[Dive #53] Doodles Genesis Box Auction
The minting process continues to evolve 👏
The Doodles NFT NYC event was notable for many things:
The Launch event which was part Keynote (by the CEO and Founders) and part Concert (Chainsmokers!)
Announcement of the first founding round led by 776 (founded by Alex Ohanian, co-founder of Reddit). Other details on the round TBD
Pharrell announced as Chief Brand Officer
There will be a Doodles music album in partnership with Columbia Records, executive produced by Pharrell
Doodles2 will be coming soon, and they will be available for the mass market and focused on wearables.
Thread below from Doodles for all the details around the announcements.
About those wearables…
So wait, WTF is Doodles2 again? And what are these wearables?
And what’s this Genesis Box?
Assuming Doodles becomes the global brand it aspires to be (quite possible), think of these Genesis boxes as…Pokemon Cards back when first released in the US in 1999.
Worthless pieces of cardboard right? RIGHT?!
Believe it or not, these were selling for even more months ago (🐻 markets affect everything heh).
Based on the information shared, these Genesis boxes are going to be not only exclusive, but valuable as collectible wearables for Doodles2, like the Fortnite skins that people pay for.
Great, lots of fanfare. What’s up with this auction and how does it work?
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Auctions and Mint Types
Let’s start off with auctions first:
English: What happens on eBay, what you see on TV, or at high end auction houses like Christie’s/Sotheby’s. Oftentimes with a reserve (minimum) price. Typical for higher end NFT art.
Dutch: There is a starting price and the price declines over time until someone bids and wins the auction. This is one of the pricing mechanisms with NFT mints, but an uncommon one.
There’s more. But let’s keep it simple.
Now let’s talks about the various NFT project mint types:
Public: There is a set date + time (or a surprise announcement) for the project mint. Depending on the project’s popularity, this causes a traffic jam on the blockchain and gas (the unit metric to determine how expensive it is to create a transaction on the blockchain) spikes. You’re not just paying to mint the NFT but also the price to transact.
Imagine you were buying tickets to a concert for your favorite artist. Those service/processing fees? 🤮
Now imagine this was a concert for Justin Bieber and the service fee was dynamic based on how many people were trying to buy tickets. It would probably look like this instead.
Am I exaggerating? I want to say ‘yes’…but remember my post on Otherside?
Yes, I had a $5,730 ‘service fee’ on the blockchain. 💀💀💀 This is not a humble brag, this is painful AF to look at still. And this is one of the areas in which the space will need to and is improving on, fortunately.
Because of this craziness, especially during a bullish market in NFTs last year and earlier this year, something had to change.
Whitelist/Allowlist: To control for the crazy gas fees (service fees on the blockchain) from popular projects, projects started to introduce the concept of whitelist/allowlist.
Projects provided special access to community members to mint the project. Friends & family, community members that have shown value, or lucky individuals that won a raffle, etc.
For example, with Subway Rats:
This is still the dominant form of minting for projects. Other projects have an allowlist minting period, then open it up to the public.
Again, there’s more. But let’s keep it simple.
PS: I plan on doing a post on the concept of gas soon-ish. I believe this is an important concept to understand, and it has not been explained well to the broader public.
The 🪣 Auction - Scenarios
So what did the Doodles team do that was worthy of a TPan dive?
24,000 boxes with a price based on market demand. 4,000 were reserved for those at NFT NYC at their Genesis Factory, which people had to wait 2-3 hours in line for. I didn’t have the time for the line, but sorta wish I was there because the activation was cool and you could reserve a box for $123 USD.
Few things about this already:
Supply of 24,000 - This is a lot. Not many successful collection have this supply.
Priced by market demand - Hard to complain about the price when it’s not set by the team. Unless the auction if structurally flawed, you get what you get.
Phygital sale - As mentioned there was a reservation mechanic where some consumers could reserve a box. And if they wanted more or someone couldn’t attend NFT NYC, there is this online auction.
24 hour bidding period - Limited but still plenty of time
So let’s look at this 22 hours in
Confused AF? Don’t worry, I got you 😘
Let’s simplify this first. Let’s say there were only 3 boxes being sold and there were only 2 bidders, me and you. You put in a bid of 2 ETH and I put in a bid of 1 ETH. This is what the result looks like.
Woohoo, we both win! I get one box at 1 ETH and you get 2 boxes at 1 ETH each.
Let’s say Cool Man Dan joins in for Scenario 2, but enters with a low bid of 0.1 ETH.
Nope, sorry Dan. No boxes for you, but you do get a refund for your bid!
Why didn’t Dan get boxes? You had your 2 ETH bid, and I had my 1 ETH bid and Dan’s bid was too low to clear (though he has the option to increase to stay competitive, but let’s say he’s broke). Result is the same.
Let’s say Rich Gal Val joins in. She’s…rich, so overpaying is not an issue. She bids 3 ETH for the boxes.
Whoa this is weird? Why this result? Let’s start from the bottom up.
Cool Man Dan - Same result as scenario 2. Disqualified due to the low bid, but bid gets refunded.
Me - I’m the clearing bid! (will explain below) I get one box. 1 ETH flat bid, no refund needed
You - Also get a box! You get a refund of 1 ETH because you only got 1 box for 1 ETH.
Rich Gal Val - She gets one box as well, with a refund of 2 ETH.
Wait a sec…why does Val get only 1 box despite the high bid? 🤔
Let’s say the clearing bid shifted up the waterfall from Me (1 ETH) to You (2 ETH). If that were the case:
You would still get 1 box, no refund.
Val would still get…1 box, with a 1 ETH refund.
And there would be 1 box left. Neither You or Val can afford another box at 2 ETH.
But that’s not how the auction is structured. It’s meant to sell out. Aha!
So let’s say Val increases her bid because she wants more than 1 box, knowing how Scenario 3 might play out.
Aw shucks, I got outbidded because the clearing bid became yours. You still get your box (at an increased price vs. previous scenarios) and Val gets her 2.
So this isn’t just a normal auction…there are layers game theory involved with clearing prices, the ability to increase your bid after submitting your initial bid, etc. Sheeeesh! Also, there are probably more technical terms for all this, but what do I know 😊
GET IT?! Trust me, I was confused too. 😵💫
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The 🪣 Auction - What Happened
Now that we know how the auction mechanics work…
22 hours in
Wow some crypto whales putting big bids in. Pranksy is a BIG player in the space and they went hard. Arguably a positive sign with big players investing a significant amount of ETH into acquiring these boxes.
Note the clearing bid of 0.266 ETH.
23.5 hours in
Ok this is nuts. Other big players coming in. Clearing price rising to 0.416 ETH
23.65 hours in
Alright, time to put my bid in before I forget.
Clearly, I am not a whale. But I did want to get a few boxes myself as a long-term play. (not financial advice, do your own research, etc.)
If the auction stopped right that moment, I would’ve gotten 5 boxes. But there were still 21 minutes left…
23.99 hours in
With the clearing price bumped up to 0.5 ETH, I only qualified for 4 boxes 😭
Note the 169.420 ETH bid in third place. As we all know, this space loves memes. But this meme is in the form of a monster bid. Walking the talk 🐳
Note the vanity bid increase by Pranksy to 290.01. Just to make it clear that they were the top bidder 😂
Andddd, that’s a wrap!
The 🪣 Auction - Reactions
This was innovative in several ways.
The market determined the price
The pricing and dynamics were transparent
You could adjust your bid (upwards) if you wanted
You could enter your bid whenever you wanted before the auction closed
Also, this auction was open to everyone, Doodle holder or not.
This was one of the most notable aspects of this auction:
Remember that $5,730 ‘service fee’ on the blockchain I paid for for Otherside? My service fee for the Doodles auction was $2.42…
Oh ya, Doodles basically did a version of a fundraise as well. How much?
Don’t get me started on how NFTs are going to change the face of fundraising lol. Maybe a post for another time.
Overall this auction went quite well. However, it wasn’t perfect by every standard. There were criticisms around distribution as the top bidders were able to get a large number of boxes. Aka: Rich get richer.
However, one of the founders countered with the bigger picture around holder distribution for the whole Doodles ecosystem.
The 🪣 Auction - What’s Next
SO WHAT SO WHAT?! Yup, on it :)
Did I mention that Doodles will open-source this? Bravo Doodles team 👏 This is going to introduce a new wave of minting mechanics. Transparent, dynamic, and market-driven auction-based minting. Not appropriate for all projects, but this space likes transparency, and here you have it.
The game theory in this will make way for a new way of thinking about consumers, liquidity, and whales. Will other projects create limits on the max bid? How can you reliably control for that (whales can just use a different wallet then)?
What about Web2? I believe that there are some thought-provoking takeaways for Web2 brands. What would it look like if Nike introduced this pricing mechanic for their next big sneaker drop? Sure, there might need to be some guardrails and more planning, but would it get eyeballs? 1000%
You love to see the innovation :)
See you next week!