From baseball players to shiny Pokemon cards, collectibles have been a cultural pillar of human behavior since the Renaissance. Memorabilia from famous movies or clothing worn by celebrities can be auctioned and sold for staggering sums. Take the prototype of the Batmobile from the 1960s Batman TV show, it sold for $ 4.2 million. With collectibles, the concept itself is simple: an item has value because of its rarity. The less of it there is, the more it is worth.
This concept is the driving principle behind the explosive growth of non-fungible tokens (NFTs). For the most part, NFTs are bought and sold on the Ethereum blockchain and are essentially digitized collectibles. Whether it’s the insanely popular and limited edition CryptoPunk avatars or Jack Dorsey’s very first tweet, NFTs are a lot of money and those who managed to get hold of a rare NFT will always have proof of ownership as that data lives on the blockchain .
Related: Art rethought: NFTs are changing the collector’s market
But how easy is it to grab an NFT?
Gas isn’t cheap
Just like Bitcoin (BTC) and Ether (ETH) are acquired, NFTs can only be obtained through mining. For seasoned crypto buyers and sellers, the process of mining and paying gas fees – a sum that someone has to pay to complete their crypto transactions – is nothing new. However, for first-time buyers who dip their toes in the NFT waters, the breakdown could feel like a nasty bite from a shark.
While this is not common practice, some NFT launches use a binding curve to determine the price of an NFT. This creates liquidity in the NFT market. For laypeople, this means that the price of an NFT asset is only determined by a finite amount of block space. With an ever-increasing demand for blockchains like Ethereum, network fees have a tendency to skyrocket.
Related: Ethereum fees are skyrocketing – but traders have alternatives
When you are a miner, you have the freedom to choose transactions that come with a high fee so that the miners fill their pockets at the buyer’s expense. Well, this condition is normal for crypto-natives. However, for someone new to crypto, the entire mining fiasco can be confusing, unacceptable, and deeply unfair, which is not a completely unreasonable point of view if you are a newbie to the market.
So how can this power imbalance be balanced so that new NFT buyers don’t have to suffer high gas charges?
Save space in the queue
When we launched its Shrug NFT and digitized an infamous emoji that had become a popular culture meme, it was very much aware of the above issues. Ultimately, we had to find a way to reduce activity in the chain and thus lower gas charges when hundreds of people try to mine an NFT. Early NFT platforms struggled with processing transaction streams, which can create a cumbersome experience for buyers and higher gas fees that they have to pay just to get their transaction approved.
Related: The NFT Marketplace: How to Buy and Sell Non-Fungible Tokens
The answer to these persistent problems lies in implementing a queuing system. Some NFT platforms have built infrastructure that can increase the speed of blockchain transactions, resulting in a better user experience. Creating a protocol where buyers have to queue to mint their NFT while also providing a window of opportunity will resolve the biggest inconsistencies in the entire minting process that are currently putting buyers at a disadvantage.
A queuing system creates a fairer market by minimizing the possibility of customers competing for the same NFT and losing their gas charges. As NFTs grow in popularity and capture the imagination of the mainstream (and our wallets), it’s important that NFT platforms make their blockchain-hosted marketplaces a fairer and more welcoming place for shoppers looking for the latest digital collectibles.
The dominance of whales in the market
Despite the hype and staggering amounts of money circulating through NFT space, the “average” price of an NFT sold on SuperRare is 2.15 Ether, or around $ 5,800, according to rankings on OpenSea. This begs the question: who exactly is buying the NFTs? Will first-time buyers be displaced by a small group of buyers with deep crypto pockets?
Even the implementation of a queuing system does not change the fact that the market is largely dominated by crypto whales. As the name suggests, a crypto whale refers to an individual or company that owns large amounts of Bitcoin or other cryptocurrencies. This is a problem in the wider crypto space as it means that people who own enough Bitcoin have the potential to manipulate currency valuations.
With NFTs in particular, most of the people who buy these non-fungible tokens are crypto whales. For example, only 2.3% of sellers on the Rarible marketplace make up 50% of NFT sales. This is reinforced on OpenSea, arguably one of the largest NFT marketplaces, where just 1.9% of sellers make up half of NFT sales. What essentially happens is that whales buy up projects early on and end up exerting too much influence on the reseller market, effectively pricing out first-time buyers.
As a result, people who don’t live and breathe cryptocurrencies are not engaging as much in the market, perhaps because there is simply no place for it.
In order to reduce the dominance of crypto whales, more needs to be done to educate the mainstream audience on how to buy NFTs so that it is not reserved for those dominant owners. We still have 197 of our Shrug NFTs left. We hope we can attract new users to the NFT space who could use the experience of buying their first NFT as an entry into the wider NFT market.
There is so much potential for NFTs to finally bring the cryptocurrency world fully into mainstream, as it essentially takes a concept that many people in the physical world understand and digitizes all of the driving force behind it. At its core, collectibles are meant to be a fun and lucrative activity for those who choose to participate. It shouldn’t be any different with NFTs.
This article does not provide investment advice or recommendations. Every step of investing and trading involves risk, and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.
Simon Yu is CEO and Co-Founder of StormX. He has been in the blockchain space since 2015 and is an avid speaker and early builder of the industry. Simon has been featured on Forbes, Reader’s Digest, Nasdaq, Business Insider, and others.