From Dutch Auctions to Open Editions: A Deep Dive Into NFT Distribution Models

JAN 12, 2023 • 22 Min Read

Teng Yan

The authors have not purchased or sold any token for which the authors had material non-public information while researching or drafting this report. These statements are made consistent with Delphi’s commitment to transparency and should not be misconstrued as a recommendation to purchase or sell any token, or to use any protocol. The content of this report reflects the opinions of its authors and is presented for informational purposes only. This is not and should not be construed to be investment advice.

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Introduction

Like fungible tokens, NFTs have many use cases and benefits — they represent digital property rights and can direct ownership to users. They can be used for fundraising, marketing, and governance. However, unlike fungible tokens, which capture value from products but don’t create value directly, NFTs are often the products themselves — consider Fidenzas, CryptoPunks, and music NFTs.

This makes the token distribution model an even more critical factor in determining the success (or failure) of an NFT project. Token distribution models represent supply, which should be designed with the expected demand in mind. If supply and demand match, it can lead to a stable and rising price. If there is a significant mismatch in supply and demand, there will be lots of price volatility and unhappiness among the community.

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