Regarding using NFTs to access Chainverse

I just had a call with amphiboly.eth regarding Chainverse FAQs, which is a document that details much of how Chainverse will operate.

One section we discussed was the following:

“Chainverse will restrict the number of NFTs available for minting to create scarcity; i.e. MVP edition 1/25, V0 edition 1/50, V1 edition 1/200. Scarcity rewards early customers with Alpha, enabling Diamond DAO to aggressively price Chainverse.”

We discussed it at length and I want to share some of my thoughts with the rest of the team.

  1. I believe using NFTs for accessing Chainverse creates bad incentives (with low/moderate conviction).
  2. If we do use NFTs to access Chainverse, I am strongly opposed to limiting the number of these NFTs (with high conviction).

I am not an expert on such incentive structures. I may be entirely wrong here and would love to hear other opinions.

First, I’m mixed on using NFTs for access because allowing customers to resell their access creates bad incentives. I have low/moderate conviction in this view.

  • For static cuts of data (ie: where a customer wants to use historical data with no need for continued updates), the customer is incentivized to purchase the NFT and then resell it immediately on a secondary market.
  • If an existing customer wishes to sell their NFT, they can do so on a secondary market by undercutting the official Chainverse price. (They will have to sell for slightly less than the official price we are selling for in order to be competitive). By reselling for cheaper, they will undercut our price and take our next customer. This will mean we are effectively competing with our own former customers.
  • New customers will be incentivized to buy NFTs on secondary markets for less than the price Chainverse is selling for.

Even if we take a % cut of subsequent NFT sales, the above two items in combination will make building a real business completely untenable.

Second, if we do decide to sell NFTs to access Chainverse, I am strongly opposed to limiting the number. I have high conviction in this view.

  • Capping access by limiting the number of NFTs sold will effectively cap our revenue. We can’t build a business off of taking a % of subsequent sales of existing NFTs. Why would we limit ourselves to earning n% revenue for new customers instead of 100% revenue? This is pointless.
  • Capping access by limiting the number of NFTs sold creates bad incentives. People should buy access to Chainverse in order to use the incredible web3 data we will provide, not because the access NFT is rare or may appreciate in value.
  • Capping access by limiting the number of NFTs sold looks shady. It looks like we’re trying to create artificial scarcity. This is a product, not a 10k NFT series. Why do we need artificial scarcity? If we want fewer people to buy, lets charge more for the product and, by doing so, improve our bottom line. If we want to drum up hype, lets make an amazing product and be selective with early access using waitlists and other standard methods which don’t commit us to the NFT direction.
  • Capping access by limiting the number of NFTs sold is bad for potential customers. If we run out of the limited NFT series we commit to selling, then are we really going to direct future customers to a secondary market where we can’t control the price? This both feels unprofessional and makes our revenue unpredictable.

Ultimately, I think this is a distraction that creates bad incentives. I propose we drop using NFTs for access and have more standard means of accessing Chainverse. If we necessarily want to use some kind of crypto auth, perhaps we do it with a token that has a fixed price, can only be bought from Diamond, and is non-transferrable.

As stated above, I am not an expert on designing such incentive structures. I may be misunderstanding something fundamental here and if that is the case, would love to hear.