Collectibles, whether baseball players or sparkling Pokemon cards, have been a cultural fixture in human behaviour since the Renaissance. Memorabilia from popular films or apparel worn by celebrities can be auctioned and sold for exorbitant sums. Consider the prototype Batmobile from the 1960s Batman television show, which fetched $4.2 million at auction. The premise behind collectibles is straightforward: an item’s value is determined by its scarcity. The scarcer it is, the more valuable it is.
This premise is the impetus for the fast growth of nonfungible tokens (NFTs). NFTs are primarily purchased and sold on the Ethereum blockchain. They are essentially digitised collectibles. Whether it’s the immensely popular and limited CryptoPunk avatars or Jack Dorsey’s very first tweet, NFTs are major business, and those who acquire a rare NFT will always have proof of ownership, as this data is stored on the blockchain.
However, how simple is it to grab yourself an NFT?
Gas doesn’t come cheap
NFTs, like Bitcoin (BTC) and Ether (ETH), can only be obtained by mining. For seasoned buyers and sellers in the cryptocurrency sector, mining and paying gas fees — a sum required to conduct crypto transactions — are not unfamiliar concepts. However, for first-time buyers dipping their toes into the NFT waters, the mining process may feel like a vicious shark attack.
Although not typical, a few NFT launches use a bonding curve to calculate the NFT’s price. This is how the NFT market generates liquidity. This means that the price of an NFT asset is controlled solely by the availability of a finite amount of block space. With growing demand for blockchain technologies like as Ethereum, network costs have a propensity to soar.
If you are a miner, you have the option of selecting transactions with a large fee, which means that miners are enriching themselves at the expense of the buyer.
This condition of affairs is now considered typical for crypto locals. For someone new to cryptocurrency, though, the entire mining saga can be perplexing, intolerable, and profoundly unjust, which is not an unreasonable position to take if you’re a beginner in the market.
Thus, how can this power imbalance be corrected so that new customers of NFTs do not face exorbitant gas fees?
Save a place in the queue
When we debuted its shrug NFT, we were well conscious of the aforementioned concerns. We were digitising an infamous emoji that had become a popular culture parody. Finally, we needed to create a technique to reduce chain activity, hence lowering gas fees, when hundreds of users attempt to mine an NFT. Early NFT platforms struggled to process streams of transactions, which might result in a burdensome experience for buyers and increased gas payments required to get their transaction confirmed.
The solution to these lingering issues is to construct a queuing system. Certain NFT platforms have developed infrastructure capable of increasing the speed of blockchain transactions, resulting in improved user experiences. By instituting a policy that requires buyers to queue up to mint their NFTs while simultaneously providing a window of time in which to do so, we may eliminate the major inconsistencies in the overall minting process that currently disfavour buyers.
A queue system fosters a more equitable marketplace by reducing the likelihood of customers fighting for the same NFT and forfeiting their gas fees. As NFTs continue to gain popularity and seize the public imagination (and our wallets), it is critical for NFT platforms to make their blockchain-based marketplaces a more equitable and appealing location for purchasers searching for the newest digital collectible.
The dominance of whales in the market
Despite the hoopla and eye-popping sums of money floating in the NFT area, the “average” price of an NFT sold on SuperRare is 2.15 Ether, or around $5,800, according to OpenSea rankings. This prompts the following question: Who is purchasing the NFTs? Are first-time purchasers being pushed out by a tiny number of buyers with large cryptocurrency holdings?
Even if a queueing system is implemented, the market will remain mostly dominated by crypto whales. As the term implies, a crypto whale is a person or entity that has a significant amount of Bitcoin or another cryptocurrency. This is problematic for the broader crypto ecosystem, as it means that individuals who have a sufficient amount of Bitcoin have the ability to manipulate currency valuations.
With regard to NFTs in particular, the majority of persons purchasing these nonfungible tokens are crypto whales. For instance, on the Rarible marketplace, only 2.3 percent of merchants account for 50% of NFT transactions. This is increased further on OpenSea, perhaps the largest NFT platform, where only 1.9 percent of merchants account for half of all NFT sales. In essence, what is occurring is that whales are acquiring projects early and end up exercising an excessive amount of power over the reseller market, thereby pricing out first-time buyers.
As a result, those who do not live and breathe cryptocurrency are less active in the market, possibly because there is no room for them to do so.
To mitigate crypto whales’ dominance, more needs to be done to educate the general public on how to purchase NFTs, so that they do not remain the exclusive domain of these prominent holders. We still have 197 shrug NFTs available. Our objective is to bring new users to the NFT area, who may utilise the experience of purchasing their first NFT as a springboard to the broader NFT market.
There is tremendous potential for NFTs to ultimately push crypto into the mainstream, as they effectively digitise an idea that many people understand in the actual world. At its core, collectibles are intended to be a pleasurable and rewarding pursuit for those who choose to participate. NFTs should be treated the same way.
This article makes no recommendations or offers investment advice. Each investing and trading decision entails risk, and readers should undertake their own research prior to making a choice. The author’s thoughts and opinions are entirely his or her own and do not necessarily reflect those of CoinNewsDaily.