Yuga Labs, the company behind the Bored Ape Yacht Club NFTs, has finished its first Ordinals auction. Minted on the Bitcoin blockchain on February 27, the TwelveFold collection earned the company $16.5 million in just 24 hours, with the most expensive artwork sold for almost $160,000.
"The TwelveFold auction has ended. Congratulations to the top 288 bidders - you will receive your inscription within one week. Valid bids that did not rank in the top 288 will have their bid amount returned to their receiving address within 24 hours," Yuga Labs commented on the auction.
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While many members of the NFT community are very excited about the success of TwelveFold, some are disappointed with the auction model used by YugaLabs. For example, Twitter user Ordinally, who describes himself as an "ordinal technical fellow," thinks that Yuga Labs is "establishing a really bad precedent" by taking control over the Bitcoins used for unsuccessful bids:
"They are taking custody of bidders’ Bitcoins with a promise to send back unsuccessful bids. Not doubting they’ll do that, but this model is a scammer’s dream, and credible players need to set better example."
Some Twitter users believe there is no other way to organize such auctions on the Bitcoin network, which does not support smart contracts. Others think a Dutch auction model or the descending process of price discovery may be a better choice. In this model, the auctioneer first asks for the highest price and gradually reaches the price level that is sufficient to cover the quality of the entire offer. Combined with partially signed Bitcoin transactions (PSBTs), a Dutch auction could be a trustless solution for auctions involving Ordinals.
There is also a concern among collectors that unsuccessful bids can be used for further investment.
Whether any other effective way for arranging such auctions exists or not, the model used by Yuga Labs to sell their TwelveFold NFTs may cause some confusion among collectors.
If the practice of withholding unsuccessful bids becomes a standard, collectors may lose their vigilance and easily fall prey to scammers who can use a similar auction model for malicious purposes.
"This space is incredibly nascent and TwelveFold was always meant to be an experiment. Many things we take for granted on Ethereum - like smart contracts, and trustless transactions - don’t exist yet on ordinals, where inscriptions trade over-the-counter on discord with bids tracked on Google spreadsheets and the existing marketplaces appear to be governed by multi-sig escrows," Greg Solano, cofounder of Yuga Labs commented on the criticism to The Block.