The growing popularity of non-fungible tokens (NFTs) often creates situations in which market demand outweighs the supply. The scarcity (or “rarity”) of an NFT is an essential feature influencing its value in the eyes of investors.
In such a highly competitive market, a group of creators came up with a clever trick to benefit investors. The NFT whitelisting practice is becoming increasingly frequent in this market, and our guide will explain how the system works.
What Is NFT Whitelisting?
In the ever-changing world of non-fungible tokens, NFTs can take inspiration from many real-world assets. In general, we have witnessed the growth of NFT digital art and metaverse virtual land. Moreover, if you are familiar with blockchain gaming, you will know how popular NFTs are in that sector.
It is no surprise that NFTs have become a hot topic in the crypto community, with so many different applications. Many NFT projects have strong and involved communities trying to get the newest NFT drop from their favorite projects.
A method to ensure that a motivated investor can mint and collect an NFT is the whitelisting procedure. Creators generally ask traders to help a community grow in exchange for early access to an NFT collection.
Why is NFT Whitelisting So Popular?
In order to reward their community, NFT project designers frequently employ an NFT whitelist.
By allowing fans to mint before the general population, projects generally avoid “gas wars.” Being on the whitelist almost often translates into a lower mint price than what is available to the general public.
Getting a free NFT is a perk of being on the whitelist from time to time. For collectors, the most crucial advantage is that the system ensures that you will get a chance to mint NFTs.
Pros and Cons of NFT Whitelisting
There are several pros and cons when joining an NFT whitelisting procedure. We chose to summarize the main points to keep in mind below.
NFT whitelisting has the potential to eliminate frauds in this industry, according to some. One type of fraud is when someone artificially inflates the value of their assets by buying and selling them repeatedly. Bad actors influence the market in various ways, one of which is wash trading.
Fraudulent activity is theoretically less likely because only a group of traders can access the NFT presale. The system can protect the NFT market against monopolization by limiting the mint time.
The most obvious advantage of whitelisting is that investors may get a head start on a project’s growth. There may be greater competition to mint NFTs in the future, which is a sign of a successful NFT initiative.
As a result, one can avoid the competition, on-chain traffic, and skyrocketing gas expenses. A project can restrict NFT minting to just those users who have joined the whitelisting system during a short period.
As a thank you to early backers, specific projects may airdrop limited-edition NFTs.
It would be unfair to praise the advantages of NFT whitelisting without warning about its potential dangers. Priority access to NFTs may sound like a good concept, but consumers should know that the system does not guarantee profits.
NFTs that are not popular may become illiquid and difficult to trade on secondary markets. Do some homework before minting, and only invest the money you’re willing to lose.
There is no way to correctly forecast the demand for new projects’ assets because of the market’s unpredictability.
In this context, you should avoid NFT whitelists that don’t ask for anything in return. Your participation in the whitelisting may be contingent on joining a Discord channel and posting related content on social media.
Those creators that promise to whitelist your wallet without performing the steps above may be trying to con you.
How Does NFT Whitelisting Work?
Each project has different NFT whitelisting rules, but we generally find several similarities. From a high-level point of view, keep in mind that a typical NFT whitelisting mechanism works as follows:
- Find a suitable project: if you manage to locate a project you consider attractive, check if it offers NFT whitelisting. Not everyone in the crypto world uses this strategy, so be careful when researching a new NFT collection.
- Check the NFT whitelisting requirements: in general, you will need to use social media to complete this step. As already mentioned, you typically need to join a Discord page and share your support for the project online.
- Apply for the NFT whitelisting: crypto projects use different ways to let you apply in this case. For example, you may need to fill in a Google Form, send a message to a Telegram bot, etc.
Depending on how well-liked NFTs become, the rivalry for mint may be fierce. Before making any trades, be sure to determine the credibility of an NFT initiative.
NFT whitelisting can be a great chance to enter the market at an ideal time. However, not all the creators are committed to their projects, so you always need to be careful.