The transition from static proof of profile pictures (PFPs) to dynamic music, battling gas wars with the use of whitelists, and the development of AI-powered projects prove that the NFT sector has rapidly evolved in 2022. New opportunities are arising in the world of NFTs, let’s explore some of these groundbreaking developments.
In 2020, newly launched NFT projects encountered costly gas wars with competing buyers potentially losing Ether (ETH $1,336) for failed transactions. Gas fees fund transaction verification and provide a layer of security by making it too expensive for malicious users to spam the network (Coindesk, 2022).
Gas wars begin when buyers offer more than the base gas fee when purchasing NFT’s. For example, on the Ethereum network, those who want to complete transactions faster can offer a “priority tip” to incentivise validators to include their transaction in the upcoming block earlier than others (Coindesk, 2022).
This situation is especially common when NFTs are being sold, as there are a limited number available. If buyers lose the gas war, they run the risk of paying significantly more than the originally offered price. This creates tension among buyers and often initiates a bidding war, specifically, a gas war. (Coindesk, 2022)
A possible solution to this undesirable situation was a shift in minting strategy.
Whitelists emerged as a shift in minting strategy due to the influx of NFT users, and in an attempt to reduce the resulting gas wars.
Whitelisting offers users the opportunity to mint an NFT sale prior to its public minting or sale. Additionally, whitelisted users can receive reduced transaction fees and access to exclusive content, depending on the project (Binance, 2022).
Benefits of NFT whitelisting (Binance, 2022):
- Rewards early supporters- The whitelist provides a way for smaller groups to have early access to an upcoming NFT release. This is a way to avoid competing with whales who can sweep the collection.
- Helps prevent gas wars- Whitelist registration limits the number of wallet addresses to mint the NFT before the public sale, reducing the likelihood of the sale experiencing network congestion and gas wars.
- Prevents spam- Projects can prevent spam from non-whitelisted addresses by using a whitelist. It also prevents mass account registrations. This is essential as spam accounts slow down network efficiency and inflate gas fees for other users.
- Reduced risk of fraud- Wash trading is an example of fraudulent practise where someone repeatedly buys and sells assets to inflate prices artificially. Since users typically have to pass whitelist criteria, theoretically, the risk of fraud and monopolisation is reduced.
The main word of caution against whitelisting is that it doesn’t guarantee profits, so keep that in mind when attempting to get whitelisted. The requirements for whitelisting vary from project to project, and can range from requiring the completion of certain tasks to a minimum wallet hold of that particular project’s asset.
NFT enthusiasts predict music NFT’s to be the next big hit. In 2021, static proof-of-profile (PFPs) were popular, but in 2022, communities, businesses, and governments are looking for NFTs with in-real-life (IRL) functionality and utility.
3LAU, a crypto investor and DJ, sold his UltraViolet NFT album for $11.6 million in just 24 hours on January 21, 2022, breaking the record for the first-ever music NFT album release.
3LAU also launched Royal.io, a music NFT platform where users can own a piece of their favourite tunes while earning royalty streams and other perks.
Other platforms, such as SoundMint, enable artists to mint generative music NFTs that bridge the audio-visual relationship through generative qualities, giving creators control over their work.
NFTs are not only evolving and becoming more dynamic, but also becoming smarter.
Train-to-earn: Intelligent NFTs make a name for themselves
Collections appear to be upping the ante by incorporating intelligent NFTs as a way to reward their users with a new model known as “train-to-earn.” Alethea AI is one project dedicated to growing iNFT technology. Revenants by Alethea AI, the world’s first intelligent collectables, are the rebirth of historical and cultural icons. Unlike most PFP projects, which have 10,000 items or more, this collection has only 100 items and has already sold out.
“Intelligent NFTs (iNFT) are non-fungible tokens with individual AI engines that owners can train through real-time interactive conversations” (CryptoBriefing, 2022). Owners can bring their avatars to life by fusing one of Alethea’s Personality Pods (9,800 items users can stake to earn rewards) with an Ethereum-based NFT avatar.
“Alethea is aiming to use this collective consciousness to build out a Metaverse populated by intelligent, individual, interactive characters that earn rewards for their owners by training and interacting with other iNFTs.” (CryptoBriefing, 2022).
Altered State Mind’s (ASM) Artificial Intelligence Football Association (AIFA) is another example of iNFTs as it’s a decentralised blockchain game with 40,000 intelligent NFTs as its genesis collection. Users can purchase AIFA genesis collection boxes, which included four AI all-stars and one AI ASM genesis brain.
The incorporation of AI into NFTs allows users to unlock a new layer of value as the more valuable the iNFT becomes, the better it performs and the more rewards its owner receives.
The top three NFT marketplaces, LooksRare, OpenSea, and Solana’s Magic Eden, generated approximately $14.3 billion in the last 30 days. All marketplaces have seen an increase in the number of traders using their platforms, implying new entrants, influences, and trends.
As they evolve at a rapid pace, NFTs become smarter and more dynamic, and therefore, more profitable.
Keep an eye out for the next post on, “NFTs and Securities Laws: Creating and Selling Compliant Non-Fungible Tokens.”