For many people, non-fungible tokens have only been around for a matter of months. Even early adopters are only just past the six-year mark. Nevertheless, mounting evidence shows the NFT industry is an “old boys club” already. Simply put, a small number of participants reap the vast majority of the gains. Or profits.
Two key reasons behind this relate to processes. On the buyer’s side, those who can invest frequently and in a wide range of projects stand to see the best returns. Which is pretty obvious when you think about it.
Less unavoidable is the concept of “whitelisting”. This is where certain followers are offered lower prices for new NFT projects because they previously invested, or engaged with the creator. Simply put, making a whitelist is a huge advantage because of secondary sales. According to the report, published by Chainalysis, “whitelisted” NFT collectors stand to make around 75% pure profit when they sell tokens to others. Those not invited into inner circles can expect just 20.8%.
Crucially, the data suggests it is almost impossible to reap outsized returns on investment without being whitelisted. “A very small group of highly sophisticated investors rake in most of the profits from NFT collecting,” the study said. “This is especially true in minting, where the whitelisting process gives early supporters of collections access to lower prices that result in greater profits. We also see possible evidence of the use of bots by investors looking to purchase during minting events, which could shut out less sophisticated users.”
NFT Industry “Old Boys Club” Takes Lead From Crypto Club
This article on Bloomberg draws interesting parallels between NFT whitelisting and “initial coin offerings”. Regulators shut this practice down, but for some time cryptocurrencies were plagued by preferential treatment for selected investors.
“NFTs represent one of the most exciting, fast-growing areas of the cryptocurrency world,” the Chainalysis report said. “However, those looking to collect and trade NFTs must understand how competitive the market is.”
This is a very good point and one we take seriously at NFTEvening. In addition to clear issues arising from whitelisting, problems with language and terminology also exist. With more and more websites dedicated to reporting on NFTs, we’re seeing increasing amounts of content produced that is confusing, poorly researched, and badly written.
As the leading independent NFT news website in the world, we’re dedicated to helping experts and newcomers alike understand how the space is evolving. Whether that’s through the latest trends and projects, or our Beginners Guides. For example this in-depth look at Solana NFT collections, or this walkthrough for making an NFT collection of your own.