Lies behind the Dutch Auction in NFTs
Of late, we’ve seen some rather hyped up projects using the Dutch Auction (DA) for their mints. Now I personally have a distaste towards many of them as they use language to coerce the public into thinking that the decision, is all about you. But is it?
Let’s first look at what a DA is and what it is not. DA’s are auctions that start high and slowly reduce in price. This is in attempt to reward those who are most excited about something (in this case, a project) while still permitting the market to decide on the final price of the item. How it works is, the FINAL SUCCESSFUL BID is used as the final price while everyone who bid earlier is either charged the final price or refunded the difference. This ensures those who valued the project at higher prices will be able to mint, albeit truly at the market decided price. If you valued it lower than the final price, you would have never had the chance to enter the bidding.
“The main point here is, market decides the final price, and those who bid early are not punished for their excitement in the item”
In the NFT space, we see projects use the DA as a way of, in their words, preventing gas wars or allowing the public to decide the price. Rarely however, are there any projects who stay true to the ideologies of the DA. Those who go in early, pay the price that they entered in. One of the few projects doing this right are Hikari NFTs. They start the mint at 0.3 eth dropping to 0.1 eth and they will REFUND you the difference you enter vs the price of the final piece sold.
Most of these other projects that use the DA don’t even invest to have contracts that optimizes gas — it may not prevent gas wars, but if that was the main concern, this is step number 1. Aside from that, they generally have a lackluster execution of how to manage the mint and who can mint. What about the case of allowing the market to decide the price? We should look at it the way it is, this is about getting the most out of the mint financially. People in this space seem to have an issue with earning money even though most are in it for the money. It’s mindboggling. DA’s are great if a project believes it has a high value but wants to allow the public to ultimately decide if that is true. It’s also good for those that aren’t too sure and want to leave it to the public. But at the end of the day, if making more money wasn’t the incentive, just price it low. The appeal to altruism while the facts show a yearning to maximize financial gain is disgusting.