A couple of weeks ago, we wrote a comprehensive post outlining what we believe is a worrying development in the NFT space. ICYMI, read up on it here:
With the recent bull run of crypto currencies in general and Ethereum, that is host to most NFT projects, in particular, we see the main premise of our post confirmed: That in fact, mint prices for NFT projects are entirely disconnected from reality. Now that ETH price has risen significantly, floor prices of countless NFT projects are dropping. Obviously, there are some other factors at play, but rising ETH prices should explain at least a good chunk of the variance.
Of course, we are not only running our own project with the Ghostwriters Guild, but are also active members of various other NFT communities. We are generally interested in knowing what’s going on in the space and it’s important to us to critically evaluate what makes projects valueable and legitimate and draw our own conclusions. One of the questions we have asked ourselves countless times is why mint prices are set in ETH and not in say, fiat. With the recent surge, this has become more relevant than ever.
There are two obvious and some less obvious answers to this question. The most obvious ones being “fuck fiat!” and “you’re paying to mint in ETH anyway, so that’s naturally the currency prices are set in”. One emotional and one seemingly logical response. But both hypothetical responses would be missing the point: We’re not asking why payment is in ETH, but rather why the value of the NFT is denominated in ETH. A very important distinction which is highlighted by the following question I’ve seen asked in a very popular NFT project (and which hasn’t received any response yet).
The user asks a legitimate question and the answer isn’t entirely straight-forward. There are only two logical scenarios from a project’s standpoint:
Scenario 1
The project’s expenses are all calculated and paid for in ETH. The project pays devs, artists and for the entire infrastructure in ETH. In this case, it would be somewhat reasonable to set NFT values in ETH and not make any changes regardless of the price flactuation. The project owners / collaborators would assume the risk of the price fluctuation which could be considered fair to some degree.
Scenario 2
The projects expenses are calculated and paid for in fiat. In this case, it is only reasonable to adjust mint prices based on the initial calculation – lowering the mint price in a bull market and increasing it in a bear market.
In fact, we have seen scenario 2 play out various times in projects that we have been involved in as community members, which does beg the questions: Why did these projects denominate their NFT’s value in ETH to begin with? If you’re changing the mint fee in accordance to current ETH prices, you’re essentially admitting that you’ve been calculating in fiat all along. So naturally, wouldn’t it be reasonable for both, transparency’s sake and for the sake of your own financial planning to set fixed prices in fiat currency and adjust to whatever that translates into ahead of the mint?
We have made the experience that most expenses for NFT projects, an the Ghostwriters Guild is no exception, have to be actually paid in fiat currencies. We’re paying for web services, developers, artists and smaller expenses like discord server boosts in USD or EUR. For our project, neither a fixed nor a flexible ETH price set in advance would make any sense really and as such, we will be issuing the price for our PFP collection in USD and to whatever number that translates to in ETH once mint date rolls around. Payment will still place in ETH – naturally.