Understanding cryptocurrencies, blockchain, and NFTs are a task alone for beginners, but they also come with a myriad of terminologies that makes a novice all the more confused about the web3 industry.
Despite this, knowledge about these terms offers you an edge over your peers and allows you to make the most out of the industry, both as a collector and investor. Moreover, command over these terms and technologies helps users make more informed decisions and prevent them from falling for scams and frauds.
So, to make things a tiny bit easier for you, we will explain NFT Drops today and how you can make the most out of them.
What is an NFT Drop?
To put it simply, an NFT Drop refers to a digital event where an NFT collection is released to the public for the purpose of sale and/or promotion. The Drop event is scheduled at a fixed date and time by the blockchain project, which also decides how investors can acquire the collectibles. Usually, interested participants can purchase the NFTs, either by simply minting them or following some steps before they can access the collectibles.
NFT Drops are similar to the limited edition collectibles released by popular brands and celebrities, which are then paid for by interested collectors or investors. For instance, in December last year, footwear giant Adidas ‘dropped’ its NFT collection ‘Into The Metaverse’ and roped in nearly $22 million by selling 29,620 NFTs for 0.2 ETH. The apparel brand had released the collection in partnership with Bored Ape Yacht Club, Punks Comics, and GMoney.
Apart from the social brag, purchasing NFTs during the Drop event often offers you exclusive deals and incentives, such as lower prices of NFTs that have potential, membership to exclusive communities, early access to new collections, and more.
For example, Italian luxury brand Dolce & Gabbana released an exclusive community membership NFT collection in partnership with NFT marketplace UNXD. Holders of the NFTs have special privileges, including access to exclusive drops, physical and digital events, and collaborations.
Types of NFT Drops
Meanwhile, not every NFT Drop is the same. There are several types of Drops that vary as per the project’s design and marketing tactics. While some projects would simply ask you to mint the NFTs on a certain date and time, others may want you to follow set instructions before enabling you to purchase the collectibles. Some companies also release a waitlist and criteria for those who want to acquire the NFTs.
Standard Drops– By far the most common type of token Drops, this one allows buyers to mint their NFT collection on a priority basis. Following the first-come, first-serve rule, the projects will enable users to buy the collectibles until the last bit of their limited-edition NFTs are sold out. Using smart contracts, the projects also place a limit on how many NFTs a single wallet can hold to maintain wide distribution and participation.
English Auctions– English Auctions refer to the sale method in which the assets are sold through bids, starting from a lower value to a higher one. The one who makes the highest bid wins the asset. In NFTs, NFT platforms and marketplaces generally take care of English auctions for artists who are more inclined to sell limited 1/1 NFTs.
Open Editions– In an Open Edition sale, interested buyers can mint the NFT collection for a set period before the time window closes. The NFT collection will feature the total number of digital assets that were minted in the time frame. This type of NFT Drops usually seeks to create a certain urgency and hype, tempting more users to participate in the project.
Dutch Auctions– Dutch Auctions are the least commonly found type of NFT Drop. In general, these auctions start with a higher price and are successively dropped until the price is accepted by a bidder. Dutch Auctions, however, are known to be ‘anti-NFT’ since they may undermine the value of a project.
Where to find NFT Drops?
Lucrative as they are, finding promising NFT Drops can be somewhat difficult as more and more projects are looking to cash in on the hype. Just like not every painting is a Picasso, not every NFT will pour money into your backyard. Some may drain your pockets too.
There are multiple ways you can find credible NFT Drops, but be ready to DYOR if you want to collect authentic NFTs that you like at an affordable price. Several companies and websites have ‘Drop’ calendars where you can find future drops, digital and physical NFT events, as well as famous releases.
Buyers and Investors can also check out social media and community platforms like Twitter, Reddit, Discord, and Telegram to see the general information and community response to a certain project. Joining NFT communities also helps you engage with like-minded NFT enthusiasts and better gauge the projects which are building in the ecosystem.
Credible news websites will likely talk about big brands and artists who are about to Drop NFTs, which have a higher potential to soar in value later on secondary marketplaces like OpenSea and Rarible. Lastly, Metaverses like The Sandbox and Decentraland often see NFT Drops from artists and companies looking to build in the virtual world.
How to buy an NFT?
Beware of scams and rug pulls
While NFTs have been nothing short of a digital miracle, not every token is an opportunity of a lifetime. Ergo, with the new art form gaining prominence, there are several things one should look forward to in an NFT collection, such as utility, rarity ranking, artist credibility, and more.
Rug pulls are extremely common in the industry and scammers find ways to scam unsuspecting buyers by generating false hype around fake projects. They will fill your DMs and Emails with so-called lucrative opportunities such as special access to an NFT Drop, exclusive merchandise, and more.
One of the more recent cases of NFT rug pull was that of Frosties, an NFT project whose creators ran off after selling 8888 NFTs for $1.3 million at the time. The fraudsters were later arrested in California, USA on charges of money laundering and fraud.
While the Frosties scammers will likely be held accountable for their actions, it may not be the case for every scam emerging in the industry. Neglect in decent research may lead you to fall into scams that are unfortunately oh-so-common in the NFT ecosystem. So, it is necessary to do your own research (DYOR as always) before investing in an NFT project.
Try researching the developers and artists behind the collection before jumping on the hype. Other ways you can check the credibility of an NFT project are social media, community response, artist background, and verified news portals.
Participating in an NFT Drop enables you to collect a digital item at its lowest price, and later on, might allow you some decent returns on your investment. Meanwhile, there is a fair chance you may not obtain an NFT simply by participating, especially if the NFT project has garnered a fair amount of popularity from the masses.
That does not mean you cannot buy the token later on. Secondary marketplaces like OpenSea, NiftyGateway, and Rarible allow you to buy NFTs listed by sellers or NFT projects on their platform. However, unnecessary hype about a project sometimes leads to inflated price levels which, in turn, leads to buyers purchasing an NFT at a higher price than what it is worth.
Thankfully, there are multiple tools available that enable buyers to accurately estimate the value of NFTs. We, at bitsCrunch, are building a precise value estimator of NFTs. Liquify uses Artificial Intelligence to gauge the fair price of digital artworks by considering several parameters including sale history, metadata, and several other key features. Till then, do plenty of research and don’t lose out on the opportunity to be a part of this ecosystem.