It has been an interesting last few weeks in the NFT space and a lot of the space has been dominated by FREE derivative mints. Today we explain why and how they came to be so popular of late.
- What’s a Derivative?
- Why Are They Popular Now?
What’s a Derivative?
We know a crucial part of any NFT collection is that it contains 1/1 non-fungible tokens on the blockchain, that can not be altered. What happens if someone takes that idea/concept and creates their own spin-off of it or simply flips it? That is the modern-day NFT derivative, which brings a mix of emotions and reactions from communities and can be unpredictable to speculate at times.
The beauty and burden of web3 is that it is open-sourced and can be very wild west-ish at times. Any one person or project can take any image and upload it for sale, it is up to the open market to deem its value. However, OpenSea has recently took a stronger stance on these “copycat/flipped” derivative projects. Recently they announced an updated DMCA policy and would be removing any collections that broke the new rules and policies laid out. When projects get removed from OpenSea, they tend to lose a lot of steam, even though they can still be purchased on any other NFT Marketplace, like LooksRare.
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In other cases, changing a background and slightly altering traits can get you and your collection verified on OpenSea. Bored Ape Solana Club, a verified collection on OS, has been benefiting from the recent SOL NFT surge and currently holds a floor of 12.8 SOL. Without knowing much about their community, you can see they took a web3 NFT concept, legally created as their own. Many ways to look at this based on your perspective, but I guess that is the fun in this space.
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Why Are They Popular Now?
These have been common for quite some time, but as of late, they have really picked up in trading due to a few reasons. One of the biggest factors is the attractive GWEI prices, which are sometimes 1/10 of the price they were in the beginning of the year. With low GWEI prices, it allows free mints and low-cost mints to make sense and it lets buyers easily speculate on their project. It is much more attractive to mint a low-cost NFT and pay 10$ in gas, opposed to 100$.
Why would projects run a FREE mint? A lot of the time, they are simply copycat derivatives looking to pump and dump, like the example above. The Cool Cat on the right is a pixelated version of the real one, but meets the criteria of being completely new and not copied.
The hope for free minted projects is the market minting them out and bringing in secondary sales and volume. The secondary volume is typically driven by hype and speculation, again since the art is more or less copied or flipped. In a lot of cases, free or low cost mint OS royalties are around 8-10%.
As mentioned above, these are like the wild west of web3 (say that 3 times fast) and can be extremely volatile. So be careful. NFT derivatives are a new development in the NFT world, and it’s unclear what’s the right or wrong way to go about making a derivative of a PFP project yet. This makes investing in derivatives even riskier than investing in a plain ‘ole NFT. But, hey, there was a time when everyone thought buying a JPEG ape was nuts.
Have you traded any derivates lately, if so, let us know below!
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