We all need to chill out a bit and remember that we’re buying digital pictures of apes, or stoned cats, or robots. But it’s hard to chill out when these pictures are initially sold at NFT minting events for a few hundred dollars and can become worth a few hundred thousand dollars in just a couple days.
I’m a fan of NFTs and believe in their utility far beyond just art pieces. But even with the silly NFT projects, I have been playing right into the madness by participating in NFT Minting Events and spending way too much time in discord channels that mimic a feeding frenzy.
This article is going to discuss some of the broken bits in the world of NFT investing. It will focus particularly on the current state of NFT collection launches, aka NFT Minting Events. The hope is that by illuminating some of the “unsavory” aspects of today’s NFT Minting Events, we can improve tomorrow’s.
People are pining to be first to mint popular NFTs. A lot of NFT collections are selling out in minutes, raising $1 Million+ for the founders. But beyond that, there is often more than 2 Million or more spent by users on gas fees. They are paying the Ethereum Blockchain (aka the miners) extra in an attempt to “win” by getting in first. The only thing is — a lot of people are losing hard with faulty transactions that leave them out a couple thousand dollars in gas.
To understand how this happens lets start from the beginning of what is an NFT Mint Event.
The Basic Structure of an NFT Minting Events
Having speculators mint the initial batch of NFTs is the current trend for randomly generated NFT collections.
A project creator writes a smart contract that is often referred to as “The Token Factory Contract.” The Token Factory lives on the (Ethereum) blockchain. Early speculators use metamask (or other crypto wallet) to pay for the NFT and the gas the contract needs to create that particular randomized NFT on the ETH blockchain.
Once all the initial NFTs are minted from the factory contract, the project is out there in the secondary market, selling on opensea or participating in the metaverse.
NFT Minters pay the mint cost + gas cost to generate a unique NFT from the “Token Factory” contract into their wallet.
⛔️If you’re participating in an NFT Minting Event, or even buying on the secondary market, double check that the Token Factory Contract address matches with what the socials of the official project state. Scammers will try to trick you into minting from fake contracts. ⛔️
Minting An NFT
The price of the NFT goes to the project owner. The gas fees go to those supporting the blockchain network as a whole (the miners).
The project owner will likely also code certain parameters into the token factory contract such as:
- Max number of NFTs the contract can mint AKA, the size of the collection. Example: the contract won’t mint more than 10,000 NFTs, so buyer 10,001+ will get a “sold out” and have to buy on the secondary market.
- A cap on the number of NFTs any one address can mint. The idea behind this is that it hopefully avoids any one person owning a majority of the collection.
- Randomness. This is perhaps the biggest draw of “minting” NFTs as opposed to waiting to get them on the secondary market. Most NFT collections have traits. Some traits are more rare than others. The NFT contract randomly selects those traits at the time of mint. So you don’t know what NFT you’re going to get. Everyone is hoping that they get the super cool, super rare NFT that goes for 100x on the secondary market. It adds this slot machine gambling feel to the entire event.
The Cult of First
There’s a “problem” in crypto where people who are early usually see huge gains. Being early is advantageous in most industries, but in crypto the first mover advantage seems to be even more disproportional. It’s often why critics of the industry call crypto one giant ponzi scheme.
Take bitcoin for example. If you were buying/mining bitcoin when it was less than .10 cents, you have a HUGE advantage over people trying to get into the game now. You’re a “whale” and you can throw your weight around accordingly to move markets, sway things etc.
Anyway, let’s step back from the macro picture and look at this rush to be first in regards to NFT minting events.
NFT Minting Events: Get In Early
By participating in a minting event, you’re already attempting to get in early on a collection. You’re buying it at launch.
But for some of these hyped up launches it is not easy to participate in the mint. In fact, it’s stressful and can cause you to lose thousands of dollars and receive no NFTs even if you click ‘buy’ the moment the sale goes live. *more on that below.
It pays to be at the front of the pack for a launch for a few reasons:
- Often times secondary markets will pay more money for an early mint number. The NFT(s) you mint are randomly generated, but everyone can still see the order that they were minted in. If your transaction was the first to go through you’ll get one of the first minted NFTs in the collection, even if the traits of the NFT are boring, the fact that it was an early mint number could make your NFT more valuable.
- The project could sell out in seconds. And this can be costly for you because if you submit your transaction, but the contract comes back as “sold out” you still lose your gas fees. this leads to…
For hyped up launches there will be thousands of people trying to buy the NFT the moment the contract goes live. This clogs up the Ethereum Network. Only the transactions with the highest gas prices get included in the early blocks. Only the early blocks will reach the contract before the NFT contract is maxed out.
So basically you have to pay extra in gas to get to the front of the line.
Losing Gas Fees
If your transaction goes through, but after the NFT contract has sold out, the set price you would have paid for each NFT is reverted back to your wallet, but the gas isn’t.
Overly simplified, but the reason this happens is the miner still had to “compute” the transaction. The result was just “sold out” as opposed to “mint”. So you don’t get your gas back. Which might not sound like the biggest deal, until I tell you that sometimes people lose $2000 / ~1 ETH+ in gas and get nothing in return.
The Vogu Collective NFT Minting Event
On July 26, 2021 my plan was to mint 17 Vogu Tars. But 8000 other people also had that plan, and there were only 7,777 tars available for mint.
Leading up to the launch, all 8000 people were in the discord hyping it up. FOMO was evewrywhere. We were all dreaming of the quick 10-100x.
People were saying how they were coming out of the gate with a 1000 GWEI gas price. Others were arguing how everyone should agree to only pay a reasonable ~50 Gwei gas fee.
The reality is, you don’t really have a way of knowing what others are going to pay. If you go to big you wayyy over pay for your NFT. If you don’t go big enough you not only miss out on the NT, but you lose the gas you attempted to buy it with.
For non-time intensive events you can more closely monitor a site like Gas Now to chose the optimal gas price. For a hyped launch. You kinda just have to fire.
Some people were minting directly from the contract on Etherscan (pro tip for added speed). Others like me, were trying to connect our metamasks via the Vogu website. In this instance, I’m glad I was trying to connect my Metamask, because it didn’t work.
The plan was to try and mint 17 Tars with a gas price of 500 GWEI. ????
Apparently, 96,000 requests were sent in the first 4 minutes and the wallet provider thought it was a DDOS attack. People couldn’t connect their wallet. The discord went crazy because everyone thought they were missing out on millions of dollars and the devs paused the contract after a few minutes.
Some people, trying to skirt the system, minted through etherscan or a few unlucky connected their wallets and got through. They sent out their transactions and were hit by the pause, never got their NFTs and lost all the gas. A few very lucky individuals minted a few before the pause and immediately sold them on open sea for 2-3x.
I saw some people in the discrod claiming to have lost over $3000 in gas and receive nothing. My guess is they were trying to mint from a few different addresses at high prices.
The launch has been postponed 24 hours (that’s today). I don’t think I’m going to even try to participate… we’ll see though. That drop is still 3 hours away, and it’s addicting.
NFT Minting Events – Conclusion
It’s addicting. That’s the problem. It’s the wild west and there’s gold in the hills. There are miners going for a cash grab, creators making a cash grab, speculators looking for a cash grab, a bunch of suckers, and then some well meaning people who are actually into the art and utility. I hope (?)
No one is to blame, but we could all be a little more thoughtful and composed. It’s early and we need to keep experimenting with different launch methods and models. We also need to keep our composure and not let FOMO take over. I’m talking to myself here as much as the reader.
Let’s find a launch structure that creates teams and communities that incentives long term value rather than a quick flip.