Publications
Publications
- September 10, 2022
- a16zcrypto.com
NFT Sales: Clearing the Market, Avoiding Gas Wars
By: Scott Duke Kominers and Tim Roughgarden
Abstract
Instead of letting the market decide the price for their primary sale offerings, many NFT projects choose to initially sell their NFTs at prices below the market-clearing level. But what happens when market designers trade off efficiency for equity; or when demand far outstrips supply, as is often the case with high-demand NFT launches and drops?
When people want to purchase scarce resources in a market, this inevitably leads to competition among prospective buyers along other dimensions. In the Ethereum ecosystem, that competition can produce so-called “gas wars” that escalate when prospective buyers bid the gas price upwards as they compete to be first in line for the sale.
So how can builders avoid this? And more broadly, how can builders address market demand if they really do want to offer their NFTs at a below-market-clearing price? Here, we offer some guidance for builders from our vantage point of auction theory and mechanism design in practice — especially in the unique context of blockchains.
Keywords
Citation
Kominers, Scott Duke, and Tim Roughgarden. "NFT Sales: Clearing the Market, Avoiding Gas Wars." a16zcrypto.com (September 10, 2022).