How to Create a Successful NFT Project
How to Create a Successful NFT Project
The time has come to make your own NFT project. You’ve been hearing more about NFTs like CryptoPunks and Bored Ape Yacht Club. You have your own idea for a community and the artwork, and are ready to launch.. Success can’t be guaranteed, but there are things you can do to improve your chances of creating something valuable.
We’ll walk through a number of different factors to consider , in order to improve your chances of success when you launch. There’s something here for all audiences, regardless of whether you’re new to Web3 or have been full-time NFT degen’ing since the good ol’ days.
The NFT boom began with NFTs on the Ethereum blockchain. There are many NFT projects to learn about. This boom began with CryptoKitties, a blockchain-based game developed by Dapper Labs and released in November of 2017.
Each CryptoKitty in the game is an NFT. The game became wildly popular. At one point, about a quarter of Ethereum’s traffic could be attributed to CryptoKitties. Though this fervor didn’t last, it raised awareness of NFTs and their potential applications.
In late 2020, the number of sales of CryptoPunks, also built on the Ethereum blockchain increased. CryptoPunks pre-date CryptoKitties and are the project that inspired the ERC-721 standard, the protocol that all modern NFTs on Ethereum conform to.
Initially given away for free in June of 2017, CryptoPunks NFTssold for ~$6,000 each in late 2020. This price tag steeply increasedthroughout 2021, with an average cost of ~$12,000 in January of 2021. In August of 2021, CryptoPunk peaked at ~$260,000. Many think this CryptoPunk run-up kicked off the mania surrounding NFTs in 2021.
There are a few high-level considerations to suss out, when setting out to plan an NFT launch. One such consideration is your blockchain of choice: which blockchain will your NFTs live on?
Here are some questions you may want to ask yourself before deciding::
- What are the chain’s underlying principles?
- How popular is this chain’s NFT ecosystem?
- How much and what kinds of support are there for this chain’s NFT ecosystem?
One principle at the heart of a blockchain is its degree of centralization. For example, Ethereum is regarded as one of the most decentralized blockchains, whereas Binance Smart Chain is entirely centralized. Centralization is a spectrum and its importance is subjective.
The practical implications manifest in transaction costs and time to finality for transactions. In general, the more decentralized a blockchain is, the more expensive a transaction will cost and the longer it will take for a transaction to be finalized.
The experience of minting an NFT on a more decentralized blockchain is quite different from that on a centralized chain. For example, Ethereum is slow and expensive, compared to other blockchains.
Transaction fees can reach upwards of 0.05 Ether, which at the time of writing is ~$150. Compared to alternative layer one chains, this transaction fee is astronomical. For example, a transaction fee on Solana is about one fortieth of a penny at the time of writing. For those that aren't keeping score, that's roughly 600,000 times cheaper than Ethereum transactions.
Despite these tradeoffs, putting your project on a maximally decentralized chain might be worth it! The most obvious benefit of decentralized chains is their censorship resistance.
Since NFTs inherit the security benefits of the chain they live on, more decentralized chains provide a higher degree of certainty to NFT holders that their assets will remain within their possession.
That’s not to say blockchains processing more transactions per second and offering cheaper transaction fees are without flaws. Cheap transaction fees, even when popular projects are minting, renders projects more susceptible to bots buying larger portions of the collection. High transaction fees can act as a deterrent for those that would otherwise wire up a bot to buy out a collection.
Another cornerstone principle is a chain's consensus mechanism. A blockchain is supported by many different computers. These computers need a way to agree on the state of the blockchain, in order to maintain the integrity and security of the chain. A consensus mechanism defines how these computers reach agreements.
A chain’s consensus mechanism will not directly impact your NFT project’s launch. But, if you’re set on being personally aligned with the ethos of a chain, it’s a good idea to understand the implications of different consensus mechanisms.
The two most common consensus mechanisms are proof of work and proof of stake. Those who use proof of work have shown that it works at scale. But proof of work also incurs a considerable amount of operational cost relative to other consensus mechanisms like proof of stake.
Both Bitcoin and Ethereum use proof of work, though Ethereum is set to upgrade its consensus mechanism to proof of stake in the near future. Proof of stake is more scalable than proof of work and, as mentioned, has a smaller environmental footprint than proof of work.
Others consensus mechanisms include
- delegated proof of stake
- proof of history
- proof of space-time
- proof of authority
Again, the consensus mechanism of the chain you launch your NFT project on will not directly impact the success of your project. Rather, it’s an aspect to be aware of, if you feel strongly about being aligned with the ethos of the chain your project is launched on. If nothing else, learning about these different consensus mechanisms is an interesting way to learn about different blockchains and their tradeoffs.
What are Some Popular and Supportive Ecosystems?
Some NFT ecosystems are more popular than others. As one might imagine, more popular NFT ecosystems have a larger pool of potential buyers and drive more sales volume than less popular ecosystems.
It’s easier to build an enthusiastic community in an ecosystem with more participants. This is one reason many projects choose to launch on Ethereum, despite the higher transaction fees. A project’s community can have a lot of influence over the project’s long-term success and secondary sale. They’ll include some of your biggest fans.
Unsurprisingly, more popular NFT ecosystems tend to have more support in place for NFT projects. It’s a good idea to build where there’s support in place to help your project be successful.
Support comes in a number of different flavors. In some circumstances, it’s demonstrated through the organization building the chain. Some chains are designed with NFTs in mind, which can make your life easier as a creator.
A final aspect to consider are the marketplaces that support a given chain. NFT marketplaces tend to cater to one or a handful of chains. For example, the popular NFT marketplace OpenSea only supports NFTs on Ethereum and Polygon.
Marketplace infrastructure tends to be more mature in ecosystems where there are more people spending money on NFTs. You’ll want to explore the user experiences on the marketplaces that support the chain you're considering launching on and select a development platform carefully.
Learn About Popular NFT Ecosystems
The best way to move forward is to learn about some of the popular NFT ecosystems. These include:
By no means is this an exhaustive list of all NFT ecosystems, though each of these blockchains have rich NFT ecosystems. The best way to form your own opinion is to start digging into the underlying principles and ecosystems of each chain.
At the end of the day, many people launching NFT projects care about the cost to the end-user. Ethereum transactions fees cost thousands of times more than those on the other chains listed above. So, it’s common for those considering which chain to launch on to take a stance on Ethereum, since the tradeoffs between Ethereum and non-Ethereum chains are so large.
What Roles Does a Successful NFT Project Need?
Well-designed NFTs are required but not sufficient for a successful project launch. You’re going to need more than artistic talent to pull this off. NFT projects usually have a team of individuals working behind the scenes to piece together the different aspects that go into a successful launch.
Here’s what an NFT project’s team might look like:
- an artist
- a software engineer, maybe two
- a Discord moderator
- a social media manager
This is the person that’s creating the art featured in the project’s NFTs. Artistic mediums for NFTs vary widely because almost anything can be tokenized. At the time of writing, most NFT projects are a collection of images. Of these, most are generative; the images are composed of a predetermined set of different layers.
Generative collections achieve a number of things. One factor driving the popularity of generative collections is the reduced cost of time to create an NFT collection of thousands of unique images. It’s far easier to compose a known set of image layers to generate thousands of images than it is to create thousands of unique images.
Software engineering skills are necessary to launch an NFT project. For one, you’ll want to have a website or blog to host information about the project. This is where you can outline the project’s origin story, list the members of the team, describe future plans, and allow people to mint NFTs from your project.
In addition to a website, you’ll need a smart contract. Smart contracts are programs that live and run on blockchains. They’re important because they transfer and verify ownership of an NFT.
You could use a third party, like OpenSea, to create an NFT project without coding up your own smart contract. However, this comes at a cost: you lose flexibility.
The most successful projects launch their own smart contracts. Not only does it allow you to extend your NFTs in unique ways, but it sends a signal to potential buyers that the team behind the project understands the NFT ecosystem.
A Discord Moderator
Almost every NFT project has a Discord community. Projects without one will be categorized as scams. NFTs are inherently social because they solve the cold start problem–typical of Web2 networks and communities–by offering a financial incentive to all holders.
By default, all holders of an NFT project want the value of the project’s NFTs to increase. This is a large reason why community is such an important aspect to NFT projects. So, you’ll need to have a Discord where members of your project’s community can congregate.
Depending on how popular your project becomes, you may have anywhere from a few hundred to 100,000 members in your Discord. You’ll need at least one person in the Discord who can hold down the fort–your Discord moderator.
A Social Media Manager
Finally, you’ll want to rope in someone who has what it takes to manage your project’s Twitter account. Similar to Discord, Twitter is a core platform that your project needs a presence on.
Crypto Twitter (CT) has become the water cooler for all things Web3. Having a Twitter presence adds legitimacy and decreases social friction for members of your community who are willing and eager to evangelize your project.
Since a Twitter account is a must-have for your project, someone will need to manage this account. Managing an NFT project’s Twitter account is like managing any other brand’s Twitter account. You’ll need to engage with members of the community.
Twitter Spaces is popular within Web3 communities on Twitter, and project owners use it as both a marketing and educational tool. Hosting a Twitter Space with influencers can help bring more eyes to what you’re creating.
Create Your Distribution Strategy
Decide on a distribution strategy as soon as you start planning out your project. Coming to a decision early on in your project’s timeline will make it easier to express a cohesive narrative to potential buyers.
It’s important to note that different strategies have varying technical requirements. The software engineers you’ve recruited will thank you for investing upfront time to make this decision. Last-minute changes to your project’s distribution strategy may result in having to delay your project’s launch, due to technical considerations. Delays in project timelines are forgivable but not optimal.
Typical distribution strategies include
- stealth drops
- dutch auctions
- public minting
- whitelist and then public minting
A project is said to have had a stealth drop if the minting contract was revealed after minting had become available. This is one way to protect against bots. People that use bots won’t be able to configure them to buy out large portions of a project, if the contract address is unknown.
NFT creators can also use stealth drops to benefit members of a community that are extremely active. It’s likely these supporters will be at the ready with their wallets when it’s discovered minting is live.
Dutch auctions can be thought of as the inverse of an English auction, the kind that comes to mind for many when they hear the word, “auction”. Rather than starting at a floor-priced bid and working its way up in value, Dutch auctions begin at a ceiling price and lower prices at known frequencies.
For example, an NFT project may begin minting at 5 ETH and decrease this price by 0.25 ETH every 10 minutes. Dutch auctions are typically used for NFT projects that are in high demand.
This is the distribution strategy that’s arguably the most intuitive. A project advertises when minting will begin, the price of a mint, and usually the website where one will be able to mint from. Depending on the popularity of your project and the chain your project is on, there’s a chance that transaction fees will rise dramatically for buyers.
For example, popular NFT projects on Ethereum may cause transaction fees to spike for all users of the blockchain, albeit for only a few minutes. However, popular projects can sell out within these few minutes when transaction fees are increased. If your project is on a chain with cheaper transaction fees, like Solana or Avalanche, this shouldn’t be an issue.
Whitelist Minting, Then Public Minting
This strategy is exactly what it sounds like; a group of wallet addresses are whitelisted and thus able to mint from a project before minting goes public. Typically, the price to mint when whitelisted is lower than it is for the public.
There’s a clear financial incentive to get whitelisted for a project, as one can mint for a cheaper price than most others. This puts whitelisted minters in a position where they can confidently make a profit, or at least not lose money.
Be aware that it’s increasingly common for people to try to get whitelisted for as many projects as possible. This is because one benefit of whitelisting is access to NFTs at a cheaper price, and if buyers can purchase an NFT lower than the public mint price, this can often yield a profit. These dynamics have increased the incentive to get on as many whitelists as possible, also known as, “grinding whitelists”.
Introducing ill-conceived whitelist criteria can dilute your project’s community with those looking to quickly flip your project’s NFTs for a profit. Flippers are mercenaries, and while there’s nothing wrong with mercenaries, too many can lead to a quickly declining floor price. Since an NFT project’s floor price is a proxy for the project’s success, it’s worthwhile to ensure your project’s whitelist criteria tend to benefit loyal members of your community.
It can be difficult to know where to begin when you’re just beginning to plan your NFT project. Only so much can be gathered by reading about how to make your project successful.
The best way to learn is by participating in NFT culture. Follow NFT influencers on Twitter. Drop in on Twitter Spaces hosted by Crypto Twitter talking heads. Find NFT projects you like and mint some NFTs. Purchasing an NFT will motivate you to learn about the project. You’ll learn far more about what makes successful NFT projects a success by engaging with NFT communities.
This is a guide on how to create a successful NFT launch, rather than a recipe for guaranteed success. The experience you gain from engaging with NFT communities will do far more to positively affect the success of your project.