One of the most popular people to auction off an NFT was Jack Dorsey, co-founder of Twitter. He wasn't the first, but since then we've seen other NFT auctions involving ridiculous amounts of money. Not only is the hype around NFTs becoming real, but a person can now spend millions of dollars on NFT auctions to purchase digital art from the comfort of their home.
Whether you’re an NFT collector or an NFT creator, understanding how NFT auctions work is one of the first steps to making the most of this industry.
What are NFT auctions?
NFT auctions are where specific NFT artworks are offered for sale to interested NFT collectors and the highest bidders place their bids to purchase the NFT artwork. In an NFT auction, the seller sets a minimum price for a given period. Buyers can bid on the amount they wish to spend on the NFT, provided it is above the minimum price. Then the NFT is sold to the highest bidder at the end of the auction period.
How does an NFT auction work?
Not all NFT marketplaces run their NFT auctions in the same way. If you want to run an automated, timed NFT auction, you can set up a reserve auction or a scheduled auction.
In a reserve auction, a public reserve price is set. Once it is reached, it sets off a 24-hour countdown to the end of the auction, allowing other collectors to bid before the deadline. Reserve auctions work well when you are not in a hurry to sell an NFT art piece, but want to get at least some money for it. Once the reserve price is set, there is no specific time frame in which it must be reached - but when it is, the timer goes off.
In a scheduled auction, specific start and end times are chosen, along with an optional starting price. The auction will start and end at approximately the specified times, regardless of whether bids reach the starting price. Scheduled auctions are ideal when you know you want to sell an NFT during a specific time period, as part of an event, or to make the auction an event in its own right.
Why should you use NFT auctions?
Once an item, including an NFT, leaves the hands of the first buyer, the principle of supply and demand determines its subsequent market value. Other factors that add value to an NFT are human stipulation, rarity, and the collective intentionality of the auction process. Despite the reserve or minimum price of any NFT, it’s the market that determines the final value of the NFT in an auction. In other words, each person participating in an NFT auction is unconsciously an evaluator of the NFT itself. In summary, the more bids an NFT auction receives, the higher the value of the NFT until it’s sold.
If you’re getting ready to release your NFT, and you think you’re going to sell out, you should consider an auction.
- First, using an auction eliminates scalpers and short-term flippers. Because the auction price is set by the market, there is no short-term profit to be made. Fans and long-term investors will be able to earn their NFTs from the first sale.
- Users would submit their bids over a period of time, and the selling price would be the highest losing bid. This avoids users overpaying – bidders are paying exactly the amount they would have had to bid to win, and then allows people to bid their estimated value.
- At the close of the bidding, the sale price would be set. Winning bidders would be given their NFTs, and the bid amount in excess of the sale price would be refunded. Losing bidders would have their money refunded.
How to auction an NFT on the AirNFTs NFT marketplace?
The process of auctioning an NFT starts with the creation of the NFT. Find out how to create and sell your own NFT in our previous article.
After creating your NFT, follow the steps below to auction it on our NFT marketplace:
1. Click on profile picture, then on “My NFTs,”
2. Scroll down to your collection and click on the NFT you want to auction,
3. Modify your NFT price to match the final price you would love to get if the auction has bidders to avoid front-run attacks – we’ll explain this later in this article,
3. Click on more icon and hit “Start Timed Auction,”
4. Indicate the Minimum Bid and the duration of the auction, then click on "Confirm,"
5. A smart contract call will pop up, click “Approve,”
6. Wait a few seconds for confirmation, you will receive a notification at the top of your screen that the auction has been successfully created.
And there you have it, your first NFT has been auctioned on AirNFTs NFT marketplace.
Note: If the NFT you wish to auction has an initial low price when you send it to the escrow account, someone can buy it within 5 seconds before the escrow account locks it. On the other hand, if the NFT was priced higher, before, that front running (attack) can be avoided.
Hopefully, you've learned that using auctions to sell your NFTs will give you and your users a great result. If you're working on an NFT project and plan to launch it, we recommend being frugal with your time and doing it from AirNFTs, an NFT marketplace running on both the Polygon and BSC blockchains, for low or near-zero gas/network fees.
Check our previous article to learn more about where you can mint and buy your NFTs with low gas fees.