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Updated: Jul 7, 2022

Something bizarre happened this week when Duke Dumont dropped his debut collection on Nifty Gateway: only one person bought into an open edition piece, effectively turning what should have been a solid middle-tier open edition NFT into a unique 1 of 1.

The piece, Morganite, was a collaboration with LOREM in the DREAM LOGIC Open Collection. This stunning, subtle video loop was priced at $1,500, which marks it as a mid-to-high tier item by the pricing standards on Nifty Gateway in recent months. (The lucky buyer has now listed the piece for a cool $3,333.)

It's not clear exactly why only one edition sold. It's possible that buyers experienced technical issues when trying to check out - a dishearteningly common experience on Nifty Gateway.

But it's also possible that there was simply no demand for this NFT. My hunch is the latter.

(As a contributing circumstance, I would point to the fact that there was another open edition piece in the same collection that was extremely similar to Morganite, but priced $1,000 lower. That piece, Amethyst, sold only 9 editions. In my opinion, the pieces were not differentiated enough for most buyers to justify spending the extra 1k on Morganite.)

Malavida Stage 2 Drop Falls Flat

But Dumont is far from the only artist whose drops have been met with lackluster demand in recent weeks. Malavida, a celebrated NFT artist who had a successful previous release on Nifty Gateway, also released a drop this week that struggled to meet the expected demand. Her collection was called Onboarding — Heal The Deal Stage 2, and appeared to be only open to those who had purchased pieces from her first collection.

Each piece the Stage 2 main collection was released as a drawing, with four of the five pieces priced at $1,499 or higher. Despite selling 180 editions of her first drop, patrons of Stage 1 did not seem to take advantage of their exclusive access to stage 2: only 14 editions of the $1,499 piece were sold, and a combined 21 editions were sold of the 3 pieces priced at $1,900.

Now, those sale numbers, I would argue, are nothing to sneeze at. But what takes the shine off them is that the drawings for most of the above pieces were limited to 40 editions. Which means that even the best-selling piece in that collection only sold 8 pieces - a dismal 20% of the edition limit.

Perhaps this was as expected, and they just wanted to be safe and place an upper limit on the drawings. (I say 'they' as my understanding is that the artists work with Nifty Gateway to determine optimal pricing.) But in general, drawings have low limits, so that demand is much higher than supply, which ensures that it's exciting to actually win. I'm going to guess they were expecting more of the Stage 1 crew to follow through on this drop - much more.

This may have challenging implications for Stage 3 of the project, which will feature the ability for holders to combine their works into diptychs and triptychs. Hopefully, Stage 2 owners are aware of the privilege they purchased for what promises to be an interesting finale.

Trouble Across the Board

Judging by the conversation in various Discords and on Twitter, market watchers have noticed an unfortunate trend on Nifty Gateway in recent weeks - declining demand across the primary and secondary markets.

An informal survey of a variety of metrics - the number of open editions minted in recent drops; the number of drawings entered; the number of higher-priced pieces being snapped up; and the final sale price of auctions - suggests the money has stopped flowing from collectors at the generous rate it was in February and March.

There could be any number of reasons for the slowdown, and the niftysphere certainly is awash with theories. Many complain that Nifty Gateway has focused too much on quantity over quality, flooding the marketplace with big-name artists hawking expensive pieces, and middling-quality art. For all of the new blood entering the NFT space since the beginning of the year - and there have been many, many newcomers - NFTs remain an extremely niche market, and there are only so many collectors out there, with so many dollars. Market saturation is a real threat.

Panic in the Secondary Market

We're seeing demand drop not only in the primary market, but the secondary as well. A number of pieces that I have collected are now selling below their initial list price. This is a particularly ominous sign for pieces that were priced below what seems to be the market standard of $700 and up. If the affordable pieces can't keep their declared value, what does that say about the rest of the market?

On Twitter today, Duncan Cock Foster, one of the cofounders of Nifty Gateway, admitted that Nifty Gateway bears some responsibility for the current bearish situation, and implied they have hurt the health of the secondary market.

The NFT bubble of spring 2021 may be popping before our eyes. Here are some of the questions that come to my mind for me as we finally cross this inevitable threshhold into a more rational pricing environment on the best-known curated NFT platform.

  • Will this first wave of NFTs released on Nifty Gateway and other curated platforms hold their value long term?

  • Can NFT platforms continue to attract new buyers, and new dollars into the system in the short/medium future?

  • With Nifty Gateway tightening the tap on drops, do we see a renaissance of activity in the secondary market as collectors begin to trade for the pieces they actually want to hold long term?

  • Will we see an exodus of patrons as panicky buyers try to dump their holdings and flippers make their exit?

  • Writer's pictureJ.T.

Updated: Apr 22, 2021

On the Ethereum network, gas is a fee that must be paid to the network in order to make a transaction.

Gas is paid directly to miners to compensate them for their computational effort used to run the network. It's called "gas" because of the easy analogy to driving: to go anywhere in a car, you must make sure you have enough gas in the tank to cover the distance. Similarly, to complete the transaction you want to make, you must make sure you pay enough gas to cover the cost.

I prefer to think of gas fees as automated taxes. Both are required fees paid by beneficiaries of the network (citizens) to cover the costs incurred by running the network.

Gas fees will arise when interacting with the network in a number of ways, including minting an NFT, purchasing an NFT, and sending an NFT from one wallet to another.

While gas fees may seem inconvenient, annoying, and at times expensive, gas is a critical part of the Ethereum network. Gas fees incentivize miners to run the network, disincentivize spam by giving every transaction a cost, and prevent infinite loops, since a transaction will fail once gas is depleted.

Nevertheless, paying fees on a per-transaction basis is not always ideal, especially for low value transactions, when gas fees can approach or exceed the value of the payload.

Ultimately, high gas fees can even disincentivize people from joining or using the Ethereum network.

For this and other reasons, developers are focused on building technologies that minimize or eliminate gas fees for many interactions with the Ethereum network. One such scheme in the NFT world is "lazy minting," in which an NFT is not actually created on the network until it is purchased, in order to save the seller upfront cost. Other solutions include "layer two" dapps and marketplaces which allow users to conduct most transactions within a network built on top of Ethereum. This can save users from having to make frequent or one-off calls to the Ethereum blockchain by batching transactions.

Last week, artist Steven Baltay, who goes by the handle @realimposter on Instagram, minted a and daring experiment in NFT art. He called it Public Domain, and declared that, "This NFT will belong to the public. The artwork itself holds the seed phrase to the wallet containing it. Please do not buy, sell, trade or destroy this art. It belongs to everyone."

The work shows a graffitied Statue of Liberty bobbing atop an undersized cargo ship in rough seas. Liberty is chained to the ship; the golden chains sway and clink, tangling around her crown and torch. Her tablet is clearly visible, and on the tablet is inscribed the seed phrase of the wallet holding her.

For those unfamiliar, a seed phrase is a 12-word phrase that acts as a recovery mechanism for a crypto wallet. The phrase must be kept secret, or else the contents of the wallet will become forever accessible to intruders. An NFT, as a tradeable object living on the blockchain, must be kept inside a wallet. Baltay had set up a dedicated wallet, placed this Public Domain inside it, then effectively gave the keys to the public.

It took about one hour for liberty to be snatched.

According to the transaction history on Opensea, a collector with the username FriesFrame transferred the NFT to their own collection shortly after it was minted. On Twitter, FriesFrame (@ChasFries) replied to the artist's tweet announcing the piece, saying, "nabbed it 😆."

When a user challenged Fries Frame, asking, "Doesn't it literally say "don't transfer it"

😂🤔", he defended himself on a technicality: "it does not - it just says dont buy, sell, trade, or destory....i traded nothing for it".

According to Fries Frame's Twitter bio, he is a Chicago based collector and "Niftygateway Moderator" (Discord?). He seems to be quite active in the space, tweeting frequently about NFTs, and his Opensea profile shows a collection of dozens of pieces.

On Twitter, I asked him what he was intending to do with the piece - lock it up indefinitely (that is, to hold it) or turn it for a profit (sell)? His answer - "why are those the only two options?" - was noncommital.

It's interesting to consider Fries' options. If he holds it, he can claim the distinction of being the only owner of this unique NFT - though that will always come with some notoriety. He could sell it, certainly, and any price he charged would be pure profit into his pocket. But to return the piece to the original wallet would presumably cost him gas fees - meaning if he chooses to put it back in its place, he will actually need to pay money to do so. At the time of writing, the gas fee might range from $50-$100 - not quite pocket change (at least in USD!). What would you do?

I love this piece as a tribute to and a test of the technology it's built on. It wouldn't work as anything other than an NFT. Because of the blockchain, we can always know who owns it, and who has taken ownership of it at any point in time.

At face value, Public Domain is an optimistic yet naive tribute to the crypto community. But being born of the community itself, I think we can conclude that it is in fact a statement on the value of trustlessness - central to blockchain technology and crypto ideology. When you allow people to take something for free, they will. Passwords, seed phrases, wallet keys, and all the other accoutrements of the blockchain are the essential tools that enable this community to thrive in spite of our tendencies toward opportunism.

With all of the excitement in the crypto space last week - the Coinbase IPO, the multi-day Pak drop extravaganza on Nifty Gateway, the Artvatars launch, and the Paris Hilton NFT debut - Public Domain seemed to fly under most people's radar. I believe that this piece is an early classic of NFTs, and whoever owns it - Fries Frame, the public, or anyone else - will be holding a piece of history.

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