NFTs: Three Months In, Here’s What I’ve Learnt
If, like me, you are a 90s baby, you’ll remember that dopamine hit that came with opening up a fresh set of Pokémon cards. Or maybe it was the first time you turned on a Gameboy colour — it felt like you’d discovered a 6th sense… albeit one that only extended across a 15cm x 15cm digital display.
As adulthood came, card collections were demoted to gathering dust in the attic. But for me, the urge to collect was always still there, driven by a somewhat (un)healthy obsession to store value into things that were not cold hard cash.
It led me into building quite an impressive Netsuke collection — Google it, VERY random. At one point I had maybe 50 rare books, and then finally it was my collection of antique masks from various countries across the world.
I owned these things and I’d paid good money for some, but I had a terrible inability to sell anything. Why?
- I get attached!
- Selling can be cumbersome and confusing. Finding a buyer, dispatch and then dealing with any issues. It’s a pain.
- Lack of liquidity makes it tough to track price fluctuations and settle on a fair figure. Why is this worth X and that worth Y?
The traditional market for collectibles is full of inefficiencies which make buying and selling a guessing game.
So in late 2021, I finally decided it was time to get my head around the world of NFTs.
- What are they?
- What the hell is a “rug pull”
- Who’s paying $200k for a Bored Ape?!
I expected to be underwhelmed and confused.com. Like the wave of Initial Coin Offerings (ICO), this was for sure another get-rich-quick fad we’d laugh about in a few months right?
So, so wrong.
1. The Art
Let’s kick this off by giving you some clarity on what exactly we are dealing with here.
The main element of any good collection is the art.
The space has a range of styles and designs but the normal running theme is they are all profile style artwork, also known as PFPs (profile pictures).
The collections can range in size, but in general projects release between 1,000–9,999. Each is totally unique, and depending on certain features have rarity rankings, with the more rare features making some NFTs much more valuable compare to others within the same collection.
2. Mint & Trading
The NFT concept can feel confusing but it’s actually surprisingly simple. Think of it basically as crowdfunding. You announce your project, share some “sneak peaks” of the artwork and explain what key utilities come with membership/ ownership.
Early adopters can mint the project at a fixed early bird fee. Once you have sold out, the only place to buy or sell will be via a secondary marketplace like Open Sea or LooksRare. When you sell your NFT you lose those membership rights, unless you buy back in.
3. Utility & Floor Price
Once the project is live, you can actively trade. In some cases, people will buy to hold for access to a range of“utilities” which this project has outlined within their “roadmap”. This usually comes in the form of exclusive events, merchandise, early access to other hyped project etc. It can extend into more complex offerings like “play to earn” (P2E) games but for the sake of this article we are keeping it top line.
However, in many cases people are trying to buy in with the intention of “flipping” the NFT/asset for a profit. It is a high risk strategy and inevitably results in huge price fluctuation, especially across the highly traded projects.
The “Floor price” of each project is defined by the price of the cheapest available NFT to buy within that collection.
If there is a lot of demand for a project, people buy “off the floor”, and thus this drives up the price. As notable names or celebs buy in, or the project announces more utility, the price of the “floor” can increase.
However, it’s more common to see the reverse happen — with projects crashing on a regular basis.
So let’s dig a little deeper…
A Project Cycle…
90% of the time a project will first surface on Twitter — giving you a little flavour of what to expect from them. They will tease some art or maybe a bit of their roadmap. Those first impressions count in the NFT space, and how you launch can boom or bust the concept in a hot second, no joke.
The next step is getting people into your Discord. Think of this like a modern day chat room but each server is dedicated to a particular project. Some projects will choose to accept anyone, and it is not uncommon to see servers with over 250,000 people in it (yep you read that right).
The problem with this is it becomes a breeding ground for “grinding” — more on this to come.
On the flip side, you have innovative teams that are turning the onboarding process on its head for all the right reasons.
Take Wonderpals, a project setup by Mina, an illustrator and Sho. They could easily have 100,000 + Discord members but they choose to limit the invitations into their discord server in order to grow a more organic audience.
Wonderpals intermittently release invite links to its followers meaning only those who are actively following and engaged will gain access. In turn, those who are able to get in, become more valuable members of the community and thus create a better dynamic for the audience as a whole.
It is no surprise that Wonderpals has already secured pre-mint collabs with some of the NFT spaces’ biggest projects — Cool Cats, Invisible Friends, Dead Fellaz, Doodles, Alien Frens and more.
This all brings value to it’s community.
Community, Community, Community.
I can’t express how important this is to any project.
Hidden amongst the plethora of crap, there are beacons of light. These community led projects focus on bringing value to their loyal followers before and after the project launches.
Take Random Character Collective (RCC). Founded by James Curran — this team is fast setting the gold standard for how to grow and manage a community within the NFT space.
James first launched his own collection, Slim Hoods, in October 2021, and has pioneered the technology that has allowed animators to create 5,000+ unique character NFT projects. He’s built an impressive team that provides a platform for other animators to launch their collections and houses it all under the RCC roof.
Why the hype? Well they followed Slim Hoods up with Mood Rollers, by Lucas Zanotto and are soon to launch Invisible Friends by Markus Magnusson — arguably the most exciting NFT project to date — fact.
Even the back office team at RCC have found NFT Twitter fame. Ask anyone who knows about RCC and they could name CoinBilly, Nelsg, Mikka or Ash.
The kicker? Holders of their existing projects get preferential rights to participate in future ones. Big thumbs up.
Breaking The Mould
There are projects that choose not to conform to the typical roadmap.
Take Deekay Kwon, better known within the NFT world as Deekaymotion. He first built his reputation in the space through is incredible 1 of 1 collections and special editions.
In early 2021, Deekay started work on his incredibly popular “Let’s Walk” series — a range of animated NFTs that are released in batches of 9 with editions ranging between 1 and 30 for each character. He is currently working on round 8 with 63/100 already in circulation.
The format shuns the more traditional route of building collections of 5,000, Instead choosing to focus on creating a qualitative approach. Holders and valued community members get priority access to each new drop which promotes building a cohesive following.
It is by far a best-in-class community driven project and there are no surprises that part of the Deekay support team crosses over into the RCC universe.
DYOR!
Sheep get eaten alive in this space. You’ve got to rely on your own research.
If you are interested in a project:
- Get stuck into their Discord channel — what’s the vibe?
- Find out as much about the team as you can
- Who made the artwork?
- What are the potential utilities?
You are going to come across “grinding” — and it is where people spend crazy hours online to try show the server moderators why they deserve that coveted early access spot. It’s a ploy to game the system so they can get noticed.
Why?
Often, getting early access means you are granted an opportunity to buy in at a price that is far cheaper to what it will eventually trade at on the secondary market. This gives those people a chance to flip out their new NFT for a sizeable profit. What’s sad, people are literally hiring people to do it, no joke.
It’s a really depressing side effect of this new NFT craze and I advise you stay clear of projects that are heavily occupied with grinders. The initial hype is often followed by floor price dumps as “paper hands” look to cash out with no care for the project itself.
This moves us nicely onto the next key thing to look out for.
Red Flags?
1. A team that is not doxxed
You wouldn’t believe how many projects have teams that hide behind online usernames, with literally zero real world information to share and a Twitter profiles that say “member since Jan 2022”. ONLY consider a project that has a “doxxed” team. This means they have shared their real world identity, and have genuine experience that will help drive value to the NFT project in the long run. When there are millions on the line, there is no reason why a team should not be prepared to reveal their true identities.
A project that does not have it’s artist front and centre is a huge red flag and often means those behind the NFT have outsourced the art.
2. Community vibe / fake accounts
It can be a little harder to suss out on first inspection but you’ve got to spend time in the twitter comments and the discord. Are people there to pump and run?
It’s very common for project to buy fake accounts to like and engage across social media posts. How many accounts are in the discord? Some can claim crazy figures but again, it is often rammed with bots and not humans. It gives the appearance that the project is getting hyped up to create a sense of FOMO (fear of missing out) — all these people want it so I NEED THIS!
You don’t; it’s just part of the scam and you are falling into the trap.
3. A high Mint Price
It is such a giveaway. There is literally NO reason a project should be charging 0.4 ETH for mint. So don’t feel pressured into spending big money on unproven projects and teams.
4. Unrealistic hype & shady celebrity endorsements
Floyd Mayweather tweeted! This is legit!
No, no it is not. Celebs are often paid to post messages with no care for the potential ramifications this has on those loyal fans who follow their every word.
Check out what happened with Bored Bunny NFT. Floyd tweeted about if a few times and they even got David Dobrik involved (what a classic choice of trustworthy celebs!) . It drove some serious hype toward the project.
So we’ve got an undoxxed team, a discord with “200k”, a super high mint price and no artist front and centre.. hmmm
These red flags are waving at gale force levels right now.
The project launched and initially had some success, with the floor almost hitting 2ETH. But, like with all the best laid scams, the house of cards was always due to come crashing down.
Just over a month on and the floor is sitting at 0.1 ETH.
Conclusion
This is a fast moving and totally unregulated environment. Understanding the complex nature of what makes project X thrive, and Y implode can be in hard to understand.
Looking back on my list of friction points.
- I get attached!
This is still an issue with my NFTs :) - Selling can be cumbersome and confusing. Finding a buyer, dispatch and then dealing with any issues. It’s a pain.
Marketplaces like Opensea and Looks Rare allow for an immediate seller to be found and there are no major friction points (let’s get into gas another time). - Lack of liquidity makes it tough to track price fluctuations and settle on a fair figure. Why is this worth X and that worth Y?
The floor price is there for all to see. Rarity rankings can be somewhat subjective but in general, a price can be far more easily dictated.
Think long term, focus on finding the community led projects and always do your own researc.
The happy ending? I found my modern day Gameboy :)
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This article is not financial advice.
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I write a series called, “Why’d You Do It?”. A chain of interviews where I ask a simple question to the founders of some of the most exciting up-and-coming businesses.
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