Welcome to the latest installment of NFT Plazas’ Monopoly Man column.
The Sevens (SEVENS) had a botched roll-out last week, as most in the NFT community are aware, after a wallet (0x8a072fB16959d1c887d80A3faEbdE38b7dFa78ED) minted 1008 tokens from the contract (15 percent of the total supply). To cut a long story short, a smart contract expert exploited ‘weaknesses’ in the Sevens’ contract to mint far more tokens than were available to the general public (capped at one token per transaction).
This contract-hack minted between 14 and 42 tokens per transaction during the launch, with nearly 200 tokens minted per minute. To acquire these tokens, this wallet spent roughly $1.3 million (at an average token cost of.38 ETH).
Shortly after, conspiracy theories exploded on the Sevens Discord. Some speculated that Seven’s had a man on the inside, while others suggested that the owner of this wallet had a vendetta against The Sevens. The public became increasingly enraged as the Sevens spent upwards of $7,000 in gas fees and still failed to secure a transaction, while a contract-hack secured over 1000 tokens at a much lower price.
With contract-hacks and gas wars becoming more common in highly-anticipated drops, it’s fair to ask if the NFT community should reconsider the entire “drop” structure.
NFTs used to drop with relative efficiency in the good old days. Even the most heavily promoted collections took hours, if not days, to sell out. Take, for example, the launch of the Bored Ape Yacht Club ($BAYC), which took nearly 12 hours to sell out. There was no need for whitelists or tiered distribution; simply issue all tokens through a contract that anyone could mint from.
As more people entered the NFT space, the time it took for massively hyped collections to sell out shrank and shrank, until collections of 10,000 or more assets could sell out in minutes. 0N1 Force (0N1), Adam Bomb Squad (ABS), CryptoDads (DAD), and others are examples of this…. The standard drop procedure has not changed, despite the fact that the number of users entering the space has increased dramatically.
Whitelists were implemented at some point during the NFT drop timeline. Whitelists were used by collections to reward active community members or giveaway winners with early access to secure an NFT before it was released to the general public. The threat of gas wars is eliminated with a whitelist spot, as only public addresses found on the whitelist have access to the collection. These spots, however, are limited!
The winners of public drops are frequently knowledgeable whales and contract minters. Whales are aware of the incentives built into the gas fee structures (essentially paying miners to prioritize their transactions above others happening at the same time). Miners of contracts are increasingly coming up with new and inventive ways to use the collection contract to mint multiple tokens with fewer transactions.
New entrants to the NFT market are frequently burned on public drops, discouraging them from participating in the market at all. If a first-time NFT buyer went to a drop with a mint price of.07 ETH and paid.2 ETH or more in gas fees and still didn’t get a token, our new NFT entrant might not feel very motivated to keep buying. This poses a serious threat to the NFT market’s long-term viability.
New entrants are the primary driver of the NFT bull market. There is more money coming in than going out. New entrants should be encouraged to participate in the NFT market rather than penalized for failing to grasp the complexities of gas fees or contract minting.
People react to poorly executed drops, as we can see from The Sevens price dynamics. The unrevealed Sevens’ floor price was trading at +2.5 ETH prior to the reveal. Sevens were trading below 1 ETH after the public drop and even before the reveal (currently traded at .44 ETH). In light of this, we must ask: what is the best way to release highly anticipated NFT collections?
Start with what we already know: whitelists are effective. They shield users from costly gas wars and compel rogue solidity geniuses to mint from a pre-registered wallet. Is it, however, possible to add everyone to a whitelist? Sure!
We’ve recently seen projects implement whitelist-only drops, and it appears to be working! Every worthwhile NFT project should theoretically sell out. Knowing this, collections can create whitelists for all eligible collectors, or even tiered whitelists, to combat the gas wars that have plagued recent NFT drops.