The decline of NFTs is evident: can't keep up anymore, can't roll anymore

Author: Planet Little Flower

Source: Odaily Planet Daily

A few days ago, a friend asked me: "I haven't followed NFTs for months, why are you still scrambling for PFPs?"

I countered: "There’s a lot of traffic coming in from outside the circle, big players are entering the market, and applications are blooming everywhere…" But upon reflection, for an ordinary investor participating in NFTs, most of the time is indeed still spent researching and scrambling for new little images. After all, who doesn’t want to be a diamond hand and buy the next BAYC Bored Ape?

However, recently, I increasingly feel that I can’t keep up anymore, and I’m exhausted.

First of all, the Gas War during the Public Sale of popular projects is no longer a battlefield for ordinary players; even scientists writing scripts have started competing against each other. Secondly, the threshold for whitelists is getting higher and higher. Chatting, recruiting people, creating secondary content—after weeks of effort, one might not even get a spot. The secondary market for whitelist trading is chaotic, with pricing based solely on guesswork, and there have even been scandals involving well-known community MODs pocketing profits. Most importantly, after all the hustle, one might not even make a profit.

According to NFTScan data, over 840,000 NFTs were created on the Ethereum chain in the past 7 days, and many projects quickly become on-chain garbage right after birth.

On the surface, most active NFT projects still maintain their popularity and won’t "break," but during the project’s release process, the mint price is often just the tip of the iceberg in terms of costs. When considering "hidden costs," many recent popular projects have actually started to "break."

At the End of the Line, There's No Turning Back

Let’s talk about "scientists competing against scientists." Taking one of the hottest projects recently (ranked first in 7-day trading volume on Opensea), Karafuru, as an example, according to Twitter user @sethwizard0x, the average Gas cost for scientists has exceeded 4.57 ETH. Assuming each person mints 2 NFTs, plus a mint price of 0.2 ETH, the cost per NFT is 2.48 ETH.

Provided by @sethwizard0x

Currently, the floor price of Karafuru is 3 ETH, and it once dropped to around 2.3 ETH on the day of the box opening. It’s clear that even for scientists, it’s not a guaranteed profit business, especially since Karafuru is one of the best-performing projects recently. The myth of scientists becoming rich by minting NFT projects is long gone.

Now, let’s talk about whitelists (WL). Many articles have already discussed how difficult it is to obtain a whitelist nowadays.

The whitelist system began to rise in the third quarter of 2021, essentially to fairly reward "labor as wealth," rewarding members who contribute to the community and bring in traffic. Common rewards include incentivizing high-frequency users, encouraging new user recruitment, promoting secondary creations and memes, collaborating with KOLs, rewarding users who excel in quiz games and community activities, and conducting lotteries.

Initially, the whitelist mechanism effectively motivated active community members and alleviated the Gas War during the Public Round, but things quickly changed. Early Discord NFT communities with a few thousand or ten thousand members were considered active, and it wasn’t too difficult for an active user to obtain a whitelist.

However, with the explosive popularity of NFTs, especially after PhantaBear was used as a profile picture by Jay Chou and gained support from numerous celebrities, a large influx of new users from China has entered the scene. Nowadays, it’s common for new project Discords to have tens of thousands of members, with some even reaching hundreds of thousands.

Thus, the effort to obtain whitelists has developed into a complete industry chain, with many "studios" specializing in acquiring whitelists, hiring college students to chat and recruit, hiring artists to create, and writing programs to boost activity. This is just the basics; there are even performances showcasing various talents, sob stories to project teams, and recently, live-streamed eating performances… they spare no effort.

Screenshots circulating in the community

The Whitelist System Needs Reform

Individuals who have worked hard to obtain whitelists often treat them as treasures, waiting to mint themselves. In contrast, whitelist studios that have already invested considerable manpower and technical costs often choose to ensure profits before minting, leading to a clearly priced secondary market for whitelists and off-market trading communities.

Some projects have started to resist whitelist studios, attempting to identify these wallet addresses and exclude them.

But where there is demand, there is a market. Those who previously bought whitelists at least had some profit potential, but recently, many have started to incur significant losses.

For example, HYPEBEARS is one of the recent projects that gained heat before its release, with over 360,000 members on Discord and 240,000 followers on Twitter. From this data, it’s clear that obtaining a whitelist is no simple task. The off-market price for whitelists before release was inflated to over 1 ETH, and the floor price reached a maximum of 1.6 ETH after release, but after the box opening, the price plummeted to around 0.2 ETH.

Not only did those who bought on the secondary market suffer significant losses, but even those who minted (with a mint price of 0.4 ETH) have started to lose money.

HYPEBEARS' OpenSea price trend

The failure of HYPEBEARS also exposed another issue: nowadays, the time from minting to box opening usually takes several days, and the box opening has become a dividing line. Initially, everyone could only get a glimpse of what the project might look like through sneak peeks in the community, but after a large number of box openings, the "true appearance" often does not meet expectations.

Many project teams rush to launch, trying to capitalize on the hype, resulting in shoddy products. They promote their projects with grand claims about cutting-edge design, but upon opening the boxes, it’s clear that they just hired some artists to hastily churn out work overnight, showing no respect for the market.

HYPEBEARS has been described as "ugly to the point of refreshing one's worldview," "visual garbage," and "not even as good as a Taobao designer's work," completely failing to meet market expectations. What was initially thought to be an animated image turned out to be static, and what was expected to be high-end 3D ended up being a lump of clay.

HYPEBEARS OpenSea screenshot

Meme stickers mocking HYPEBEARS circulating in the community

Moreover, when we open blind boxes, we always hope to pull out a rare version, holding a 1/1 and becoming a diamond hand, but most of the time, what we get are just floor items.

Regarding this issue, Odaily Planet Daily previously discussed with industry insiders that, in reality, project teams may have adjusted the random numbers, causing ordinary players to skip those numbers when minting. They can even modify the metadata, turning your rare item into a common one.

Ordinary Investors Always Get Hurt

In addition, the issuance of NFTs and the operation of enthusiast communities mostly take place in a DAO format, where most people are anonymous. Many communities also use Mods (moderators) for daily communication and maintenance. When conflicts of interest arise, it often leads to chaos, and disputes are not uncommon.

Recently, well-known NFT KOL, core contributor of 721 CLUB and OpenDAO, 9x9x9, tweeted several times, accusing a former Mod of using the Club721 and OpenDAO brands to obtain whitelists for community collaborations and pocketing most of the profits for themselves. For example, they discussed a collaboration for 100 whitelists, but the community lottery only ended up with 30.

The former Mod quickly retaliated, claiming that 9x9x9 had driven away several former Mods of 721, taking over their positions, and exposed his real identity as Qu Jiawei—the CEO of the De Exchange who fled after the 2019 ICO—and requested all NFT project teams to stop cooperating with OpenDAO. 9x9x9 denied this and stated that he would continue to remain anonymous.

Regardless of who is right or wrong, the real situation exposes the difficulties of DAO governance in the face of profit distribution and reflects the chaotic state of the current NFT market.

"Whitelist" is like a black box; it’s hard to clarify who got what, who is profiting, and how many hidden manipulations are going on.

As an ordinary NFT enthusiast who has been burned a few times in the secondary market, it’s easy to feel tired and think, "Enough is enough."

It’s hard not to draw parallels with the once-popular IEOs and IDOs. Initially, platforms carefully selected projects, the number was small, and there were many investors. Getting in meant profit, and holding long-term could yield dozens or even hundreds of times returns; later, the benefits gradually diminished, the frequency increased, and while getting in could still yield several times returns, many projects peaked immediately after launch, leading most people to sell right away; eventually, it reached a point where even participating in IDOs could result in losses, with projects frequently breaking.

Throughout this process, there have also been continuous instances of project teams engaging in insider trading or even having conflicts of interest with trading platforms.

In the end, it’s always the ordinary investors who get hurt. A market that loses ordinary investors will gradually lose its vitality, projects will compete against each other, and development will stagnate. We have experienced this cycle too many times.

NFTs are a promising early market, with many conscientious projects and quality teams, but they are also filled with countless irregularities and scams. It’s time for the issuance systems and platforms to further protect retail investors.