Welcome to another weekly edition of the Monopoly Man column here at NFT Plazas.
Why Gas Wars?
Last week I analyzed the poorly planned Sevens drop which resulted in a gas war. Gas wars occur when demand is greater than supply and no action is taken to reduce price shock. Moreover, when demand is greater than supply, the minter prioritizes who’s transactions will be approved and who’s will wait in gas purgatory. The approved transactions secure the NFTs while the unapproved transactions lay in waiting until the applicants cancel their request.
Gas is paid to incentivize the minter, the third party who validates transactions within a block then distributes the results within the blockchain. During highly anticipated drops, participating wallets aim to incentivize the minter by raising gas fees. Imagine it as a scene from Wall Street before computerized trading: thousands of traders screaming and shouting until their trade is made. Gas is like a megaphone in this environment; the more you pay, the louder your voice is amongst the crowd.
Gas wars are not a new phenomenon. Throughout the summer, gas wars have occurred with increasing intensity. This make sense given the increasing number of new entrants into the NFT space.
Gas War Offenders
Collections don’t benefit from gas wars, in fact, it’s quite the opposite. With the Sevens as our example, prior to the botched public launch, these tokens traded around 2.5 ETH while now the price floor is near .3 ETH. It’s important to ask, why are collections still participating in public drops?
The most recent offender in the gas wars is unfortunately, TIME Magazine. Earlier this week, TIME elected to drop their TIMEPiece collection (BuildABetterFuture $BABF) publicly with only 4676 tokens while also allowing users to mint 25 tokens per transaction. Within two minutes, the collection sold out. With so much demand and limited supply, several users were left in gas purgatory. Within minutes, disgruntled applicants took to Twitter to share their war stories (sharing their absurdly high gas fee requests). A notable war story is displayed below:
There must be a better way to drop NFT collections! Last week I postulated that whitelists are a tried and true way to prevent gas wars. These lists allow wallets to privately mint NFTs while the general public is excluded from these sales. While whitelists provide a means to prevent gas wars, they can lead to an Us-vs-Them mentality. Those omitted from the whitelist may feel disenfranchised by the project and ultimately reject the project outright (thus lowering demand and trade price).
How to Avoid Gas Wars
Most recently a collection that caught my attention for their superior release was Loomdart’s, LoomlockNFT ($LL) or Wassies. LoomlockNFT defeated gas wars without use of whitelists, or any sort of collection-side manipulation. LoomlockNFT released their entire collection via auction.
The auction took place over a series of three days where applicants were allowed to place bids for the Wassies at Metadrop. All applicants had access to the Wassie’s public bids and therefore a free market mint price was established. Further, if an applicant did not secure a Wassie the bid was returned. LoomlockNFT effectively eliminated participation risks (gas wars) associated with public drops.
While the evolution of the drop is still in its very early stages, LoomlockNFT ($LL) has provided a template for all highly anticipated NFT collections to eliminate gas wars.
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Futurist hedged against traditionalism