A token for slow auctions

  • Bidding is an information game for all participants: the bidders also want to discover what their competitors are willing to pay. Bidders prefer to reveal information about their own bids as late in the game as possible. This leads to sudden frenetic activity close to the closing time for a lot, and bidders may attempt to “snipe” at the very last moment.

A different, slower game

Web3 technologies such as non-fungible tokens (NFTs) allow us to think differently about auction mechanisms. What if a bid has a current owner? Can a bid then be an NFT itself, to be bought and sold through the run of the auction?

The holding game

For this full collection, we implemented an auction contract that works as follows:

  • The buyer pays in cryptocurrency (USDC) and is the current highest bidder. The bid amount is held in reserve in the marketplace smart contract towards the final purchase of the asset.
  • However, the bid token is always on sale (inspired by this project by #cryptodavinci Simon de la Rouviere). Anyone can purchase it at a price of their choosing to become the next highest bidder — as long as the price they pay is a minimum increment more than what the previous bidder paid.
  • When the bid token is sold, the previous bidder is refunded their bid, and the balance is added to the marketplace reserve. This means that the current bid price for the asset is always reserved upfront.
  • Blockchain bidding closes at a fixed date (e.g. 1 week after the last work was created). After that the bid token can no longer be sold or transferred.

Best of both worlds

The intriguing thing about this mechanism is that it encourages bidders to post their acceptable buy price as early as possible, since this allows them to hold the token for as long as possible — and to have the best chance at deciding the final bid. Consequently, information is released to the rest of the market as early as possible, which helps the market to discover the ideal price point.

The Strijdom 52 slow auction

Individual 52 Collection digital originals will be put on sale at fixed price from 31 March 2022. We aim to have the auction token for the separate set of 52 originals on sale towards the end of April, at a modest opening price.

Conclusion

The 52 Collection auction token (like the rest of the project) is intended more as a concept expo than a purely commercial endeavour. It serves to demonstrate how Web3 can create new markets for well-established artforms. We are excited to see how ideas like this evolve in the future.

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