5 Factors to Consider about NFT Drops in 2024

NFTs have made their way into the mainstream public culture in the last year, and due to their different use cases, they are unlikely to go away. A concept that is heard a lot in the NFT community is NFT drops. This article will explore the world of NFT drops and explain factors you should be aware of.  

What are NFT drops?

NFT drop is the first issuance of a non-fungible token. NFTs become available for minting at the time of drop. A drop specifies the date, time, and sometimes minting price for an NFT. 

NFT drops allow the buyers to purchase (i.e. mint) the NFTs at the issuance price. Potential benefits include:

• Securing access to NFT: For example, a music fan may want to mint an NFT that provides admission to a concert. If the fan can mint the NFT, she can attend the concert and doesn’t need to search secondary markets for a ticket. 
• Financial speculation: offers the buyer the opportunity to speculate on the price increase of NFTs because if interest in that NFT rises, prices could rise as well. 

Pre-sale and public sale

Pre-sale allows buyers that have been selected by the developers (whitelisted) to mint NFTs at an earlier date than the public sale, usually at a lower price and a guaranteed slot. This means that the buyers have almost a guarantee (with the exception of potential cases like sudden gas price hikes) that they can mint the NFT. The time constraint is looser as pre-sales happen days or hours before the public sale begins which gives the whitelisted buyers the opportunity to mint at their own discretion. Developers usually put a cap on how many NFTs can be minted by each buyer. 

The public sale is when minting becomes available to everyone, but it does not mean everyone will be able to mint an NFT, especially if the project has become very popular, as there is a limited number of NFTs offered. During public sales, transaction fees can soar; this is an issue primarily observed in the Ethereum blockchain due to its scalability issue.

Types of drops

Standard drops

In standard drops, a limited number of NFTs become purchasable at a specific time, and they are allocated based on the first come first serve principle. NFT collections can have a certain cap on how many NFTs can be minted per wallet. For example, Time Magazine’s NFT collection, TimePieces, which had 4,676 unique NFTs, was a standard drop. It was priced at 0.1 ETH per NFT, and buyers could only own 10 NFTs. 

Open editions

There is no limit on how many NFTs can be minted, but there is a time limit on the NFT drop with open editions. During this time limit, buyers can mint multiple editions of the NFT. So if the NFT is an image, buyers get multiple copies with different unique identities.

For example, BoardRooms NFTs were mintable for 5 minutes for $2,000 per mint on Nifty Gateway. 195 NFTs were minted during the 5-minute period.

English auctions

In English auctions, collectors bid on an NFT in a certain time period and the highest bidder at the end of the time receives the NFT. The auctions are usually done for 1 to 1 (single edition) or super rare NFTs. For example one of Beeple’s NFTs was sold for more than $1.2 million in an auction. 

Dutch auctions

NFT prices in a Dutch auction drop gradually in a certain time interval. For example, a collection has 100 NFTs and the price is set at 10 ETH at the beginning. The price declines by 0.2 ETH every 10 minutes and it will continue until the auction time runs out or all of the NFTs in a collection is sold out. 

Figure 1. An example of an NFT collection being sold in a dutch auction.

Editions

Editions are a type of drop for semi-fungible tokens (SFTs). It functions similarly to standard drops; the only difference is that the drops include SFTs and not NFTs. SFTs are being used in metaverse games such as The Sandbox. 

Where to find NFT drops

There are many NFT drops that happen every week. NFT enthusiasts can learn about them from various channels such as:

• Social media: Twitter, Tiktok
• Instant messaging apps: Discord, Telegram
• Marketplaces: OpenSea, Nifty Gateway
• NFT drop websites: NFT Calendar, NFT Drops Calendar

Challenges with NFT drops

Network congestion and excessive gas fees 

Popular NFT drops can cause surges in gas fees especially in the Ethereum blockchain. This leads buyers to pay higher transaction fees without providing more value to creators.

Gas fees must be paid to miners on the Ethereum blockchain so users can transact on the blockchain. Fees change heavily based on demand. For example, the Doodle collection was first dropped to white-list buyers and then to the public. Upon public drop, gas fees soared and exceeded the minting price of the doodles which were set at 0.123 ETH*

Figure 2. Ethereum gas prices during Doodles collection release

Fraud

Fraudsters took around $14 billion in 2021 in the crypto space. The most common type of scams include: 

Rug pulls 

This type of scam promotes an NFT through various channels and tries to create buzz around the project. The developers stop supporting the project almost immediately after the drop is finished and close all communication channels. It leaves the developer with all the money from the drop and the buyers with an NFT with no live project.

For example, Frosties NFTs were marketed as an NFT that would deliver early access and exclusive content for a game that the Frosties founders were allegedly developing. The collection drop was a massive success, selling for a total of $1.1 million. But almost as soon as the drop was complete, the founders took all of the money and closed all of their communication channels. 

Recommendation: Do a thorough check on the founders, and see their experience and projects that they have worked on before. If they do not have the relevant experience, it can be a red flag. 

Pump and dump

Pump and dump schemes are an old trick. It involves one or a group of individuals buying and selling NFTs among themselves to drive their prices up. The increase in the price attracts other investors who start buying up those NFTs and when the scammers think the time is right they dump their NFTs.

Recommendation: Check the transactions of an NFT before purchasing it. Many marketplaces show all of the previous transactions for an NFT. A red flag would be when you come across transactions that are trading or transferring NFTs between a few accounts. 

Phishing scams 

Phishing messages are common on social media and massaging platforms such as Telegram and Discord. These scams usually say that you have won a free NFT or you have been selected for a highly limited NFT drop, and they attach a link to it where they will ask for information that can compromise your wallet or transfer your funds. They are usually easy to recognize but some of them can be sophisticated. For example, scammers used an old discord URL of CryptoBatz to send visitors to a phishing website that compromised visitors’ wallet information. 

Recommendation: Keep your private information private. Make sure you are on the correct website, and do not use pop-up pages for transactions. Also, keep a backup of your wallet and your secret recovery phrase as you may need to recover your account.

Further reading

• Top NFT types
• Top NFT use cases

Footnotes

* Sales were limited to 5 NFTs per wallet. The total ETH paid by wallets that minted 5 NFTs was 0.615 ETH which makes price per Doodle to be 0.123ETH.