Analysis of early decision-making data of NFT Mint

The author of the article is Daren Matsuoka, a partner in the crypto investment team of a16z.

NFTs offer creators a new way to make a living online. The technology allows creators to attract fan sponsorships directly, rather than relying solely on extractive, ad-based centralized platforms as intermediaries.

But it is important that creators take special care when setting initial parameters when minting their NFTs (the process of putting them on the blockchain, allowing them to be sold, etc.). Because these early decisions affect the viability and viability of their projects.

To share some early data, I analyzed minting data from the top 150 NFT collections on NFT marketplace OpenSea, which may give creators some insights beyond their own projects.

Here are some benchmarks and a quick summary based on a new dashboard I created on Dune Analytics:

NFT Mint Price

Choosing the “ideal” NFT minting price is key. A higher initial price means more revenue up front, assuming there is enough demand. But a higher initial price would also dampen potential returns for the earliest backers, as this could impact secondary sales volumes. (One of the benefits of NFTs is that creators can easily earn royalties from secondary sales.)

According to the dataset, NFT collections with mint price settings greater than 0.25 ETH rarely get more than a 10x return. Only two series managed to do this:

Azuki Zen, with an average mint price of 0.94 ETH; Invisible Friends, sold at a fixed price of 0.25 ETH. (At the time of writing, their floor prices were 6.4 ETH and 19.5 ETH, respectively.)

Most commonly, the best performing collection of NFTs in terms of returns are initially priced in the 0.05 to 0.10 ETH range. To be clear, success is assessed by more criteria than price. These include high-profile projects such as the Boring Ape Yacht Club and Women’s World.

Mint price is the easiest lever for NFT creators to grasp, and it can have a significant impact on future market dynamics.

market capacity

Many of the most successful NFT projects raised less than $5 million at coinage. In fact, in this dataset, there is a negative correlation between primary sales revenue and performance since minting, as shown in the following graph:

Why is it negatively correlated? One reason is that it is harder to generate higher multiples on a larger base. In other words, going from 0.02 ETH to 0.20 ETH is much easier than going from 0.50 ETH to 5.00 ETH.

Another reason we might see a negative correlation: creators who earn a lot of upfront revenue may be less willing to focus on the long-term success of their projects. This is similar to a misalignment of compensation plans for startup founders. If a founder is already well-paid, why stick around for years and continue to grapple with the hassle of building a business?

Primary sales revenue and secondary transaction volume show a similar negative correlation. As it turns out, many projects that raise very little money at the Mint have gained significant traction on the secondary market.

While sales may be the main source of income for creators today, the long-term success of the project will depend on a sustainable secondary market and engaged community. Of course, the vast majority of the NFT market is less than a year old, so there are limits to the data (and anyone’s ability to extrapolate from it).

Wallet Limit

Another issue faced by creators is whether to limit the number of coins minted per on-chain address. Will projects with fewer coins minted per address get higher returns? Based on this dataset, the answer seems to be no.

Many of the top performers averaged 5 to 10 coins per address. Some of these include Meebits, Doodles and Cool Cats.

Summarize

Lower mint prices correlate with higher return multiples for early backers

Many of today’s most active secondary markets have little primary sales revenue

For the top performing collectibles, each address has a “sweet spot” of 5 to 10 minted coins

These are just some quick takeaways. Of course, every creator and every project is different. The design of NFT drop is more art than science. But hopefully these data benchmarks will help inform key decisions for NFT creators, at least until the community develops and shares more best practices around them.