NFT Auction

An open ascending-price auction where the price increases until only one bidder remains. It is the most common format for high-value NFTs.

• Process: Bidders publicly place increasingly higher bids.
• End Condition: Auction ends after a set time; the highest bid wins.
• Example: Used by platforms like Sotheby's and Christie's for digital art sales.

A descending-price auction where the price starts high and drops at fixed intervals until a buyer accepts the current price.

• Process: The listed price decreases until a bidder claims the NFT.
• Purpose: Efficiently discovers the market-clearing price for an asset.
• Use Case: Common for NFT collections launching multiple editions simultaneously.

A minimum price threshold set by the seller that must be met for the auction to conclude successfully.

• Function: Protects the seller from selling below a desired value.
• Types: Can be public (known to bidders) or hidden (only revealed if met).
• Consequence: If the reserve is not met, the NFT is not sold, and bids are refunded.

An auction where bidders submit private, confidential bids without knowing others' offers.

• Process: All bids are submitted by a deadline and opened simultaneously.
• Winner: Typically the highest bidder (First-Price) or the highest bidder who pays the second-highest bid (Vickrey).
• Advantage: Reduces strategic bidding and potential for bid sniping.

The on-chain process that concludes an auction, transferring the NFT and funds.

• Steps: The smart contract verifies the winning bid, transfers the NFT to the winner's wallet, and sends the proceeds (minus fees) to the seller.
• Gas Fees: The winner typically pays the gas cost for the final settlement transaction.
• Irreversibility: Once settled on-chain, the transaction is immutable.

Key behavioral dynamics and contract rules governing bid modifications.

• Bid Revocation: Most auctions allow bidders to withdraw a lower bid if they are outbid.
• Bid Sniping: A last-second bid placed to win without giving others time to counter.
• Anti-Sniping: Some contracts implement auction extensions (e.g., a 15-minute buffer after any late bid) to mitigate this.

A security risk where a malicious actor observes a pending winning bid transaction in the mempool and submits a higher bid with a higher gas fee to be processed first, outbidding the original winner at the last moment. This exploits blockchain transparency and can be mitigated by blind auctions or using a commit-reveal scheme.

Smart contract vulnerabilities can prevent bidders from withdrawing losing bids or allow the auctioneer to cancel a finalized sale. Key risks include:

• Reentrancy attacks draining funds from the auction contract.
• Improper access controls allowing unauthorized withdrawals.
• Lack of time-locks enabling last-second cancellations after a high bid is placed.

An economic attack where a user bids on their own NFT from a secondary wallet to artificially inflate the perceived market value and trading volume. This creates misleading price signals and can lure unsuspecting buyers. It is a form of market manipulation that distorts price discovery and can violate platform terms of service.

Economic safeguards to ensure seller protection and efficient price discovery.

• Reserve Price: A hidden minimum price; if not met, the NFT is not sold.
• Dutch Auction: Price starts high and decreases over time until a bid is placed, accelerating sales and finding market-clearing price efficiently. Both mitigate the risk of an asset selling for significantly below its market value.

In popular auctions, bidders engage in gas fee auctions, paying exorbitant transaction fees to prioritize their bids, often exceeding the value of the NFT itself. This creates a negative-sum game for participants and highlights the economic tension between time preference and transaction cost in blockchain-based auctions.

Post-auction risks involving the transfer of assets and ownership history.

• Failed settlement: NFT transfer fails after payment is taken due to contract error.
• Provenance dilution: If the auction contract does not properly record the sale on-chain, it can break the chain of custody, reducing the NFT's verifiable history and future value.

Also known as an open ascending-price auction. This is the most common NFT auction format. The auction starts at a low price, and bidders publicly place increasingly higher bids until the auction timer expires. The highest bidder wins. This format is effective for discovering the true market price of a unique asset and is used by major marketplaces like OpenSea and Foundation.

An open descending-price auction. The seller sets a high starting price, which automatically decreases at scheduled intervals until a buyer accepts the current price. This format creates urgency and is often used for NFT drops to ensure fair distribution and price discovery. It was popularized by projects like Art Blocks for generative art releases.

A confidential minimum price set by the seller. If the highest bid does not meet or exceed this reserve price, the auction ends with no sale. This protects sellers from selling an asset below their valuation. On platforms like Sotheby's Metaverse, a 'Reserve Not Met' indicator is shown until the threshold is crossed.

A private auction format where bidders submit a single, confidential bid without knowing others' offers. After the deadline, all bids are revealed, and the highest wins. This prevents bidding wars and strategic manipulation. It's less common for public NFT sales but used in high-value private sales and some DAO treasury distributions.

The platform or protocol that facilitates NFT auctions. They provide the smart contract infrastructure, user interface, and often handle settlement. Key types include:

• General Marketplaces: OpenSea, Blur, LooksRare.
• Curated Marketplaces: Foundation, SuperRare (often invite-only).
• Vertical-Specific: Magic Eden (Solana), Tensor.

A strategy where a participant places the winning bid in the final moments of an auction (often the last block), leaving no time for counter-bids. This is a high-risk tactic enabled by blockchain's transparent, time-bound nature. It can be mitigated by auction extensions (e.g., a 15-minute 'overtime' rule on OpenSea that resets with each new bid).