These examples are, once again, only an excerpt from a broad range of projects being listed on many different exchanges on the internet. Still, it gives a relatively interesting picture: NFTs have broadly become an investment vehicle. Many of those projects don’t have much utility. Of course, they are a form of art, which is also worth something. Traditional paintings have always been sold for a lot of money, and they were often only something for the rich people who could afford to pay a higher price. The same is seemingly happening with NFTs now, as well, though.
More and more NFT collections are released every day, and many follow the same pattern. n thousand NFTs, randomly generated from a certain amount of unique traits, programmatically. Often, those drops are lotteries. You stand in line (the project’s website) on launch day, hammer a button, and hope your transaction goes through (which is gambling on Ethereum right now). Next to the minting price, which is often something in the range of $100 - $200, you also pay gas fees, which might go as high as $300 or even more. If your transaction fails and you try again, you pay that gas fee again. That’s around $500 when you’re lucky, or even more when not.
Don’t misunderstand the statements here. It’s perfectly fine to do it this way. The people or teams behind those projects usually put in a lot of work, and they deserve to get paid for it properly. The only issue with all this currently is that many people slowly get left out of the equation. $500 is a lot of money for some people, and even if we take a look at other Blockchains like Solana, we also begin to see minting prices in the range of $200 to $400 there. That’s usually a good chunk of someone’s monthly budget.
The issue becomes clearer when we look at utility NFTs. Those are tokens that not only come with some well-looking graphics but also with additional perks. Let’s take VeeFriends
as an example, the NFT project by Gary Vaynerchuck. The images are neat, hand-drawn by Gary himself, and they have utility. They all act as a ticket to the VeeCon, a convention that will be held yearly. The secondary market for those tokens is up, as well, and even the most common of them are already quite pricey. While many more investor-focused holders make quite some money from all of them, and even regularly get rewarded with additional airdrops (an airdrop is an “event” where holders of a certain token get other tokens as a reward for holding), more and more people get left out because they can’t afford a token.
Okay, is this all pretty bad now? No, it isn’t. I also hold quite a few NFTs myself, and most of them are indeed bought for investment purposes. I can afford it. It’s an explicit decision I made. But I think that there is a bubble slowly building up, and it will burst at some point. Until then, even projects with the greatest goal aren’t protected from speculation. Minting an NFT for $100 is fine. That’s $1,000,000 revenue for 10,000 NFTs minted. Many people can afford an NFT for $100. But the secondary markets might explode and quickly make that awesome collection with the greatest goals unreachable for many “small people.” And currently, there is nothing that prevents investors from buying half of your collection. Those investors would then regularly get your airdrops, basically making them more money. Is this the spirit of your collection?
Overall, it’s an interesting dilemma forming here. It all depends on each project’s motivation. All of them should at least ask themselves how they can let as many people as possible participate and how they can ensure that even on the secondary market, the small people are still a part of the equation. Perhaps limit airdrops to one NFT per account, or use advanced identity providers that help to identify secondary and tertiary wallets. There are ways to solve these problems, and we only need to start exploring solutions to them further.
NFTs are an incredible addition to Web 3 and the internet itself. The bubble will burst at some point, making room for healthy and functional NFT collections. Those collections that let you support your favorite creators, providing utility to the community, like discounts on purchases, one on one access, entry to closed communities, and so on. And it will also make room for airline and festival tickets and much more as NFTs. And probably all of that will come with a reasonably priced secondary market.
Until then, your choice is to explore and analyze upcoming projects thoroughly, make a decision, and buy-in when you think it’s worth it. There are still many projects that are not overpriced and worth a small investment. Especially Polygon and Solana are great blockchains with low gas fees that regularly see interesting collections released. You’ll have a better chance at getting yourself one of those tokens, although they might not be the next Bored Ape Yacht Club or CryptoPunks. And if you plan to launch your own collection, make sure to include the people who actually create all your hype. The people with the small wallets usually believe in you, not the whales.