We have invented a new type of auction that is specifically designed for Cryptomedia. Zora Auctions have the following characteristics:
In traditional economic parlance, the Zora Auction is a perpetual, multi-attribute, Swedish auction.
Let’s go into the details of each of these characteristics:
The market for a piece of media lasts for as long as the media itself does. The auction starts on a token at the point of minting. Once minted, the market runs forever, or until the token is burned.
For the lifetime of the token, anyone can bid and participate in the auction. If a token is burned, this ends the market for the token forever, it can never be reinstated.
The perpetual nature of the market allows for perpetual value discovery for any piece of media on the internet. This can be queried by anyone interfacing with the protocol.
Anyone can bid in any currency, or more specifically, any ERC20 token that is on Ethereum.
Crypto has provided the foundations of a universal value system, composed of a potentially infinite number of communities that can create and manage their own value. With this new system, people and their communities can truly create their own value, in a currency that matters to them, out of nothing.
With an ever-growing number of stablecoins, community tokens, creator tokens, social tokens, platform tokens and DAOs that each have their own value systems, it seems unreasonable to force everyone to conform to a single currency for bidding. With this in mind, anyone is able to bid in any ERC20 token of their choice.
What is the winning bid? Unlike a market for a fungible token or stock, it’s not always about the highest bidder. The identity of the bidder is a meaningful factor in who you might sell your piece of media to. In the art world, and for cultural goods generally, the collector identity can be as important as the amount being bid. That fact, coupled with the nature of multi-currency bidding means that the winning bidder is entirely up to the owner. Any bid can be selected. The highest bid is not forced to be selected in any way.
The nature of open bidding means that it is possible to construct more complex and alternate auction and market forms on top of Zora: including a traditional auction or the Coldie Method.
The identity of the bidder is a meaningful factor that gets taken into account by the owner when assessing bids. There is a wide range of cultural, reputational and identity factors that change the context and provenance of a token and therefore impact value. Who you sell to matters.
We have created a mechanism that allows for these factors to be taken into account in a bid. We’ve called it the Sell-on share.
The sell-on share is a percentage offered by the current bidder, and it is the percentage they are willing to give to the seller when they sell it.
Say you see two bids:
If you select Kanye’s bid, you’re only receiving $100 upfront but if/when Kanye West sells it you will get a 25% cut. Given Kanye’s cultural prominence, his purchase can have an extremely meaningful impact on the value of the object and could lead to a higher return than accepting the $10,000 but from the Anonymous bidder.
In an environment that is as competitive, pseudonymous, adversarial and trustless it is very expensive and difficult to become trusted. Being trusted in a trustless ecosystem is hard and valuable, just look at Coinbase for example.
This sell-on share is trivial to route around, so to see successful bids with a sell on share, you will need to continually demonstrate onchain that you are both honoring the market AND adding value to the collected works, and importantly selling them in some timeframe—a sell on-share is not particularly valuable if there is never a subsequent sale.
Identities that can build sufficient reputation in a sense gain an economies of scale, or perhaps an economies of trust that means they could bid with nothing other than their reputation (e.g. $0 and a 90% sell-on share).
This mechanism directly empowers curators, and will likely change the nature of how platforms interact with artists and cryptomedia.
Artist Resale Royalties are a simple concept: every time an artwork sells again a.k.a. Is resold, give a percentage of the sale value to the artist. The creation of the work may be a one time exercise, but that artworks lifetime, history and value changes as it moves through society’s contexts and collectors hands. To say it in financial terms, price discovery is something that happens over time, and with many transactions and happens best in an open and universal market. In an ideal world, it is entirely reasonable that the artist should receive a share of the value they are creating over time—not just the first time they sell their work. France has had a law called “Droit de suite” since 1920 that requires an artist royalty, and a number of countries have adopted a similar law in recent years. Notably, the United States has no such law—leaving artists out. In most cases, this only applies to auctions and doesn’t encapsulate sales between collectors.
Artist Resale Royalties were first implemented in NFTs by Superrare. As a mechanic, it is proving itself to be a meaningful step forward in artist ownership of their work past the initial sale, and helping artists reclaim some of the value they are creating in their work over time. As such, we have built it natively into the Zora Auction.
The creator share is set at the time of minting by the creator and is immutable, it can never be changed or updated.
Zora Auctions are entirely trustless, the value capture and transfer is entirely controlled by the protocol. This means that it is trivial to construct trustless smart contracts on top of the protocol. Including but not limited to DAOs to collectively mint and collect cryptomedia and fractionalization.
The Zora Auction is a net new market design that is specifically designed for Cryptomedia. It allows for the perpetual value discovery of a token, as well as providing the flexibility and mechanisms to account for a universe of value systems and non-financial factors.