Collectibles, Generative Profile Pictures and FOMO

In May 2021 the sale of Meebits took place and we saw a strong influx of newcomers that followed after. This interest in collectibles grew very quickly with projects like VeeFriends and Bored Ape Yacht Club and many others..

An elegant design, an original look, some features were rarer than others with the beginning of July marked by the success of Bored Ape Yacht Club which was, for better or worse, quickly followed by a slew of ‘inspired by’ projects.

It’s difficult to make an exhaustive list because that’s getting longer every day, but it’s not an understatement to say that today there’s a real zoo 3.0 made up of the different animal species of the planet, also notably robots, aliens and other fantastic creatures.

Although we greatly appreciate the diversity and creativity induced by these new collectible projects, in recent weeks their multiplication has made us wonder if there was something hiding in the shadows.

The primary distribution of PFP Project

The big question is how the initial distribution of sales was made. Indeed, if the Whales have too many assets from the start, the distribution is biased and the market is therefore subject to their goodwill. In addition, there is a high probability that they will be sending transactions with very high gas fees, ensuring they can recover as many assets as possible… before you!

That’s why lately the gas costs are starting to become very high again on Ethereum… but these are not the only negative consequences. The following are a likely consequences of an unfair distribution scenario:

During a presale you manage to mint an NFT at the warning signal price of $100, after spending $150 in transaction fees. But you’re lucky, after unveiling its metadata, you discover you have a rare asset!

You look at the price of similar assets and put yours up for sale, a little above the floor price at $500. Only here, all the other assets are selling except yours. You do not want to miss this momentum, in addition there are offers of $250 that accumulate for your asset but this price is too low for you!
You give up the hope of realizing a x5 and lower your price a little.

As soon as you put $500 as the sale price, your asset is bought within a minute! And in less time than it takes to congratulate yourself, this new buyer has put it back on sale at $1250 and worse few minutes later, it sells..

You look at the floor price of “common” NFTs which has reached $750 and you say to yourself “I should have kept my rare NFT”. 

The question that follows is: are you going to take the risk of buying a $750 NFT in the hope of selling it for more afterwards? Here you are in a situation of Fear Of Missing Out (FOMO) that can quite honestly ruin you..

The scenario above is quite possible if:

• A group coordinates to buy their own NFT among themselves but “boycott” those who are not part of the group’s portfolios.
• The initial distribution is mainly acquired by this group.

In this way they can obtain all the rare assets for very cheap and sell the common one at gold prices to the naïve who are influenced by the volumes of the markets that seem good.

What are the consequences on the NFT market?

Although the main consequence of this unequal distribution is a risk of market manipulation, this has revealed other problems.

The attraction of quick cash has attracted practices and behaviors that were previously quite rare in the ecosystem: total anonymity of the team, with Smart Contracts made public 10 minutes before the Presale or an army of trolls that invade Discord servers to spam or broadcast FUD…

It is possible to set in the smart contract a limit of mint per transaction. If this limit is ever abnormally high (100 or 200 for example), this can be considered as a warning signal.

Also, if projects are listed on certain sites because they paid in order to announce their presale faster, this increases the likelihood of insider trading or conflict of interest.

Finally, another consequence of this unfair competition is the lack of lower gas prices for creatives who are wanting to try out minting NFTs.

This sends out an extremely negative signal from the ecosystem to see “low effort” projects being sold out in less than an hour while they themselves are still waiting for an order to make a personalized tailor-made portrait.

Are PFP collectibles a scam?

The segment of collectible NFTs is special because it is very similar to that of Art in the sense that their main usefulness is… to be collected. When purchasing one of these NFTs several elements must be taken into account:

• Decentralized Metadata
• Decentralized Image
• Artists’ Reputation
• Reputation of the Team
• Rarity of Attributes
• Another Utility (video games, privileges, access to a club…)

It is therefore important to understand that by purchasing NFTs whose sole function is to serve as a collector’s item, will confer a sense of belonging to a group or community but there is absolutely no guarantee of getting back the money spent.

Regarding the “generative” collectibles of different animals or fantastic species, having a rarer NFT than the others will give a more important social status within the community but generally, that’s where it stops.

If the collector’s item is sufficiently decentralized, it will be kept in your wallet for years and years, thus constituting an imperishable memory and defining part of your digital identity.

It is therefore important to distinguish between Collectible projects that are in danger of disappearing overnight and those that really want to develop a project in the mid-long term, even if the main ambition is above all to have fun.

It’s up to you to choose if you like the graphic design of a project and to check that maximum of its data is decentralized so as not to fall victim to a scam!

Stay curious and especially sharing, there is still a lot of room for the NFTs ecosystem to grow!