Introduction
The NFT market is similar to the art market. Each NFT project creates a story that remains after the creation and release of the collection. No story = no value.
You can publish one picture, or you can publish a whole collection, when a project makes several thousand NFTs, so the process of creating is semi-automated. As an illustration, the artist draws basic elements of the image and then generates different combinations according to programmed algorithms.
The release of such NFT collections is called Drop.
The main stages of a Drop
Concept development and implementation of the product, i.e. drawing pictures, smart contract development, creating a website, renting servers, etc.
Community building – creating an informational story of the project.
Creating a marketing funnel – usually the basic part of the audience is attracted to the project website (5-15 thousand people) through Twitter.
The audience is then redirected from the website to the project server in Discord, where the main work on community development takes place. This happens when the initial number of engaged users grows by 3 times or more.
Minting is the sale of copyrights, which allows you to buy NFTs, while images have no metadata, on which the image depends itself.
There is a sale within the community only, at the stage of minting — an analogue of a pre-ICO. At this stage, users cannot choose the images in advance, they just buy the picture, and they will see it only after Reveal.
Successful minting — when the community buys all the NFTs of the project. One of the parameters of successful minting is that one user has an average of 1-2 NFTs by himself. (It is a sign of a large community and the right hype of the project).
Reveal — the start of the project, when the formation of a unique NFT takes place.
Participants start to post some of the NFTs on the open market after mining and Reveal.
NFTs differ from each other by unique elements (caps, glasses, earrings, etc.) the rarer the combination of such unique elements in a particular NFT, then the rarer it is, so more expensive.
The algorithm of creating images has an automated and controllable process only in a number of parameters, consequently a main part of the pictures have a large number of unique features.
For instance, there is a collection of characters, a whole 10 thousand NFTs have earrings, but only five don’t — these will be rare ones and greatly outweigh the others in price.
You need to analyze the most promising projects to make profit on the resale of NFTs, (project description, team, development plans, the presence of a large number of subscribers in Discord and Twitter, etc).
Also, there are services that monitor the rarity of certain NFTs, the usage of such tools makes it more possible to make a successful resale.
Quick profit income
A large part of the NFT buyers audience are seeking a chance to make a quick profit on the resale of tokens. Mostly participants seek the opportunity to buy tokens at the MINT stage to make it happen.
On projects with a well-promoted background, it is usual for the open market price to be 5-10 times higher than the price at the MINT stage. Also, if the NFT turns out to be rare, its value also increases by 3-10 times or even more.
Usually there is a limit on buying tokens by one person at the Mint stage — 1-2 NFT pictures and that’s it. Consequently, one user can’t earn 10X on a large amount.
In addition, there is a risk that the entire collection is not sold out at the Mint stage. If that doesn’t happen, the price may fall after Reveal.
Projects make airdrops at the beginning — giveaways of NFTs to early participants for an active support of the project and PR, so sometimes NFTs appear on secondary marketplaces with a price below than the minimum advertised. They are sold by those members who received them for an active participation in a project promotion, but didn’t buy tokens.
The marketplaces platform allows users to see the price and date when it was purchased for each NFT (this is data from the NFT blockchain). Thus, on the one hand, you can see that some NFT tokens are growing in price, on the other hand, you can get into a situation when someone intentionally resells the picture overstating its value.
Game projects
There are gaming projects based on NFTs — users storing NFT get in-game currency for storage (about 70-100% p.a.). Some of such cryptocurrencies are traded on the exchange, and their capitalization reaches hundreds of millions of dollars. Gaming projects launcings are different from NFT-Drop launching.
Projects are launched on Launchpads oftenly — platforms that provide projects with technical implementation of fundraising. Such platforms have a large traffic of crypto investors, so because of this start-up projects have a chance to sell the required number of their project tokens.
Market volume
In the second quarter of 2021, the NFT market circulation was $2.4 billion, up slightly from $2.3 billion in the first quarter. These figures do not take into account over-the-counter sales, i.e., sales made through auction houses.
Sales were up 111.46% from the first quarter, and the number of active wallets was up 151.89% over the same time period.
Big players are appearing in the market, and unlike the hype surrounding ICOs, the NFT industry is more integrated into the real world.
Global brands coming to the NFT market: Gucci, McDonald’s, Time magazine, etc.
In my opinion, the market has yet to see a rapid growth in this direction, because the market has gone less than 10% of the way.
How to transfer a real art collection into NFT and make profit on it?
You should first understand that NFT is 90% supported by the crypto community, when selling your collection. This is an individual subculture with its own values and economy.
You need to be a part of it to understand it better— to communicate with people who bought bitcoins for 10 dollars, talk with those who make and are making projects on the blockchain, to participate in discord chats.
The subculture of the crypto-community challenges traditional values, patterns, and the traditional economy in many ways.
Case studies such as cryptopunks are results of this — the market value of the simplest pixel image easily exceeds $1 million, and the value of the top 12 is over $65 million.
Examples of successful collections
The team was bought by Nike on December 13. The price of the deal is unknown yet, but it can be assumed that the amount of the deal exceeded $1 billion, because guys are selling their collection for tens of millions of dollars.
This collection contains 3D characters with sounds, a total amount of characters is 152 , the lowest price is 4.4 Eth ($17600 at the exchange rate of $4000).
A collection of 9999 Galactic Eggs with wonderful 3D art. Sales volume of the collection at OpenSea is 13,800ETH ($55.2M at the exchange rate of $4000).
A collection of 10,000 dynamic images collected from 240 attributes in 14 categories (the more each item in the collection, the rarer it is, which affects the average price).
By purchasing an NFT from the collection, users get a ticket to a world of exclusive content, from music to events to meta-universe avatars.
A collection of 10,000 NFTs sold for 0.05 ETH and has a limit of 3 avatars per wallet. There was a public sale of another 10,000 brand-new characters two days later.
The sale followed the Dutch auction model, and according to my sources, the guys managed to sell the collection for over $100M.
A total of 20,000 3D NFT avatars with unique traits were produced. Collectors will be able to use each avatar for videos, games, social media and other types of content in the meta universe.
How do you make an ordinary offline exhibition a success?
Why are there no traditional paintings, three-dimensional sculptures and other classics? Exactly because of the value of this art that is not represented for the crypto community that is present in the classic market.
You have to please the boomondas, the opinion leaders and the critics in order to get a queue for a regular offline exhibition.
Everything is the same in the NFT market, but only the target audience is the crypto community. If there is no understanding of what crypto community values — there is no chance to make money in this market.
Another essential feature of success is the commercial part. Collections sell out in minutes, not only because the community likes the images and the idea, but because the project team creates the conditions for the collection to quickly grow in value.
What you shouldn’t do if you have your own offline art collection?
You don’t need to try to drop classic works of art, i.e. move from offline to online.
First of all, well-known brands succeed. They have resources, recognition and a loyal audience.
It’s easy for a brand to bring its audience to the NFT-marketplace and get them interested in buying their collection.
What if you don’t have your own brand, but have offline artwork?
What I see as an option for those who have a valuable physical art object/objects and would like to make money in the NFT marketplace.
NFT sales should not be treated as an opportunity to make a few million dollars, but as an opportunity to make a few thousand, maybe tens of thousands of dollars with minimal effort and investment. On the plus side will be the pursuit of new technologies and trends.
Don’t make a lot of money — minimize the cost of launching an NFT collection. Create everything exclusively on the marketplace, without creating a project website, setting up a discord, etc. The key point is how to sell.
I propose to sell NFTs to those who want to buy a physical art object . For example, during the exhibition, there is an instruction sheet for buying an NFT next to each piece — a copy of that piece.
Trained staff can help you with buying cryptocurrency, with installing crypto wallets and make your first purchase. You can also use information about the availability of NFT copies of the collection in social networks — this is a great way to communicate with current customers.
This solves a key problem — you don’t waste resources and time trying to sell your works to a non-target audience.
Your own, loyal audience is happy to engage with new technology even just to try it out. It is important to guess the price and have clearly spelled out instructions for users. For instance, you can give brochures so that a person can make a purchase at a marketplace after visiting the exhibition.
I believe you need to prepare answers to such questions from potential customers as: «what do I need it for», «what will I do with it», «what’s the point of it», etc.
The influence of NFT and virtual and augmented reality technologies on the art industry will only increase — people can visit virtual exhibitions in meta universes and purchase both NFT and familiar objects of art there.
Characteristics of a successful NFT project
Now more specifically about what properties and characteristics should have a successful NFT project.
Characteristics of images
The collection should be one of the most perfect in terms of rarity. Rarity is the percentage of unique images. The more different properties a character has, the better, or there should be more than one character in the collection. Obviously, the rarer the collection, the more time it takes to build it.
This is why most collections have only a small percentage of rare images, with 80% of the images in such collections being similar and of little value. Information about the level of rarity of the collection should be present on the project website:
The level of detail of the characters should exceed or be on par with the best NFT collections. The characters themselves should cause positive emotions among NFT collectors and ordinary people. If people see an image and ask where they can buy it, that’s a good sign!
How to build community?
A community is not just the number of members on Discord and followers on Twitter. There can be 50,000 members, but the community won’t be of high quality. Conversely, 1,000 people can be a great community that can quickly grow tenfold.
The community in the chat room reflects the overall atmosphere. If people are interested in the project, the authors, the meanings, then that’s a good sign. If the community is only concerned with how to make 10x on resale – that’s not good for the future of the project.
Team members should interact with the community on Discord. Team participation in Twitter spaces with the community is also appreciated.
Using bots and other automation to hype up the project is not desirable. It’s better to try to create a natural growth of people’s curiosity about the project.
If a part of the community becomes a famous collector or celebrity, that’s great!
Changing industry standards, philanthropy, and creating unique works are good examples of project values.
It’s cool when collection users get some additional options, like private access to some content.
It is good when the sale of the collection is only the first step in the further development of the project. For example, in the future the project plans to create a game, with characters, make a 3D series, realize its own metaverse, or release a project within some other metaverse.
In the summer of 2021 it was already enough to use Twitter and discord, now it is not so enough. We need to use other channels of communication with the audience. However, information about followers on Twitter and discord is still used to evaluate the project by third-party resources:
The main goal of all channels of communication with users is to make them part of the community. So usually the first thing any collection site offers users is to join Discord at first, just to get to the site.
A benefit will be having instructions for new users on how to get NFT if they’ve never encountered it before:
How to make project team?
It is crucial for the project to reveal as much information about the participants as possible. Another awesome thing is when the profiles of the founders are styled as the characters of the project:
or like that:
The experience of the team members is an extremely significant aspect.
If the artists of the project have worked on famous projects of such companies as Pixar and Dreamworks, and have weight in the art community, all this is a definite advantage.
The team’s experience in other crypto projects will also be a benefit.
This also includes partnerships with other great teams and projects:
Social networking by team members using project content will also be a plus:
How to launch marketing campaign?
There are two essentially different strategies for launching projects:
Focusing on a cool product and developing the virality of the project. This happens when you are not investing in direct advertising, but developing the project’s existing community.
Focusing on the most effective way to buy traffic and increase conversion to purchase. When the key goal is to know how to buy a user for a dollar and sell to them for 10.
The first variant does not require large marketing budgets to buy traffic. It is the most difficult to build and grow a user base, but it is the least risky because it requires significantly less spending to buy traffic.
The first strategy variant is more suitable for product teams who are in love with their product and live that story, the second variant is for companies who regularly bring their projects to the NFT market and it is essential for them to get positive economics on several projects.
First, you need to form a core community, which then expands using the strategies described below.
Then you need to give them a reason to spread the word about the project, which should lead to an explosive growth of the project’s followers.
Next, you need to track the best moment to launch the project. And then a launch that will lead to the purchase of the entire collection in one day if it is successful.
At the stage of forming the core of the community, paid channels of attraction are used.
Giveaways are announced – the distribution of various valuable opportunities to the first members of the community.
There is a separate business when groups of people receive giveaways in the early period of the project, and then, when the project becomes popular, sell the received “chips” to new members.
So it should not be unexpected that new projects add several thousand community members in a single day, and sometimes tens of thousands.
The main channels for attracting users are Twitter and Discord, and it is good if other channels for attracting an audience are also used. But it should be mentioned that while evaluating projects by third-party services, the number of followers on Twitter and Discord is evaluated in the first place:
The task of the project team is to grow the community and involve it in the project development process, so that many paid media and popular bloggers themselves will want to write news about the project.
This is how marketing should be prioritized:
Content is the king!
In order for a project to take off, a significant amount of content related to the project must be provided to the audience on a regular basis. This is usually the responsibility of the content management team, which has a content plan that additionally always has space for unplanned creativity, whose ideas will emerge as the project progresses.
Don’t forget about the large number of image formats:
Regular images will not be enough, Gif animations and videos are very encouraged:
Usually the start of a project happens by launching Twitter and Discord. The company website is usually inactive, and each launch of a new communication channel is also great content to get the community’s approval. You have to frame each news item beautifully:
NFT collection teasers are one of the key content options that should go viral in community members’ Instagrams:
Every element of the project development process should also be framed with unique content: teasers, giveaways, mint announcements:
Engaging community members to create content related to the project is one of the most difficult, but perhaps the most important tasks of community project managers.
Usually, a contest is held in which a few winners are chosen who create the best creativity. The prizes are either access to the whitelist or even an NFT from a future collection.
The project’s statuses and progress are also worthy of separate posts to reinforce the community’s understanding that the team is keeping its promises and roadmap:
It’s quite obvious to use news or seasonal context, holidays, etc:
You can create project stickers, or you can hold a contest and ask community members to try to create a cool collection:
Don’t forget the appropriate use of hashtags in publications:
The conclusion is that there is never enough content. It is necessary to allocate a team of 5-15 people to generate quality content and build engagement with the community, which will lead to its growth.
It is necessary to track statistics to understand which tools worked better and which it is better not to dwell on.
Why do I need a smart contract to release an NFT collection?
There are 2 options for releasing the NFT collection.
– Simply release to the marketplace.
– Drop collection.
If the collection is released without Drop, a smart contract is not needed. This approach assumes that the collection creator pays for mining the collection himself (creating the NFT in the blockchain). The user simply goes to the trading floor and uploads the collection to the blockchain, paying a fee for doing so.
Releases the collection without Drop:
PLUSES
– Much less cost overall.
– No need to write a smart contract.
– No need to rent a server.
– No need to make a website.
– No need to make a mint button.
MINUSES
– You have to pay for the mint yourself.
– If you pay for mint yourself, you will likely choose a blockchain other than ETH, and this greatly reduces the likelihood of high collection sales.
– There is no way to automatically distribute funds from collection sales to multiple project founders’ wallets
Releasing the collection via Drop:
PLUSES
– Users pay for the coin collection themselves.
– You can make a collection for several thousand NFT. The amount of costs does not depend on the number of NFTs in the collection.
– You can release a collection in ETH – this greatly increases the market volume.
– You can come up with your own logic of interaction with the audience (auctions, division of sales into several stages, etc.).
– You can describe in a smart contract the automatic distribution of funds to several wallets according to a certain rule.
DISADVANTAGES
– There is a risk of being hacked and having everything stolen.
– You will need more money for the smart contract, website, server, mint button, thinking through the logic.
EXCEPT
Without Drop and without a smart contract, it makes sense to launch a collection for those who want to try to do something in this market and aren’t ready to invest serious money in the project.
Drop should be done, and a smart contract is necessary if you have ambitions to make a cool project.
How to manage Discord for NFT collection?
Discord is a messenger, a counterpart of Telegram, but well adapted mainly for games. About 90% of active NFT market participants use it.
If you launch a collection via Drop on your site, the main task is to grow a community that:
will believe in your idea
will love your project and your art, will buy your NFTs
won’t sell your NFT for a quick X
Discord is the most convenient tool to solve this problem. Additionally, as I wrote above — 90% of users who have experience in buying NFT, are active users of this tool, so it makes no sense to sell the collection without having Discord.
Organization of Discord — community
There are two key elements:
The technical part.
Marketing part (divided into internal and external marketing)
The technical part — lends itself well to outsourcing.
Server setup
Initial design and first message
Setting up the categories of the server
Setting up bots for analytics, etc.
Setting up an inactivity channel — inactive users go there h/within the period you set up
Setting up automatic moderation (auto-delete obscene words, pornography, etc.).
Assigning roles for users
Setting up community emoji
Internal marketing — almost impossible to outsource
Creating rules for adding to the community
Creating a script for getting users into the chat room
Definition of the rules by which users will be moderate.
Basic information about the project
Description of the stages of information disclosure about the project. It is important not to lay out everything at once, but to show it in parts, stirring up interest.
A description of the tasks in the community for participants to get access to Whitelist
Creating a table with a plan for how many users should be Whitelisted at each stage.
Assigning tasks to moderators
Controlling moderators
Tracking statistics
External marketing
External marketing
Paid users involvement (outsourcing)
Partnerships with other projects (cannot be outsourced)
Organization of Discord is a 20% technique that can be outsourced, but 70% is project management by the project founders. And this is what determines whether you can build a community around the project or not.
Depending on the size of the community, the number of moderators can vary from 1 to 7 people.
To organize a Drop it is necessary to understand the principles by which the NFT-communities of other projects are created and developed and to use the best practices.