Digital NFT art is one of the main reasons why this field has become so popular, and many artists have been able to earn millions of dollars on this. NFT auctions are the new way collectors meet with their favorite NFT artists and buy their prized artworks. How do NFT auctions work? What are the best marketplaces for digital auctions in 2023? Today, we’ll try to find out!
How NFT Auctions Work: Key Things to Know
Digital auction is a method of selling NFTs based on the highest price. The lot is placed on the marketplace with the following data:
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- art description and links to social networks of the NFT-artist;
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- type of auction (classic, Dutch);
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- the opening bid, that is, the amount suggested to start bidding
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- start and end dates;
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- reserve bid (the product cannot be sold cheaper than it) — optional;
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- who is eligible to participate — optional.
After the launch, a seller cannot change anything in the conditions. Thus the only thing left is to wait for the result. Potential buyers place bids — the one who suggests the highest bid will take the lot. This sales method allows getting the most advantageous offer for the demanded NFTs. For unknown artists, this is an opportunity to sell their NFTs at least for a small price since the lot can be sold for months at a fixed price. Thus, this is how NFT auctions work.
Main Types of NFT Auctions
By the Method for Determining a Winner
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- English. It is a classic variant when the one who suggested the highest price wins. The money is frozen until the end of the event or until the price is outbid.
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- Dutch NFT auctions, how they work: Trades are going down from the opening bid, which is deliberately overpriced. The lot is taken by the one who places the bet first. It is considered the most effective for quick bulk sales. For example, the Non-Fungible Fungi Genesis collection auction started at 2.1 ETH and dropped to 0.08 ETH in two hours. Collectors could purchase up to 5 NFT mushrooms in one transaction (3,000 were sold in total). Those who bought an asset earlier could have time to make a flip — to resell the token several times more expensive instantly. Participants who expect the lowest price often get nothing.
By the Admission of Participants
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- Open. Any user of the platform can buy an asset.
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- Closed. A user has to obtain an invitation in advance. You can win them in a lottery and receive them for staking or active participation in the project’s activity.
By Type of Organization
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- Online.
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- Combined. These are held by auction houses (e.g., Sotheby’s). Participants can compete for a lot online or attend the auction for offline trading.
Top 5 Marketplaces for NFT Auctions
The list contains only online platforms since it is unlikely that a reader plans to participate in events from auction houses. So, how do NFT auctions work on the most promising marketplaces? Let’s try to find out!
Rarible
The Russian marketplace ranks second in terms of trading volume in the world. Rarible, which operates on the Ethereum blockchain, received $14 million in investments from American funds. A commission is charged for any action (minting, putting on or taking off the market, etc.).
How do NFT auctions work here? Well, digital artists receive not only royalties for the initial sale but also from each resale. There is a government token RARI used to participate in voting and receive bonuses.
OpenSea
OpenSea is a convenient marketplace for beginner artists, which operates on Ethereum, Polygon networks — there is no need to pay money to turn a picture into an NFT. This commission can be shifted to the buyer, allowing you to save $150-200 on each lot. Still, you will have to pay this amount once for linking your account to the blockchain.
For the same reason, there are many low-quality arts on the platform, among which it is difficult for even a talented beginner to stand out. However, collectors have a chance to find a promising art earlier than others.
Foundation
It is one of the most famous closed-access platforms where famous artists share their arts. You can become an author at Foundation only by receiving the invitation of users who have successfully sold their arts. All newcomers want to get here, and ‘Give me an invite on Foundation’ has already become a meme. The platform is known for some of the highest prices on the Ethereum blockchain.
Binance NFT
The largest cryptocurrency exchange launched its Binance NFT marketplace in 2021. There are no minting fees, and the platform’s commission from each sale is 1%, which a buyer pays. To become an author, you need to obtain admission from the administration.
Users who have passed KYC (identity verification) can buy and sell other users’ work. Thousands of auctions take place almost every day, and the purchased tokens are stored on the Binance Smart Chain network.
SuperRare
The American platform has been operating since 2018. It specializes in exclusive drops, but you can also find inexpensive art here. When selling NFTs, an artist pays a 15% commission (the highest among all platforms), while a collector pays a 3% fee. Royalty on resale in the secondary market — 10%.
How Can You Make Money on NFT Auctions?
Once we’ve found out how NFT auctions work, it’s time to learn the key ways to make money on this. Let’s get started!
#1 Selling Your Own NFTs
A beginner without well-promoted social networks and a recognizable name can count on a price of up to $200 (most likely, it will be $30-$50). With a well-tuned royalty option, a token can bring a large resale value in the future. The main thing is for artists to make their brand recognizable.
#2 Buy & Hold
If a collector is sure that a token will rise in price in the future, they buy it out at an affordable price and put it on hold. If the artist becomes popular in 1-2 years, the art is put up for sale several times (sometimes hundreds of times) more expensive.
#3 Fast Speculation
On Binance, in the Mistery box section, sellers are auctioning game and collectible NFTs that need to be urgently sold. At the same time, it is possible to buy an NFT at an auction 10-30% cheaper than the market value. The won lot is immediately sent for sale at the market’s bottom and sold during the day. With a turnover of $300 per day, you can earn $50-$100.
Conclusion
Today, we’ve found out how NFT auctions work and considered the best marketplaces for digital auctions in 2021. Given the growing popularity and adoption of NFTs, many promising arts are sold on NFT auctions almost every day.
There is no doubt that more artists will enter the sector in the near future. Thus one should wait for new promising NFT collections!
Have you ever participated in an NFT auction? Feel free to share your experience in the comments below!
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