below the reserve to draw in buyers and create an exciting atmosphere as bidders attempt to outbid each other until they hit the Reserve Price. At this point, the auction functions similarly to a classic auction and ends when they decide on the buyer willing to pay the most. Not only does this maximize financial returns for sellers, but it also promotes fairness and transparency throughout the whole process.
No reserve auction
A no-reserve auction can be risky for sellers, as the lowest bid accepted becomes the final sale price. Therefore, the seller must weigh their potential risks and rewards before committing to this auction.
A no-reserve bet is not the best choice if the goods have a high value or they expect them to fetch top dollar at auction.
If goods are more common and unlikely to attract tremendous attention, opting for a no-reserve auction is advantageous.
It’s up to the seller to decide what is best and remain mindful that they may end up with less money than intended, no matter how successful an auction appears.
Sellers conduct open auctions during a live event, and all prospective buyers must be present. The openness can create an exciting atmosphere with bidders eager to outbid one another to secure their desired items.
The main downside to this type of auction is that it lacks transparency, as only one bidder knows how much they’re willing to pay for a given item. Open auctions also tend to favor large entities like corporations or wealthy individuals who may have deeper pockets than any other potential buyer in attendance.
A closed auction is the opposite of an open auction, meaning that the auctioneer gives access to only a select group of participants in the bidding process. Limitations can benefit those looking to protect their interests as it limits the chance of competitors driving up prices.
Buyers can rest assured that no one else will be able to bid higher than them while preventing any potentially unwanted attention from other wealthy bidders.
Sellers benefit from a more private setting where there is better control over the sales and how much they are worth. This auction style can lead to some hefty returns but may not necessarily result in strong sales due to lack of publicity or exposure which can be essential for a successful auction.
NFT auction sites
Common NFT auction sites include:
- Rarible – Rarible is a non-fungible token (NFT) auction platform that enables users to create, buy and sell digital items. It allows users to list their NFTs for sale through auctions or fixed-price offers, and buyers can purchase them with cryptocurrency payments. OpenSea – OpenSea is an open marketplace for
- Opensea is an open marketplace for buying, selling, and trading digital collectibles. The platform enables users to buy and sell NFTs through auctions, fixed-price offers, or direct trades between users. It also allows users to create their own NFTs and list them on OpenSea’s marketplace.
- SuperRare – SuperRare is a digital art marketplace powered by Ethereum. It enables users to buy and sell cryptocurrency-backed digital art through auctions or fixed-price offers. In addition, all artwork is cryptographically verified and stored on the blockchain, so buyers can rest assured that their purchases are genuine and secure.
- AtomicHub – AtomicHub is a digital asset market for rare items and digital collectibles. It enables users to purchase, sell and trade their NFTs through auctions or fixed-price offers. AtomicHub also allows users to create unique digital assets and list them for sale on its marketplace.
Tips for buying NFTs at NFT auction sites
When buying at NFT auction sites, buyers should research the product they are interested in and double-check the details before bidding. In addition, it’s essential to understand that these digital assets are typically non-refundable and may be subject to fluctuating prices due to supply and demand.
Buyers should know that a fee is often associated with participating in an auction.
It’s also essential to track how much money you spend to stay within one’s budget.
Read reviews from past customers and make sure to use a secure payment method when purchasing an item.
How to set up an NFT for sale
If you’re looking to auction an NFT:
- Find the NFT marketplace where you want to host the auction.
- Create an account, connect your wallet, and select the NFT you want to put up for sale via the ‘Auction’ option.
- Wait for buyers to start placing bids.
- When the auction eventually ends, you will receive a notification of who has placed the highest bid.
Famous examples of NFT auctions sales
Melania Trump NFT hat auction – A hat owned by former US First Lady Melania Trump auctioned at a stunning $170,000, with proceeds going to the charity.
Beeple artwork auction – Artist Mike Winkelmann’s digital artwork titled “The Last Days” sold for an incredible $77 million in an NFT art auction, setting a new record for the most expensive digital artwork ever sold.
CryptoPunk auction – CryptoPunks, a collection of 10,000 unique pixel art characters, sold for almost $7 million in an NFT auction; the sale was part of the first-ever collection organized by crypto-collectible marketplace Larva Labs.
GIFTOBI auction – GIFTOBI, a popular digital art marketplace, hosted a series of auctions selling over $50 million in four days.
NFTs have ushered in a new world of digital collecting, which can be both exciting and complex. As the NFT space continues to mature, processes are constantly changing, and success often requires keeping up with the latest NFT-related news and events, such as NFTs for sale or an auction of NFTs.
While there can be potential rewards to buying NFTs, it is essential to stay informed on trends and regulations relating to NFTs so that one can understand what they are purchasing or selling.
Refraining from the research could ultimately prove costly. Therefore, before engaging in the NFT space, users should research what NFTs offer and the risks involved.