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Good Drop, Bad Drop: What’s the Best Way to Drop an NFT Collection?

Welcome to the newest iteration of the Monopoly Man column here at NFT Plazas.

As most in the NFT community are aware, The Sevens (SEVENS) had a botched roll-out last week after a wallet (0x8a072fB16959d1c887d80A3faEbdE38b7dFa78ED) minted 1008 tokens from the contract (15% of the total supply). Long story short, a person extremely familiar with smart contracts exploited ‘weaknesses’ in the Sevens’ contract to mint far more tokens than accessible by the general public (capped at one token per transaction).

During the launch, this contract-hack minted between 14 and 42 tokens per transaction, with nearly more than 200 tokens minted per minute. This wallet spent roughly $1.3 million (with an average token cost of .38 ETH) to acquire these tokens.

The conspiracy theories flourished shortly thereafter on the Sevens Discord. Some postulated that Seven’s had a man on the inside and others insinuated that the owner of this wallet maliciously targeted The Sevens. The Sevens found themselves with rising tensions from the public, some of whom spent upwards of $7,000 in gas fees, still failing to secure a transaction while a contract-hack secured more than 1000 tokens at a much lower price.

With contract-hacks and gas wars are becoming more commonplace in highly-anticipated drops, it’s fair to pose the question; should the NFT community revisit the entire “drop” structure?

In the good ol’ days, NFTs dropped with relative efficiency. Even massively hyped collections took hours, sometimes days to sell-out. Take for example, Bored Ape Yacht Club ($BAYC), which took nearly 12 hours to sell-out after launch. There was no need for whitelists or tiered distribution; simply launch all tokens via contract which anybody could mint from.

As more people entered the NFT space, the time for massively hyped collections to sell-out became shorter and shorter until eventually, collections of 10,000+ assets could sell-out within minutes. This is evidenced by 0N1 Force (0N1), Adam Bomb Squad (ABS), CryptoDads (DAD), etc.… While the number of users entering the space changed drastically, the standard drop procedure has not.

Somewhere along the timeline of the NFT drop, whitelists were implemented. Collections leveraged whitelists to reward active community members or giveaway winners with early access to secure an NFT prior to the public release. With a whitelist spot, the threat of gas wars is eliminated as only public addresses found on the whitelist have access to the collection. However, these spots are limited!

Knowledgeable whales and contract minters are often the winners of public drops. Whales understand the incentivization measures built into the gas fee structures (essentially paying miners to prioritize their transactions above others happening at the same time). Contract minters are increasingly finding new and creative ways to exploit the collection contract to mint several tokens with fewer transactions.

New entrants to the NFT market are often burned on public drops and thus disincentivized to participate in the NFT market altogether. If a first-time NFT purchaser went to a drop with a mint price of .07 ETH and paid .2 ETH or more in gas fees and still didn’t secure a token, our new NFT entrant might not feel particularly incentivized to continue in the market. This is a real problem for the longevity of the NFT market a whole.

The chief reason for the NFT bull market is new entrants. More money is coming in than leaving. New entrants should be incentivized to participate in the NFT market – not penalized for misunderstanding the intricacies of gas fees or contract minting.

As we can observe from The Sevens price dynamics, people respond to poorly executed drops. Prior to the reveal, the floor price of the unrevealed Sevens were trading at +2.5 ETH. Following the public drop, even prior to the reveal, Sevens were trading below 1 ETH (currently traded at .44 ETH). With this in mind, we’re forced to ask: what is the best way to drop highly anticipated NFT collections?

Start with what we know, whitelists work. They protect users from expensive gas wars and they force wayward solidity geniuses to mint from a preregistered wallet. But, is it possible to put everybody on a whitelist? Sure!

Most recently, we’re seeing projects implement whitelist-only drops and it’s working! Theoretically, every worthwhile NFT project will sell-out. Knowing this, collections can place all eligible collectors on whitelists, or even tiered whitelists to combat the gas wars that have plagued NFT drops of the recent past.

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*All investment/financial opinions expressed by NFT Plazas are from the personal research and experience of our site moderators and are intended as educational material only. Individuals are required to fully research any product prior to making any kind of investment.

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