How Do NFT Auction Websites Work?
Key Questions Answered
NFT Auctions are the primary way in which users acquire NFTs. Instead of simply picking an NFT and buying it, NFT auction websites are where sellers and buyers interact to agree on a price for the NFT that is being auctioned. Even traditional art galleries like Christie’s and Sotheby’s have included NFTs in their catalogue and regularly host renowned NFT auctions.
An analysis by Consensys, the software firm that backs Ethereum’s infrastructure, revealed that crypto based artwork now accounts for 10% of all art sales worldwide. DappRadar’s 2021 industry report shows that the NFT marketcap of the top 100 collections is showing no signs of slowing down and has increased MoM in the second half of 2021 with metaverse projects taking a share of the pie as well.
What is an NFT Auction?
In an NFT auction, the seller sets a minimum price for a specific time period. Buyers can bid on how much they want to spend for the NFT as long as it is more than the minimum price. After that, the NFT is sold to the highest bidder at the end of the sale period.
(How to buy and sell NFTs Source: ideasoft.io)
What is an NFT Auction Site?
An NFT auction site is an online marketplace where non-fungible art is sold, and buyers can purchase it using cryptocurrency such as Ethereum. Most marketplaces charge a transaction fee and require that you create an account with them, which is usually free.
Biggest Platforms & NFT Marketplaces
Here are the most prominent marketplaces to buy and sell NFTs.
- Nifty Gateway
- Async Art
- Terra Virtua
- Axie Marketplace
How do NFT Auctions Work?
The minimum amount of ETH you would be ready to take for an NFT is known as a reserve price. Collectors will be able to see the reserve price on the platform or marketplace and will not be able to bid below the reserve price.
Remember that a 15% service fee will be added to the final sale price of your NFT, so keep that in mind when determining the reserve price. When an NFT’s reserve price is met, a 24-hour countdown begins, after which the auction will close automatically. The countdown timer will reset to 15 minutes for each offer placed in the final 15 minutes of the countdown until no more bids are placed.
Collectors can only make bids that are equal to or greater than your reserve price. A 24-hour timed auction will commence once the first bid is placed. All subsequent bids must be 10% higher or 0.1 ETH higher than the current bid, whichever is lower. You can use social media to generate interest in your auction and promote more bids. If no other bids are received after a collector submits a bid at the reserve amount, the object will be sold to the first bidder.
Extensions can run forever as long as no bids are put in the final 15 minutes of an auction. The addition of 15-minute extensions allows each buyer one last chance to put a bid, as well as the artwork to reach its full market worth.
Biggest NFT Auctions To-Date
1 Beeple, Everydays—The First 5000 Days
$69 million, March 2021, Christie’s
Mike Winkelmann, also known as Beeple, sold Everydays: The First 5,000 Days (2021) at Christie’s for $69 million earlier in 2021; making him one of the world’s highest paid living artists. The sale was historic. Not only did the work fetch such a high price, but it also effectively spread NFT fever throughout the art world.
2 Beeple, Crossroads
$6.6 million, February 2021, Nifty Gateway
In Beeple’s first NFT sale, “The First Drop,” in October 2020, the initial buyer had no idea which works of art he would receive. Depending on the outcome of the US presidential election, there were two possible visuals. After the votes were tallied and the painting was completed, depicting a defeated President Donald Trump laying naked and covered in graffiti on a roadside, the collector flipped it for 100 times the initial sale price.
3 Beeple, Ocean Front
$6 million, Nifty Gateway, March 2021
The work that was created as an NFT is titled “Ocean Front,” and it speaks about Earth’s current climate change challenge. It shows a tree perched on an image of trailers and shipping containers sitting atop a platform on the ocean floor. The artist has pledged to contribute the revenues to the Open Earth Foundation, a non-profit organization.
As interest in NFTs grows, platforms that take a “wide” approach by reducing friction, making entry easy for new users, and allowing participation by the widest possible audience — effectively valuing scalability over decentralization and security — will see increased adoption and growth.