GM frens,

In today's edition of The Ground Floor, we will be focusing the rising popularity of open edition NFTs with novel burning mechanics.

The Open Edition Boom

What makes an NFT collection successful?

Limited edition NFT collections such as BAYC, Doodles & Azuki are some of the most successful NFT projects of the past 2 years.

In the last 6 weeks, however, open edition NFT collections have picked up incredible popularity as collectors seek to collect artwork at more accessible price points.

The Pendulum Swings

Exclusivity and high value assets have been the primary talking point in the Web3 World since the bull run began in 2020, however, it's clear that change is on the horizon.

While assets such as Bored Apes continue to command enormously high price points, and the assets they release range from $2,500 to $4,000 — the Web3 World has reached an inflection point whereby the prices these assets command has become one of biggest blockers preventing new consumers from being onboarded to NFTs.

In response to this friction, open edition NFTs ~ whereby collectors are given the agency to determine the quantity created have taken the Web3 world by storm, with several open edition NFT collections consistently ranking in OpenSea top 10 most popular collections on any given day in 2023.

Too Much Supply?

In the past, the primary concern artists had when releasing an open edition piece is creating too much supply that would prevent their artwork from accruing value.

This concern is something both physical and digital artists have to contend with.

While it's certainly possible that a surplus of supply could reduce the prices people are willing to pay for an open edition piece, Checks by Jack Butcher and Proceed w/ Caution by DesLucrece have risen 100X & 10x in value since they minted.

These collections exemplify that open edition artwork can in fact accrue value.

Exchangable Artwork

What's the secret sauce behind these recent success stories?

🔥 Burning Mechanics 🔥

Burning mechanics are by no means a new phenomenon in the Web3 World, however, in the last 6 weeks burning mechanics have taken on a new lease of life as Jack Butcher popularized the idea of collectors having the option to burn multiple pieces of the original open edition artwork to receive a new piece of art.

This burning mechanic serves several purposes.

Alleviating the concern that there will be too much supply is near the top of this list, as artists creating open edition NFTs can create simple incentives for their collectors to exchange any number of the original artwork they minted to receive something new.

Example from Checks ⬇️

Example from Proceed w/ caution ⬅️

In both of these cases, the open edition artwork collectors minted are effectively serving as "ecosystem tokens" that allow collectors to purchase new artwork — purchased exclusively with the tokens created during the original open edition mint.

💸 Valuations

In light of these recent open edition success stories, one of the most pressing questions is the valuations these collections are currently commanding.

To get a pulse on the sustainability of the prices people are currently paying for these open editions, commonly collectors compare the current "market cap" (floor price x the quantity created) to the previous price points people paid for their 1/1 artwork.

In many cases, the current market cap of these open edition collections far exceeds not only the previous prices people were willing to pay for these artists 1/1 artwork, in certain cases such as Checks & Proceed w/ Caution, these collections market caps currently exceed the combined value of all previous sales from these artists.

Using this simple comparison, one could easily conclude that these collections are overpriced, however, the reality is a lot more nuanced than comparing two numbers.

The Attention Economy

By reducing the barriers to owning an artist's creation, open edition artwork demonstrates the increased value of a collection that receives the backing of a large group of collectors.

This might not seem like sufficient causation for these collections to command such premiums, however, in the age of the internet whereby the attention a product receives is the prerequisite to people purchasing said product ~ having the support of thousands of collectors is something that shouldn't be overlooked.

Not only are artists able to receive more engagement with the content they share online, many collectors are taking on the task of creating derivatives of the original artwork, in addition to creating content that aims to educate other collectors on the artist's creations.

Such behavior has proven itself to be instrumental in the continued success of both Checks & Proceed w/ Caution, and I suspect we are only scratching the surface of this new trend.

📡 Looking Forward

The growing success story of open edition NFTs has made many collectors ask the question "are artists being paid too much" with a number of artists making hundreds of thousands, and in some cases millions from their open editions.

This is a significant sign of progress, as it stands in stark contrast to the age old meme of "the starving artist", and as someone who subscribes to the viewpoint that the best version of the Web3 World exists at the intersection of artists and engineers, it's amazing to witness artists take full advantage of all that's possible with on chain artwork.

💡 Web3 Roundup

1) Refunds For NFTs? 💸

2) Amazon Is Planning To Enter Web3 🚚

3) Sorare x English Premier League NFTs ⚽

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See you next time! — OB1👋

This newsletter is for informational purposes only and does not constitute financial or business advice to any person or entity.