One of the most important choices a creator of an NFT project must make is the structure of its drops. It may be the difference between a successful and unsuccessful launch from a financial standpoint. It can be an early sign of your team’s readiness, expertise, and capacity to deal with the unexpected.
For simple reasons, NFT decreases aren’t ideal. As a result of bots snatching up a substantial portion of the supply, the public drop for Adidas’ Into the Metaverse left minters with astronomically expensive gas costs and a bad taste in their mouths. CloneX’s Dutch auction was hacked, botted, and plagued by dishonest frontrunning by community members. There was a 96% failure rate on the first TimePiece drop because of a contract leak before the mint.
Every approach has benefits and drawbacks, and the community is unlikely to find a solution that will make everyone happy anytime soon. However, that shouldn’t stop you from trying!
Therefore, we are offering several techniques for NFT drops, discussing their respective benefits and drawbacks, and incorporating the insightful comments of specialists in the field.
FCFS Public Mint
Even though first-come, first-served (FCFS) public mints are the easiest, they are also the most chaotic. FCFS drops are public, and public minting sessions are scheduled ahead of time, as the name would imply. Collectors will rush to manufacture their coins before anybody else does. Some initiatives put caps on the number of NFTs any wallet owner may buy to prevent speculative trading and maintain a stable user base. In contrast, others allow anybody to buy as many NFTs as they like. Although the FCFS mint price is always predetermined (often between.08 ETH and.2 ETH), collectors often pay much higher gas fees for highly anticipated mints because of the increased demand on the network.
Advantages and Disadvantages:
Anxiety over missing out is inevitable when resources are limited. And the fear of missing out is what drives sales. When public FCFS mints are well-organized, they can sell out rapidly, building even more excitement for the initiative. FCFS mints are one of the most equitable types of minting since they provide everyone an equal chance of earning an NFT if developers can stop bots from participating.
However, although the urgency of FCFS public mints may be a great way to boost demand, it’s critical to have your smart contracts rock-solid from both a gas efficiency and bot-prevention standpoint. All widely expected FCFS mints are severely hampered by gas wars or sudden increases in gas prices caused by network congestion. When an NFT collection sells out, only the first customers who get in may mint one before the supply runs out, leaving the rest of the buyers with unsuccessful transactions and lost fees.
Getting It Right
It is important to anticipate resistance from people who could not mint, who were forced to pay expensive gas rates or lost gas payments in unsuccessful transactions. Things like these will inevitably happen. And it doesn’t even consider the zillions of people who will try to utilize bots to mine NFTs in bulk, just to flip most of their holdings quickly as prices rise.
Public Mint + Whitelist
The combination of a whitelist and a public mint, identical to the FCFS mint, is now the norm for releasing new NFTs.
There is usually a presale for a project 24–72 hours before it sells to the general public. This presale is available only to those on the Whitelist (called allowlist or starlist).
So, how can you get on the Whitelist without avoiding all the fuss? Join the project’s online forum and chatroom and participate actively. Before a presale and public mint, most projects will award whitelist places to active Discord users who have demonstrated helpful behavior, such as frequent chatting, sharing the project with others, or performing random acts of kindness. Many projects will also host giveaways in their Discord or in the Discords of other projects to build anticipation for the launch.
Pros and Cons
Presale prices are often lower than public mint sale pricing, but one major benefit to getting on the Whitelist is no bidding wars for gas. Whitelists also give those who care deeply about the project’s community the peace of mind that comes from knowing they may mint without interference.
However, whitelists provide a different set of hazards than the public mint section, which includes but is not limited to gas warfare and bots. Whitelisted individuals of Discord groups are notorious for their rapid NFT flips after disappearing from the community’s radar. This is not unlawful, but striving to recognize and reward the people in your community who are involved for the right reasons is important.
Taking Proper Steps
The goal of any project’s originator should be to amass a group of NFT holders who appreciate the tokens for what they are—a work of art and technology—rather than a speculative investment. While it’s not illegal to “flip,” it is important to find and encourage community members who participate for the right reasons rather than to make a quick buck.
Free-to-mint NFTs are issued to the public with no upfront costs other than the price of petrol. Given the present bear market’s lack of liquidity and available capital, free mints have become a popular drop option for many projects’ creators. Founders that choose free mints generate most of their cash from secondary royalties on all collection sales rather than the initial capital from primary sale revenues.
Pros & Cons
On the one hand, this is a promising trend in the business world since it lowers the entrance price for the people. Projects must plan well, work hard, and be fully dedicated to satisfying their stakeholders. From the perspective of the project’s founders, trade volume (and founder revenue) will suffer if the initiative fails to progress toward its vision.
However, free mints can be extremely harmful in their own right when used by malicious individuals. The prevalence of free mints has led to an increase in “free mint scams,” in which investors think they are minting a free NFT when, in fact, they are linking their wallet to a malicious smart contract that automatically drains their funds upon transaction confirmation. Brendan Mulligan, the founder of PREMINT, claims this is a widespread issue.
Getting It Right:
The vast majority of founders will only provide free mints for the correct reasons; nonetheless, you should never rug or scam your community.
Many NFT projects have set mint pricing, while some use an auction model, particularly in the art industry. Dutch auctions are more involved than their English counterparts (think eBay or old-school bidding at an auction house).
When participating in a Dutch auction, bidders establish an initial high bid and then watch as the price falls at predetermined intervals until it reaches a floor (resting price). Once all of the items in the lot are sold, or the reserve price is met, the auction will stop.
Let’s look at Alien Insects by Shvembldr, which was part of the ArtBlocks Playground release. The beginning bid for the Dutch auction of one thousand Alien Insects was three Ether (ETH), which was lowered by a quarter of an Ether (ETH) every five minutes.
What are the Benefits and Drawbacks of Dutch Auctions?
The capacity of Dutch auctions to avert gas wars by overwhelming demand is their primary benefit. There is a social aspect as well. In a previous Discord thread, Art Blocks Founder and CEO Erick Calderon noted that, with conventional public mints, the miners pocket almost all of the astronomical gas fees. Collectors’ willingness to bid extra on an item at a Dutch auction may be influenced by the fact that many artists use the money they earn to make donations to charities or community DAOs.
However, despite its excellent intentions and theory, Dutch auctions do not always function successfully. The group has released a piece of promotional content for its next Otherdeeds drop titled Dutch Auctions are actually bullshit, in which they argue (after holding many Dutch auctions of their own) that the drop mechanism fails to moderate demand or negate gas wars properly. Unfortunately, the Otherdeeds fork didn’t appear to address the issues either, with a total of 64,000 ETH ($175 million at the time of mint) being burned in just 24 hours due to an inefficient smart contract.
However, some community members, such as Purrnelope’s Country Club’s creator and former NFTBOXES co-founder Carlini, believe that Dutch auctions are unfair since they force early adopters to pay more. Some drops, such as The Writer’s Room Azurbala, have mechanisms to compensate minters for the gap between their original mint and the clearing price.
Getting It Right
The final verdict in Dutch auctions is always controversial. However, there is one step that every Dutch auction participant appreciates: refunding the difference between the original mint and clearing price.