Non-Fungible Tokens, or NFTs, have introduced a new and proven approach to establishing proof of ownership for digital assets. NFT auctions are the common way of acquiring Non-Fungible Tokens. Instead of simply selecting and buying an NFT, an NFT auction enables the sellers and buyers to negotiate the price of the NFT being auctioned. So, what is an NFT auction and how is it similar to general auctions? This article introduces you to NFT auctions and how to increase your chances of winning an NFT auction. How does Auctioning work?
What is an NFT Auction?
An NFT auction is a type of sale in which the seller specifies the lowest price of the NFT (floor price) and the length of the sale. The NFT auction is done on an NFT auction site where the NFT is listed for potential buyers to place their bids. The process works in the same way as traditional auctions. NFT marketplaces usually act as auction houses, and potential buyers place their bids digitally rather than physically.
Some NFT collections offer pre-sale and public sales, but others choose to run NFT auctions. Typically, auctioned NFTs are unique works by creators. Part of the revenue generated from an NFT auction goes towards funding the initiative and rewarding the participants.
Compared to NFT auctions, where the price of the NFT may rise depending on the number of bids, the price of a fixed-price NFT doesn’t change. The owner sets a fixed price for the NFT. The seller can choose to sell the NFT at or above its floor price depending on the rarity of the NFT. Learn more about NFT pricing here.
The NFT bidding process begins with the seller setting the reserve price for the NFT. Anyone can place a bid that is equal to or above the reserve price. By the end of the NFT auction, the highest bidder becomes the new owner of the NFT.
Types of NFT Auctions
The following are the various types of NFT auctions:
#1: Classic/Timed NFT Auction
This type of NFT auction follows the same principles as traditional auctions, allowing the seller to set the base price and the duration. Potential buyers are allowed to place their bids, and the highest bidder becomes the new owner of the NFT at the end of the bidding process.
However, if no buyer places a bid, the NFT is not sold and the seller retains the ownership of the NFT. The classic NFT auction is becoming increasingly popular due to its easy user experience.
Timed auctions attract many participants because they are exciting. The buyers are driven by the desire to own high-value items. It’s also easy for sellers to find buyers with deeper pockets or greater monetary value for the NFTs.
However, unbidden NFT auctions are not uncommon and can lead to less profitability. Also, the sellers are not guaranteed that their NFTs will sell, leaving them in a precarious position.
#2: Dutch Auction NFT Sale
This type of NFT auction starts at a high price and gradually decreases until a buyer is willing to purchase the NFT. They are used for items with a lower value, such as game items, digital tokens, and other collectibles.
A Dutch auction offers benefits to both the buyer and the seller. Instead of trying to gauge the actual value of the NFT, buyers can pay what they think is the fair value of the token. The seller also benefits because the price tends to be pushed up as buyers try to secure their purchase. However, the buyers have a disadvantage because they have to overpay to avoid missing out on their desired NFTs.
#3: Reserve NFT Auction
Reserve auctions are good for sellers who want to ensure that they receive money that meets or exceeds expectations. Once the seller sets the minimum price, they will rest assured that buyers won’t undervalue their NFT.
Typically, bidding begins below the reserve price to attract buyers and create an atmosphere where bidders try to outbid each other until they reach the reserve price. Thus, the auction works just as the classic auction and ends when they find the buyer willing to pay the most. This maximizes the financial returns of the seller and creates a transparent NFT auction process.
#4: No Reserve Auction
This type of NFT auction can be risky to sellers because the lowest bid accepted becomes the final sale price of the NFT. Thus, the seller must weigh the risks and the rewards before choosing this type of auction.
#5: Open Auction
Open auctions are conducted in live events in the presence of both the seller and prospective buyers. The openness creates an exciting atmosphere as bidders try to outbid each other.
#6: Closed Auction
A closed auction is the opposite of an open auction. The auctioneer selects a group of participants in the bidding process. This can help buyers prevent unwanted attention from wealthy buyers.
Top NFT Auction Sites
The following are the common NFT auction sites:
Rarible is an NFT auction site that enables users to create, buy, and sell digital assets. Users can list their NFTs for sale on the platform through auctions or fixed-price offers, and buyers can purchase them using cryptocurrency.
OpenSea is an open NFT marketplace for buying, selling, and trading digital collectibles. Users can trade NFTs on the platform through fixed-price offers, auctions, or direct trades between users. Users can also create their NFTs and list them for sale on the platform.
SuperRare is another NFT auction site and it runs on Ethereum. It allows users to trade digital art backed by cryptocurrency through auctions and fixed-price offers. Additionally, all art is verified using cryptography and stored on the blockchain. Thus, buyers only purchase secure and genuine art.
AtomicHub is an NFT auction site for rare digital collectibles. Users can trade NFTs on the platform through auctions or fixed-price offers.
How to Participate in an NFT Auction
NFT auction is a good way of obtaining your favorite NFT. You can join an NFT auction as a bidder by following these steps:
Step 1: Choose the NFT auction site from which to buy the NFT.
Step 2: Connect your NFT wallet to the NFT auction site.
Step 3: Use the browse and search options provided by the NFT auction site to find all the existing auctions. You can also search for the preferred NFT under auction.
Step 4: During the NFT bid auction, you will be able to see details of the existing bids and the remaining time for the auction. You can also find other important details about the NFT.
Step 5: Place your bid on the NFT, citing an amount that is higher than the existing bids.
Step 6: Sign the transaction and confirm the bid.
If your bid becomes successful, you will become the new owner of the NFT.
How to List an NFT for Auction
You can auction the NFTs you have in your wallet or the newly minted ones. But first, you must sign up for an account with an NFT auction site and connect your wallet.
To create an NFT auction, you should list the NFT on sale on an NFT marketplace. The marketplace will request you to choose how to sell your NFT, whether through auction or fixed price. Choose the auction option and set the minimum price for the NFT.
After a successful listing, you will only need to wait for bids from prospective buyers. Once the NFT auction closes, buyers will be notified of the highest bidder, and you can close the auction.
Popular NFT Auctions
So, what are the most popular NFT auctions? One of the famous NFT auctions was the “Everydays: The First 5000 Days” artwork NFT by artist Beeple. The artwork fetched a price of $69.3 million in an NFT auction in 2021. This auction made the whole world believe in NFTs and their potential. Beeple also auctioned many other NFTs, like the Ocean Front and The First Drop. These fetched $6 million and $6.6 million respectively, strengthening Beeple’s position as an NFT artist.
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What is the trend in the NFT market in 2023?
The trend in the NFT market is projected to reach US$1,601.00m in 2023.
Who is the biggest NFT buyer?
Beeple is the biggest NFT Buyer.
Who is the biggest NFT seller?
The Merge is Biggest NFT Seller
What is the most successful NFT collection of all time?
Beeple, Everydays: The First 5000 Days – $69.3 million is the most successful NFT Collection of all time
What kind of NFT sells best?
Digital collectibles NFT sells best.
How do I find a successful NFT project?
Do detailed research on top NFT-selling websites.