Marketplace to Maximize Profit for Established Artists:
A well-known artist creates a work of digital art and is then looking to maximize their profits. In a simple example, we will assume they have two options:
Sell one unique version of the digital art to a single buyer (1/1).
Sell a hundred identical versions of their art to a hundred different buyers (1/100).
For an artist who is well established the question is will a single motivated buyer pay more for a unique piece of art (1/1) than a hundred buyers will pay for a semi-rare work of art (1/100). To solve for the maximising outcome, the platform can open an auction on behalf of the seller for the two different rarities. Whichever scenario (1/1 or 1/100) will generate more money for the artist will be selected and the representative number of NFTs will then be minted to the blockchain.
The above example is from the artist’s perspective, this line of thinking could also be used when the owner of a valuable NFT is looking to sell in the aftermarket. The seller could use this marketplace to decide whether to sell their NFT to one buyer or to sell fractional ownership to many buyers.
How do you see the 1/100 auction taking place?
What would make copy 3/100 more valuable than copy 2/100 to motivate a buyer to buy it at the auction for a higher price or even the same price as 2/100, if it has the choice to pay less.
My thinking is the lower the item number the more expensive the item, I might be wrong.
With a fixed price, you don’t have the choice.
Another approach that could be interesting IMO, would be to publish the 1/1 for an auction with a reserve price. If the reserve is not met, you could fallback to the 1/100 where price per copy would be reserve price / number of copies.
As I’m sure you’re aware artists can also take a % of secondary market sales, like on SuperRare. So IMO it’s preferable to sell an item, even if undervalued, than keep it, as the artist would benefit from the % on secondary sales. In some cases, the commission made by the artist from a secondary sale, was bigger than the original price the item sold for.
I was thinking that for the 1/100 auction buyers will be able to place separate bids on individual copies, this lets users decide the value of low serial numbers. For example, I might bid $100 for copy 1/100 and also bid $50 for copy 50/100. While the amount of copies that will be minted is being established the smart contract will take the highest bids for each copy (1-100/100) add them together and then compare that to the highest bid for the 1/1 copy. The scenario that generates more money for the artist is then selected.
This is an interesting idea, and I like how you are aiming to let the market decide which sale will be more profitable for the artist.
I’m assuming all the information regarding bids would be publicly available such that someone who really valued having the only one of something could continue to raise their bid on the 1/1 to beat out the sum total of the 1/100 up until the deadline? Do you envision allowing individuals to bid/participate in both auctions? If so, you might want to have a feature that allows them to rank order their preference or provide a backup bid for the 1/100 option if their 1/1 bid fails-- without having that backup bid “add” to the competition so to speak.
I also like @daniel’s suggestion about reserve pricing with multiple copies being a fallback. Look forward to seeing how this develops!
The information regarding bids will be public as this allows buyers to attempt to out bid each other which in the end will benefit the artist, as is the goal of this project. I would love to implement a feature allowing buyers to place bids on both 1/1s and 1/100s.
Love this idea and especially love that you’re giving the artist the choice of keeping their work as a whole or fractionalizing the ownership. This is certainly an interesting revnue model for artists.
What do you think about extending it to a royalty model? Any time the artist’s work is cited or re-used a small royalty is paid back to them?
I have been thinking about a royalty model, as it will help the artist which is the goal of my project. My only concern is that if I put too many features to support artists buyers will see other marketplaces as more desirable. In conclusion, I do want to have a royalty model I’m just not sure what percentage of royalties the artist should get. If anyone with more experience would like to recommend a royalty model please reply to this coment.
Hi @kinger9999, I was thinking of something similar to this - but with physical art. Perhaps we could combine forces and do both? 1 painting and 100 NFTs are produced. Whichever value is lowest at the end of the auction is quite literally burnt! I have a well know artist that has a half decent following we could use that would be up for doing this?
One model you can look at is superrare. 3% of each transaction goes to the original artist. If you bring that number higher you could attract artists away from superrare.
Another thing worth exploring in price discovery is the Dutch Auction style for the 1/100 part, while the 1/1 auction is pretty straightforward. It could start with Dutch Auction at combined price way higher than the initial price of 1/1 traditional auction. The former will go down with bids while the latter will go up. You can also take a look at Nifty Gateway that recently had a Momo Wang CryptoKitty auction too.
What is a Dutch Auction?
A Dutch auction is a public offering auction structure in which the price of the offering is set after taking in all bids to determine the highest price at which the total offering can be sold. In this type of auction, investors place a bid for the amount they are willing to buy in terms of quantity and price.
A Dutch auction also refers to a type of auction in which the price on an item is lowered until it gets a bid. The first bid made is the winning bid and results in a sale, assuming that the price is above the reserve price. This is in contrast to typical options, where the price rises as bidders compete.
I don’t really understand the code in those entries (I’m not a coder), but the idea from the first entry where the user has some power over the artwork that is minted is kind of like what I am trying to do. I believe that in order to build an active marketplace and community the users have to feel as though they have an impact on the product, which is partially the thinking behind my product idea (the other part being supporting artists).
@kinger9999 great idea here, this could really help maximize an artists sales and profits. Are you looking for anymore team members? I am on the product track.