A key feature of Web3 is to enable creators, early fans of a product or platform to form communities by owning associated tokens on the blockchain. When it comes to NFTs—they uniquely represent ownership of media such as code, digital art, characters, memes, music, text, video, games, virtual real estate, and more—creators typically pull High fans' expectations for NFTs and release of whitelists can promote community building among early collectors, which in turn can sometimes increase the value of holding tokens.
However, many NFT projects did not let the market determine the price of their first round of minting, but chose to sell their NFT at a price below the market purchase level. Sometimes this is because the team didn't realize the absolute need for their product, or because they designed the initial sales mechanism poorly. However, selling NFTs at a price below the market purchase price is usually motivated by the desire to make the sale available to more people or to achieve a specific distribution goal.
But what happens when market designers trade efficiency for fairness?
Or when demand far exceeds supply, as is the case with high-demand NFT launches and airdrops?
When people want to buy scarce resources in a market, this inevitably leads to competition among potential buyers on other dimensions. In the Ethereum ecosystem, this competition can result in what is known as a "gas war," which escalates as potential buyers compete to increase the price of the gas fee. So how can NFT issuers avoid this situation? More broadly, if issuers really want to offer NFTs at below-market selling prices, how do they meet the market demand?
Taking Financial NFT as an example, the average annual total financing of cryptocurrencies in 2020-2022 is about 30 billion U.S. dollars. If 10% of it is realized through NFT or SFT (semi-fungible tokens) in the future, it will bring new opportunities to the NFT market. 30 (fundraising level) + 30 (investment level) = 6 billion US dollars in growth; 10% of DeFi TVL will bring 4.8 billion US dollars in growth, and these two areas alone can bring the current NFT market size. Come 183% growth. As shown in the figure below, from an overall perspective, the stock market represented by PFP will be subject to the scale of the homogeneous token market, but the incremental market is relatively independent and may even exceed the scale of the homogeneous token market. There is no shortage of new narratives for NFT or NFTfi, which will be SLOWLY BUT SURELY higher than the overall growth rate of the encryption market.
Market-clearing prices are as inevitable as gravity. Anyone building a market mechanism—whether on a blockchain or not—must grapple with the forces of supply and demand balance. But at the same time, COSO believes that considering market forces and incentive design can help us establish the correct mechanism and shape the final sales equilibrium. We have seen that the most critical decision is whether to rely on market forces; or stick to the more challenging method of selling below the market clearing price.
The design of the NFT drop provides another example of how difficult mechanism design can be on the blockchain, and as the NFT space evolves, we expect to see new mechanisms that both guide and contribute to classic market design theory. But as more and more researchers and builders deeply internalize the classic mechanism design and the characteristics of web3, COSO starts to see a lot of experiments around various blockchain-based distribution mechanisms. Progress is inevitable, and we're excited for what's next!
The tide of the track comes from the tide of the market. When there is sufficient liquidity, it will inevitably lead to over-investment. The market has sufficient funds to subsidize and support high valuations. However, in the long run, whether it is the primary or secondary market, pure money is burned /The hype will eventually pass, and it is also at this stage that those agreements that can achieve a complete business closure and create real income/value will continue to live and come out of the valley of death, and the market will return to [technology-driven] and [demand-driven].