A fairly recent trend in NFT pricing has been a greater number of projects choosing to mint for free.
The benefits of free NFT mints are various but primarily it incentivises the market to mint a project and therefore increases the visibility and then hopefully, the velocity of trade. It solves for the network problem and increases adoption at the loss of upfront cashflow to creators hoping to recoup on the creator fees of sales on the backend.
Supply of NFT projects is high. Barriers to entry have dropped. There are no-code, NFT sweatshops for hire and weapons grade outfits pumping out thousand run PFP projects weekly.
Individual non brand NFT projects have been commodified into the ground.
The markers of potential success are juiced, so the fog of war descends over the charts, utility, and communities – leaving buyers distrustful and suspicious.
Many will wait until volume appears and then play the scalp rather than the early buy and hold. Many will take the small chance on a free mint and hope the community does the heavy lifting.
Its not the worst idea to take the leading position and price at zero to optimize for community and the alternative ways to activate.
NFT pricing is built around demand for projects, which is mostly driven by the status afforded to holders, by communities. This means the starting price isn’t a reflection of status/value attached to a project, but floor price is. If during price discovery, the project is traded multiple times then the creator wins because they clip creator royalty tickets on each sale.
There’s an equation here that I’m not going to do – but it would be to find the volume required to net more royalty payouts than just minting at a given price and having suboptimum volume. This is a transient problem however, as royalty payouts might be on their way out.
Fees and royalties
The Opensea monopoly has been targeted since day dot. Everybody wants to be the kingmaker NFT marketplace that clips each ticket. Its a one-way street to bankman-friedsville. So rival marketplaces listen to the customer – which is the oft repeated advice that will generally help your business, but can be incredibly destructive in the wrong dosage.
Ask any NFT customer what they want from a marketplace and they say no fees. Opensea takes 2.5% of sale price and creators can set up to 10% royalties. 12.5% is a lot, but if the creator sets it, then that’s the product and buyers have to respect that. Opensea can justify 2.5% due to its network effect, but as soon as a competitor breaches a certain daily active user threshold, people will jump to less fees. Like Looksrare who trimmed .5% with fees at 2%
Now we all want to pay artists, don’t we. That’s why there’s record sums and Ocean’s 11 style art theft and gaudy extravagance. Artists love that kind of thing.
But we also want to not pay fees because if you’ve obsessed, and waited, and risked, and sniped, and undercut, and finally end up trading an NFT for 10% profit… Then 5% is quite a lot to take off the top, especially in a bear market.
A race to the bottom
Now while we care about paying artists, we also actually care way more about decentralization. So when sudoswap (which is basically uniswap for NFTS) came along offering 0.5% fees and no royalties, the market said yes of course. On this platform NFTS commodify further with trading tools like limit and stop orders being introduced.
In time, we will see millionaires being minted from trading NFTs in this way, and the market will be driven to adopt or die.
Where this leaves us.
A few years into a market maturing, and things are changing rapidly in a way that rebalances alpha for every party.
Creators are struggling to achieve price points and have started trying to recoup on the back end, which is being taken away by buyers not wanting fees on trades, which are being moved from marketplace to marketplace.
At least the space isn’t stale!
Where there’s movement there’s opportunity.
If you found this summary of recent movements interesting then get in touch and we can talk about practical ways to successfully engage and differentiate.