What is NFT Auction?
NFTs have come to stay! There are several NFT marketplaces now, and tons of people on these exchanges are selling or looking to be sold a Non-fungible token (NFT). It’s incredible how this industry has grown in the last year or two, and it keeps getting better.
Some of the most significant sales in NFT circles to date have been through auctions, notably – Beeple’s art, Larva Lab’s CryptoKitties, and more. Auctions on NFT marketplaces are a viable option for any artist or creator to sell their work of art, and the reason is not far-fetched. Auctions tend to fetch a higher selling price for NFT cards.
The more people place bids and try to outbid one another, the higher the price of the NFT. So, an NFT that had a starting price of $100 could end up selling for $1 million or more. The possibilities are endless.
If you’re new to everything NFT and want to get involved in this fast-moving multi-million Dollar industry, either as a creator or collector, you will find this article helpful.
We will explain in detail how NFT auctions work, how you can set them up or participate, as the case may be.
Read this piece if you want to know the other ways artists sell their tokens aside from an auction.
What is NFT Auction, and How Does It Work?
NFT auctions are similar to traditional art auctions – the apparent difference is that the former takes place online. That aside, an NFT auction involves artists or creators putting up their work for sale on a marketplace. Members of that marketplace can browse through the available items for auction and place bids.
The art owner usually sets a starting price, and it could be any amount, depending on what the owner thinks is a fair price. Some exchanges may have a minimum starting price, so it’s worth checking out if you plan to list an item for auction.
After setting the starting price, the creator also has to set the time frame during which potential owners can make bids. When the given countdown is up, the auctioned NFT token will have a new owner – the person with the highest bid. And that concludes the auction.
The modus operandi or method of operation of NFT auctions, however, differ from marketplace to marketplace. Each one has its way of doing things, and you might want to familiarize yourself with what is obtainable on the platform you choose to host an auction.
To give you some perspective, let’s see some of the main characteristics of Foundation’s auction style. Foundation is an NFT marketplace and will be our case study for auctions in this article.
How Auctions Work on Foundation
Foundation is one of the top choices for anyone looking to get involved with NFTs, including auctions. If you decide to use Foundation to auction your digital art, here are a few things to keep in mind:
Starting Price: As hinted earlier, Foundation marketplace requires creators to set a starting price for every auctioned item. When the auction begins, buyers will have to place their bids at this starting price or above it. For instance, if the starting price is $250, the first bid must be $250 or more ($500, $1000, …).
24 Hour Countdown: Foundation has something called the 24-hour countdown. What does it mean? After an initial bid on the auctioned item (at or above the reserve/starting price), a 24-hour countdown will begin. All other bids are expected to come in within that time frame. Once the timer is up, the auction will be closed.
However, if a bid comes in 15 minutes to the closing time, the timer will allow another 15 minutes grace period for any intending buyer(s) until there are no more bids. This practice is designed to give as many people the opportunity to place their stake before the window closes. Also, considering the difference in time zones and how challenging it might be for some bidders to get in early.
Ethereum-based Platform: Keep in mind that auctions on Foundation and all its related actions, including placing bids, listing NFTs, are done on the Ethereum blockchain. As such, if Foundation is your choice marketplace, you should ensure that you have the accepted cryptocurrency – Ethereum or ETH. You will need it to perform all the transactions on Foundation.
We recommend creating a wallet on Trust Wallet or MetaMask. With these wallets, you can make and receive payments for any NFT related activity on Foundation and other marketplaces that accept Ethereum.
How to Place a Bid on Foundation
Link your wallet to Foundation and ensure you have enough ETH to bid and cover gas costs. If you’re the first to bid, you must either exceed or meet the creator’s reserve price.
As mentioned earlier, the starting price depends on how much a creator wants to put their NFT up for sale. This is because it is the minimum amount they are willing to accept. If you want to bid for an item, your bid must be at or above the starting price.
If the minimum bid has already been reached, the next bid must be more than the current bid by 10% or 0.1 ETH, whichever is less expensive. If your bid is too low, you’ll receive an error message; if your bid is sufficient, you’ll receive a confirmation to proceed.
To finish the process, confirm the transaction with your wallet and pay a gas fee. Find out more about Foundation gas fees and how they help to keep the Ethereum blockchain functioning. Each time you put a bid or send an Ethereum transaction, you’ll need to pay for gas.
The money will be transferred from your wallet and deposited in escrow in Foundation’s smart contract on the Ethereum blockchain after the transaction is completed. They don’t have access to your funds during the process because Foundation is a non-custodial platform.
What Happens if You Get Outbid?
When you place your bid, the smart contract locks up your funds for the duration of the countdown. If another person makes a higher bid before that time ends, your funds will be transferred back to your wallet. You will also receive an email notification to this effect.
If the auction is still open, you can click “Bid again” to put a higher bid than the current one. Your wallet will prompt you to confirm the new transaction when you put in a new bid.
If you don’t make a bid before the countdown is over, your ETH will remain in your wallet, and the NFT is sold to the highest bidder (otherwise known as “winning bidder”).
If you are the NFT creator, Foundation will send your funds to you immediately after receiving them from the winning bidder. You will then need to send the NFTs to the winner if they are using an external platform or release them from the escrow if they are using Foundation.
What Happens After You Win an Auction on Foundation?
When you win an auction on Foundation and complete the transfer process (you’ll be prompted to do this when your bid is successful), Foundation will initiate the transaction on the blockchain. This initiates a release from escrow, which will take up to 20 minutes, depending on the network congestion.
Let’s clarify the transfer process.
To add your NFT to your wallet and collection, you need to settle it, which entails submitting a transaction to the Ethereum network to complete the auction.
After you win an auction, ensure to settle your NFT as quickly as possible. You’re withdrawing the NFT from escrow and transferring it to your wallet when you settle it. This will remove the relevant ETH payments from escrow and deliver them to the artist immediately.
Click “Bids” on the upper right side of any page to settle your NFT. Next to the artwork you won, select “settle your NFT.” You’ll be asked to confirm the transaction with your wallet. To finish the process, confirm the transaction and pay the gas price. Wait for the transaction to complete. By selecting “View on Etherscan,” you can keep track of the status.
This completes the NFT’s transfer of ownership from the maker to you.
Other Top Marketplaces for NFT Auctions
In addition to Foundation, several other platforms allow users to trade crypto collectibles through auctions. If you don’t want to use the Foundation auction, you can list your NFT for sale on the following marketplaces. Just note that each site has its own rules and procedures.
OpenSea is a top decentralized marketplace for NFTs with DApps for selling, trading, and browsing thousands of digital items. In terms of NFT sales, OpenSea is arguably the market leader.
OpenSea has a wide range of digital assets available on its platform, and signing up and browsing the broad choices is completely free. It also helps artists and creators, and it provides a simple approach for creating your own NFT (known as “minting”).
The platform’s moniker (OpenSea) is fitting because it supports over 150 different payment tokens. OpenSea is an excellent place to start if you’re new to the NFT universe.
Mintable is designed to be an open marketplace like OpenSea. You’ll need Ethereum to participate in purchasing and selling NFTs on Mintable. The platform also allows creators of all kinds (from photographers to musicians) to mint NFTs to market their work as digital assets.
A prospective NFT collector or creator must first purchase Ethereum on a crypto exchange, then connect their wallet to Mintable to participate in the marketplace’s bidding and buying.
Rarible, like OpenSea, is a big marketplace for all kinds of NFTs. You can buy, sell, or create all kinds of art, video, collectibles, and music on the site.
However, unlike OpenSea, you’ll have to purchase and sell using the marketplace’s token, Rarible (CRYPTO:RARI). You can also manage NFTs on OpenSea using Rarible tokens.
Axie Marketplace is the online store for Axie Infinity, a video game. Axies are mythological beings that can be purchased and trained before being matched against the Axies of other players for rewards. Players can purchase new Axies and entire lands and other items as NFTs for use in the game on the Axie Marketplace.
The Ethereum network is used to create Axie Infinity tokens (also known as Axie Shards). As a result, they’re available for purchase and sale on many additional NFT markets and other cryptocurrency exchanges like Coinbase.
What is NFT Auction? – FAQs
Where do NFTs live when they’re up for auction?
When items are up for auction, they’re held in escrow until the transaction is completed. When you make a bid, the ETH payment goes into escrow, enabling the seller to withdraw the items from the escrow if their bid is surpassed.
Item status can be seen by opening the NFTs page. You’ll find information about both winning and losing bids there.
NFTs are transferred to your wallet immediately upon settlement, but the ETH used to buy them is held in escrow until the end of the auction.
What is a reserve price?
The minimum amount of ETH you’d be willing to accept for an NFT is known as a reserve price. Collectors will be able to see the reserve or starting price and not bid below it.
The NFT market is still in its early stages, but it’s growing rapidly. If you’re considering entering the NFT market, make sure you understand the pros and cons of your chosen marketplace.
Also, do your due diligence by reading their terms and conditions to buying NFTs through auctions, so you’re not caught unawares. And if you’re not sure of the marketplace to choose, any of the ones mentioned above would do just fine.