Intro to Digital Art NFT Auctions on Solana
Understand how artists and creators can use NFT auctions to amplify their art.
Auctions for one-of-one art pieces are gaining popularity on Solana. NFT collectors flock to attention grabbing auctions shared on Twitter and in Discord servers. They're much more exhilarating than your regular ol' auction house (sorry not sorry Christie's). Behind it all, the Solana blockchain is facilitating a golden age of opportunity for all artists, especially small and newer artists. Through auctions, NFT collectors are supporting NFT creators in a massive way. Understanding how auctions work on Solana can help new artists price their pieces correctly and get rewarded fairly for their work.
NFTs (non-fungible tokens) on Solana are relatively new, and generative profile pictures remain dominant. The one-of-one space is just starting to get the attention it deserves, which is rewarding for everyone involved. The audience on Solana is eager to spend on quality art from up and coming artists. It’s exciting for auction bidders to find value in great contemporary art from under-appreciated artists on Solana.
1/1 via Auction vs. Buy Now
Both seasoned and first time NFT artists can use auctions. Unlike Ethereum where there’s a high minting cost in ETH gas fees, Solana’s transaction fees are close to none. There are reasons to sell one-of-one art through instant buy but in the vast majority of cases, an auction is the best idea for NFT artists and collectors.
The main reason why: pricing. It’s insanely difficult to gauge the proper value for your digital art. Furthermore, a fixed price drop can carry with it the cadence of lower quality and value for both the artist’s work and the collector’s investment. Through auctions, bidders naturally come to an agreed upon value for the piece. They can bid their perceived value for your digital work of art and win if it is the largest value.
Auctions also develop an interest on their own that an instant buy doesn’t generate. By seeing what others are bidding on, potential buyers can see genuine interest in an artwork backed by real monetary value (in cryptocurrency). Each bidder helps the creator build an audience, contributing to the attention placed on the auction. NFT creators and collectors have unusually aligned incentives dealing with one-of-one art on Solana.
How do auctions work?
There are two types of auctions for NFTs on Magic Eden: Dutch and English.
For one-of-one art, English Auctions are used in almost all cases. Dutch Auctions are used for many of the largest NFT sales.
Pricing is the most important information about any auction. All pricing information should be available to buyers before placing bids in order to make an informed decision. Here are some key terminology to know:
Starting Price is the price that the auction starts at.
Tick Price is the minimum increment by which the bids must change by, either increasing for English Auctions or decreasing in Dutch Auctions.
Royalties are the percentage that the artist will receive from any secondary sale. On Solana, this is built into the metadata of the NFT itself.
A Dutch Auction starts with a high asking price, and is lowered by the tick price at predetermined intervals until the participant accepts or the reserve price is met. More simply, the price decreases until someone buys. Tick size is crucial here; smaller ticks help the seller find the most value for their art. As the number of participants increases, so does the chance of a bidder accepting the asking price and FOMO results in quicker and higher value sales.
Pros: Controlled speed, Revenue increases with # of participants
Cons: Loss of return with time, Technically capped
English Auctions have a low starting or reserve price. Bids are ascending in order, the tick size higher than the last bid placed until the standing bid is not challenged. If the reserve price is not met, the piece is either unsold or the reserve is lowered, or a lower bid may be allowed depending on the auction’s rules. Because all bidders can see the bids of others, they are incentivized to bid up to their true perceived value without regard to other’s decisions.
Pros: Transparency for all buyers to bid true value, good for buyers and sellers
Cons: Bidder could overpay “winner’s curse”, pricing could hurt returns for seller
How can NFT artists foster genuine relationships with collectors?
To attract collectors, attention is key: more awareness of an auction leads to more bidders collectively agreeing on fair value for the auction. On Solana, there are many ways to meaningfully engage with collectors. Even if a bidder doesn’t win that auction, you can give them a participatory NFT commemorating the experience. Holding a participatory NFT may grant collectors special access to a Discord server for your art, or it could just be proof of support.
A lot of the lessons from our article NFT Marketing 101 apply here. Starting a Discord server alongside a Twitter account is highly recommended: Twitter has great reach, and Discord has great depth of connection. One important question to answer is, how will your collection be organized? Collections following a certain theme are typically named and numbered, and generally one big collection will gain more notoriety than many smaller distinct collections. One-off collab NFTs can be part of the same big collection, and follow a separate naming and numbering system! In most cases it will be best for the artist to keep their entire collection together. A great move is making honorary 1/1 art for a popular collection, as Zen0 did for The Chimpions on Magic Eden!
While it’s a fast growing and exciting time for Solana NFTs, it’s still important to set realistic expectations with modest pricing to start. Having your first mint start at 10 SOL is not quite setting yourself up for success. Instead, start with an initial price under 1 SOL, with smaller tick prices. Many more bids will come in, each a public appreciation of your work. Enjoy the journey, because this is just the start of artists being recognized and rewarded for their work.