Community Trust ScoreLikely Real
Vitalik Buterin recently expressed his thoughts on the “mechanism design” for the sales of limited-supply items like the NFTs and tokens but also about stuff that is inherently blockchainy. He has been contemplating on how to do better than the existing sales, which will sell out quickly to create big and annoying splats in the gas market.
He points to market-clearing price, which is the price at which the amount the buyers are willing to buy exactly equals the amount the seller has to sell. When the seller is not clear about the market-clearing price, the seller should sell through an auction. The market determines the price through an auction.
When the seller is selling below the market-clearing price, it sacrifices profits. Also, buyers who are willing to pay a reasonable price for the property do not have the opportunity to buy it as the product below the market-clearing price is sold out.
Selling at below market-clearing price is an inefficient approach, and the demand exceeds supply. So some people will buy it and others will not.
He recollected the capped sale during the ICO craze of 2017, when people were willing to pay higher and higher gas price to have their transactions processed quickly, and the sale closed quickly in just 30 minutes. Thus, revenues were going to the miner than the token seller. Different strategies were tried to prevent gas price auctions. Now, NFTs are popular, but they have not learned a lesson from 2017.
NFTs are now making fixed supply sales like ICOs, and buyers are fighting to pay higher gas prices to get in first. Thus, selling below market price is not a new phenomenon; it has been existent forever. Several sellers are not willing make use of auctions or set prices for market-clearing levels.
The important concern in the process is locking poorer people out or losing fans due to the lack of fairness in price.
The auction, like a sale, creates a perception of “greed” about the seller. Products selling out while there are still long lines waiting to buy make the product more attractive to those who are still waiting in the line to buy the product.
Some buyers like the idea of grabbing up a limited set of opportunities before everyone else can take them as being a lot of fun.
He also points to: “The most basic rule of community sentiment management is simple: you want prices to go up, not down. If community members are “in the green,” they are happy. But suppose the price goes lower than what it was when the community members bought, leaving them at a net loss. In that case, they become unhappy and start calling you a scammer, and possibly creating a social media cascade leading to everyone else calling you a scammer.”
So, to avoid this situation, the sale price is set very low, but the post-launch market price will be high.
So, With NFT sale, the desired properties are fairness, not creating races, not requiring fine-grained knowledge of market conditions, providing buyers with positive expected returns, and making the sale part fun.
