What exactly is an NFT drop?
Different kinds of NFT drops in 2022
The NFT has dropped.
You may have come across the term while scrolling through tweets, chatting in your Discord group, or listening to a message from your favorite artist. Some believe that buying NFTs early from a collection is crucial. However, the term may have raised some eyebrows:
- What exactly is an NFT drop?
- What are the various types of NFT drops?
- How should you get ready for an NFT drop?
You've come to the right place if you're unfamiliar with the term or want to expand your NFT knowledge. This article will answer all of those questions and more, giving you all of the information you need to identify the correct NFT drops before they occur.
Let’s start with the most basic question: What is an NFT drop?
What is an NFT drop?
To get the first clear definition of an “NFT drop,” we must look at a similar phrase: the “limited edition drop.” These drops are common for various merchandise, such as clothing, gaming, and specialty electronics. They are successful because they tap into a mixture of FOMO (fear of missing out) and hype. News about them often spread through word of mouth.
Take a hypothetical example: the streetwear clothing brand Supreme decides to release a line of limited edition clothing at a set price for just one day. People line up at stores the morning before to get their hands on the merchandise. Because there are more buyers than articles of clothing, the merchandise sells out quickly, and the owners have bragging rights that they own the line of limited edition clothing. Because there are more buyers than articles of clothing, the merchandise sells quickly, and the owners can brag about owning a line of limited edition clothing.
NFT drops function similarly in terms of mechanics and marketing. They typically:
- Set a start date for the sale of NFTs.
- Buyers are aware of a set price or price format.
- There is a lot of buzz on social media or other channels, which causes FOMO.
- The NFT considers early buyers to have "bragging rights."
This format has advantages such as predictability, fair distribution, and transparency. These benefits help buyers feel more confident that they are getting good value for their money.
What are the various types of NFT drops?
Although NFT drops generally follow the same format, there are some minor variations depending on the type of NFT you're minting or the team's pricing strategies. We'll go over five different types of NFT drops here, beginning with the one we've already discussed:
Set price: There is a set price, a start time, and a fixed number of NFTs for sale in this NFT drop. Typically, the team will set the price in Ethereum, Solana, or another cryptocurrency. For larger providers, the team will occasionally list the price in fiat currency. Although the drop has a start time, there is usually no end time, and users can purchase the NFTs until they are sold out.
Open edition: This drop is frequently seen with NFT artwork. There is a fixed price, a start and end time, and no limit to the number of NFTs that can be issued. The digital artist is generally well-known for this type of mint and will set a lower price for this NFT than for their other works. Because there is a purchase window, there may be a rush on the NFTs, and no one knows how many will be sold in the end.
English auction: The most common auction format in which people bid on an NFT until the highest bidder wins. In the case of this drop, there is usually a start and end time, as well as a "reserve bid," which is similar to the lowest price at which a user can purchase the NFT. This format is also common on NFT art platforms, where 1/1 NFTs can have a high final bid price.
Dutch auction: A lesser-known auction format in which the price decreases for each period of no bids. An NFT may begin with a price of 3 ETH and then decrease by 0.5 ETH for every hour that no one bids. Rather than letting the price fall indefinitely, the team will occasionally create a "reserve bid" by putting a floor on the Dutch auction.
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