New non-fungible token (NFT) collections pop up every other day, offering collectors an opportunity to become the first buyer of an NFT – a process known as “minting.”
When it comes to navigating NFTs, minting as a term may seem confusing because it refers both to a collection becoming part of the blockchain and to a collector buying an item from that collection for the first time. We will focus on minting in the latter sense.
One of the main benefits of minting NFTs is investors are able to buy into a collection at the earliest possible opportunity. That means they stand the best chance of making a profit if the NFT collection goes on to soar in value once it’s listed on secondary NFT marketplaces like OpenSea.
But high rewards come with high risks, and NFTs are no exception. When investing in non-fungible assets, you may find that your funds will become more illiquid (more difficult to cash out) than if you had invested in fungible cryptocurrencies like bitcoin. For example, selling bitcoin can be done at any time across a huge range of exchanges, mobile applications and brokerage platforms. But with NFTs, you are typically limited to just a handful of marketplaces – some of which have a limited number of buyers.
Fast-changing norms of NFT sales
The Bored Ape Yacht Club is now the world’s most valuable NFT collection, with a floor price of 100 ETH (around $270,000 at the time of writing). The public mint of the collection took place in late April 2021 and lasted several days. Those first in line were able to snag the hugely desirable NFTs at just 0.08 ETH ($217) each.
Admittedly, there wasn’t a great deal of competition to mint NFTs prior to the sector’s boom in early 2021. But as the NFT market has continued to evolve and expand, the minting processes took on new forms.
These days, many NFT projects come to market through a two-tiered system. Instead of launching only through a public sale, projects might run a pre-sale first.
Getting whitelisted for the presale
The holy grail in NFT mints these days is a whitelist spot. These provide access to the presale, which takes place either a few days or several hours before the main public sale.
Presale mint prices are often lower than the those in a public sale. But the low price isn’t the only reason why whitelists are highly sought after. Having a guaranteed slot to mint an NFT takes the pressure off from competing to mint during a public sale when the collection has a limited supply.
The requirements of whitelist eligibility vary by NFT projects. They will normally be listed in the “announcements” on the project’s Discord channel, and the link to join the Discord channel will be shared on the project’s Twitter feed.
Typically, projects will hand out whitelist spots based on engagement on the messaging app Discord. NFT projects like a good buzz, and they will reward the most active community members who contribute to that. Chat frequency and friend invitations are common metrics.
The NFT project might also give whitelist spots on Twitter to those who help get the word out by tweeting about the upcoming collection.
Some projects may call whitelists by different names, like “pregame” or “star list.” But the idea remains the same.
The NFT grind
Like with anything in crypto involving the potential to make a lucrative return on your investment, there’s a catch.
Whitelist requirements have recently become so exacting and time-consuming that many NFT traders refer to the process as “grinding.”
Whitelist grinding has turned into a full time job.
Anyone else feeling that whitelist burnout?
— richerd.eth (マ,マ) (@richerd) January 31, 2022
Invisible Friends, a project that has yet to launch as of this writing, requires prospective collectors to purchase a branded hoodie and beanie for $150 in order to be entered into a raffle. This only gives people a chance of getting on the whitelist.
Minting during the presale
If you have snagged a whitelist spot, congratulations! You will be able to mint an NFT during the presale by going to the project’s website, connecting your crypto wallet and clicking “mint.”
Caution must be exercised however, as scams pretending to be presale NFT launches are common on Discord. Project administrators will never privately message you with a mint link, but plenty of scammers will.
It’s important to think of minting like entering a lottery drawing. You often can’t choose which artwork you get to mint, meaning you have no control over the rarity of the piece you receive. The so-called “reveal” may happen sometime after the public sale, when the whole collection has been minted.
Secondary markets open for trading right after the presale, and so you can sell or buy an unrevealed NFT before the public sale if you wanted to secure a quick profit.
Public sales and gas wars
The mechanics of public sales are similar to presales – you connect your crypto wallet and mint – but you may well fail to mint an NFT if there’s too much demand. Not to mention, rampant demand can send Ethereum gas prices soaring.
Public sales operate on a first-come-first-served basis. To be the first person to get served, savvy NFT traders will engage in “gas wars.” That involves offering increasingly higher tips to miners in the hope their transactions will be processed faster than other competing minters.
When a popular NFT collection launches, with 100,000 people fighting for 10,000 NFTs, you need to increase your gas fee and outbid the others’ for your transaction to go through. This is what’s known as a gas war.
— Jaeger 🔺️🎮 (@Coinwahala) January 28, 2022
To make matters worse, you’ll still be required to pay gas fees even if your transaction fails, and so you should proceed carefully. The blockchain doesn’t issue refunds.
Finally, when all is said and done, remember there’s no guarantee your NFT will be worth more than the public or presale prices when you try to sell it on a secondary market. Abstract Loot, a collection of 8,000 items that sold out at a public mint price of 0.065 ETH in August 2021, has a floor price of 0 ETH at the time of writing.