Whitelisting typically means that a crypto wallet address has been pre-approved for the minting of NFTs on specific dates and times
In a typical Silicon Valley startup, you look to start with an innovative product or service and then match that to customer demand, testing out your hypothesis with an MVP (minimal viable product) before seeking to scale up the business backed by VC funds.
The VC model seemed in decline during the crypto ICO boom years in 2017/18, when an ambitious whitepaper and an impressive founding team and advisors were enough to gain token investment.
But nowadays, as the world of DeFi, the metaverse and NFTs all usher in the Web3 world, that’s certainly not enough. Projects need to have purpose and be community-led, in a real sense, in terms of both governance and tokenomics.
As Maggie Hsu, partner at top crypto VC Andreessen Horowitz pointed out regarding the nature of Web3 projects earlier this year, “It means having a strong community, not just being “community-led” or “community-first,” but also being community-owned, blurring the distinction between owner, shareholder, and user. What allows for long-term success in Web3 is a clear purpose, having an engaged and high-quality community, and matching the right organisational governance to that purpose and community.”
That being said, how does the current practice of whitelisting, allowing early pre-sale access to NFT and DAOs, square with this Web3 vision? When there is an opportunity from being lucky enough to be whitelisted to make a significant short-term profit, is that right from the longer-term view of the project.
What is whitelisting?
Before we get into the expert discussion, let’s briefly consider the focus of this article. Whitelisting was introduced in the NFT space near the end of 2021 after NFT enthusiasts identified a critical issue during the launch of new projects.
Also Read: NFTs: The good, the bad, and the future
Before the concept of whitelisting became popular, NFT projects with a lot of hype were usually ‘botted’ on the mint day by NFT whales (people who hold large amounts of crypto), leaving little to nothing for retail investors. Using trading bots allows the whales to buy the NFTs before community members have a chance to buy.
As explained in the NFT Examiner, whitelisting is when a specific crypto wallet has been approved for minting a specific NFT.
“As an example, Neo Tokyo is a project where participants have to pass a test to become eligible to mint a Neo Tokyo Identity NFT. If they solve the challenge, they are added to the whitelist, allowing the participant to mint the highly sought after NFT. Without being on the whitelist, buyers could attempt to mint the NFT, but the transaction would fail.”
In the NFT world, whitelisting typically means that a crypto wallet address has been pre-approved for the minting of NFTs on specific dates and times.
Furthermore, due to the high demand for these projects, particularly on the Ethereum blockchain, there were usually ‘gas wars’, with transaction fees reaching thousands of dollars, which was a bad look for the NFT sector and hampered user adoption.
In addition, pre-approved users on the whitelist can spread out their minting so that they are not all transacting simultaneously, avoiding a sudden spike in transaction prices caused by demand. Most new NFT projects layout their whitelisting requirements on their respective
Discord servers, with different tasks and assignments ranging from chatting to a certain level, posting fan art, promoting the project on social media platforms, etc.
In some ways, it’s an evolution of the practice of ‘bounty campaigns’ used in the days of ICOs in 2017/18 to market token offerings by offering giveaways in return for tweets and Facebook likes to help promote the coin offering.
The lure of big profits
Of course, the popularity of getting yourself invited onto an NFT or DAO whitelist isn’t just about being part of an exclusive community, to be part of a long term Web3 project; for too many people simply a chance to make a quick buck.
In his video explainer on the power of whitelisting, YouTuber ‘_DB’ points out that if you get access to a pre-sale token, it usually sells between US$10 to US$20 or even US$30, though how much can vary according to the amount of hype behind a project; with a limit in the amount of pre-sale tokens typically set between US$1,500 to US$2,000.
The new NFT drop from the High Sloth Society (HSS) of 10,000 Elite Sloths recently organised a public sale that was sold out in 29 minutes for US$1.2 Million.
“The High Sloth Society is a group of people that are no longer interested in money but want to focus on what money cannot buy. By owning a high sloth, the users are granted the opportunity to have a direct interest in the ancient artefacts. The Korean National Treasure is just the first one,” Leon Kim, Core Contributor of HSS, said.
What’s the benefit for the community?
The purpose of whitelisting serves two core purposes. The first relates to the fact that if you are going to have any degree of success, you need to build a community around a project. Achieving this involves driving online engagement through social media.
And using a whitelist is an excellent way to do this. For the user, it’s a way of getting preferential access to a project, providing an incentive for a community to rally around a project.
“It can be a really good way to start getting people again, like talking about things on social media, retweeting, commenting, sharing pictures, all that sort of thing, because if you if you make things obvious, then you’ll get like, you’ll get some pretty good organic traction,” confirmed Ben Baldieri, Director of a Web3 tech consultancy Disintermediate Ltd.
The future for whitelisting
The whitelisting method currently dominating the NFT space is relatively new. Therefore, while it’s successfully prevented botted NFT project launches and conserving gas fees, they need to be used with the community in mind.
BigONE Chairman Anndy Lian said, “While the whitelisting practice was founded on good intentions, it has been tainted by some bad actors in the NFT space; this ranges from over-stringent requirements for being considered for a whitelist to some Discord server moderators giving out multiple whitelist spots to their family and friends.”
“I believe that commonly agreed best practices for the NFT space are the logical next step forward to ensure all participants’ safety and security in this exciting marketplace. NFTs have a lot of potential as their utility develops from collectibles to allowing fans to connect directly with artists and creators and their role to prove ownership in the metaverse and GameFi projects. But as things move quickly, we need to ensure we get the balance right in such a fast-changing technology,” Lian added.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.