2 weeks ago we announced a new Frame template for /magicframes: Auctions.
Not any auction, because wanted to push some limits and test some theories, but rather an Bidding Fee Auction, a distinct category of All-pay Auctions. To contextualise, we named these "DEGEN Auctions".
They have been around for a while, although less popular than other established siblings, Dutch or English.
On an axis between English Auction and Raffle, the DEGEN Auctions sit close to the middle:
like traditional auction, the winner is not random and it requires a drop of skill, mostly around timing and understanding the mechanic
like a raffle, the winner has a high reward while all others loose money
DEGEN Auctions aim to test player behavior, including their response to competition and value assessment in high-stake, low-win scenarios.
One of the motivations for engaged players to continue is the sunk-cost fallacy.
Some theories to verify were:
People like to compete against friends and strangers for a prize ✅
Frames are a good, casual playground for such experiments ✅
All players are comfortable with Frame Transactions 🚧
Players are less apprehensive about playing with memecoins 🚧
It's a good alternative to mints or token sales 🚧
What We Auctioned
The item offered is important. It should have a clear, market-established value that people know and can quickly asses if the risk of losing your entire bid is worth it. Eg. a bid of 10$ for a PS5 worth 500$ is in the realm of buying a lottery ticket.
No opportunity for price discovery here, because it would break the psychology behind the game mechanics.
The vision here isn't along the lines of Sotheby's selling a priceless piece of art with a very high, yet unknown ceiling to some avid collectors or status-seeking-money-bags.
We decided to auction off a fun, nounish, /yellow token with a nod to Farcaster and Base:
What Went Well
Before going further, the auction itself:
Some players became very competitive.
The auction lasted far longer than we expected, given our relatively small potential outreach and audience, so the excitement from a Friday evening continued well into Saturday.
As a developer I started getting paranoid about various things that could break or get hacked over night, which is why I did my best to reply to everyone. The burden of MVPs!
30 players placed 199 bids over a span of almost 19 hours. The cast got 1.3k of views.
Query source: https://dune.com/queries/3733870/6280362/
For reference, around 400 bids would be needed to reach the market value of the NFT auctioned. Anything beyond is profit for the seller. There's a formula!
We did not break even.
Lesson Learned
The Hub API has an experience-breaking delay. Reactions take a while to appear in the Frame Message from frames.js so players had to refresh the frame a few times. This might be a data propagation issue, although the FrameActionHubContext is populated through a Neymar hub. There might be a few ways to improve this flow. Still experimenting.
We need to be better at explaining the rules, because this auction format is even less known than I thought. Regardless of existing similar web2 businesses and TV ads. Curse of knowledge. One immediate step was to populate the official docs.
The Frame Transaction experience is great, but not full-proof. One of the first bugs we hit was when people placed bids from wallets that were not verified on Farcaster, thus we couldn't obtain the their username to display who the current bidder is. This exact area broke in multiple ways though.
Still on Frame Transactions, the mobile UX opened the Coinbase Wallet app, but failed to open alternative ones like Rainbow. Must investigate this further.
Unused Stock
Other popular auction formats have certain goals:
get the highest price possible for an item
raise funds and grow membership of a DAO like /yellow, /purple and Nouns.
allow customers to decide their buy-in price like hotter wheels
Raffles are great at raising engagement with your audience, although border-line engagement farming and certainly in the grey area for the healthy growth of a social platform.
Where do all-pay auctions fit in?
Our theory? Midway between auctions and raffles again.
Unused stock is a missed chance to engage with a potential audience. A missed 2nd chance.
Nouns has >500 NFTs sitting in the treasury. What if a small number of them would be auctioned off?
A creator has an NFT which is valuable with a healthy floor price in their wallet. Why not auction it off and allow fans to collect it, a lower price point for the individual, but high enough for the creator?
These auctions are sometimes meant to run across multiple days. Why not keep "Channel Tourists" entertained and allow them to punt a bid?
What's next?
A few marketplaces and communities have DC'ed us to run auctions, but we're mostly focusing on implementing lessons + feedback from players, as well as fix bugs and clarifying comms.
The Farcaster protocol is moving fast and they recently announced programmatic Direct Casts, which are perfect for keeping players informed about the progress of the auction, as long as the balance between informative and noisy is achieved.
Follow us on /magicframes where we continue to experiment and build tools native to web3 communities. We tip and buy pizza for feedback.
Closing
Thanks @breno and @iggy for review and feedback.
To the players, I'm grateful for your participation and support! ❤
WAGMI
