TLDR: Although VRGDA (Variable Rate Gradual Dutch Auctions) is originally designed for the Art Gobblers, it should be applied for more new NFT projects as their NFT issuance model after investigations. In particular, the Logistic NFT Issuance Schedule derived from VRGDA formula can align the supply more closely with the expected demand growth of the project over time.

What is VRGDA?

Variable Rate GDAs (VRGDAs) is designed for Art Gobblers developed by Paradigm, which allows you to sell tokens close to a custom schedule over time by raising prices when sales are ahead of schedule and lowering prices when sales are behind schedule.

What’s wrong with the current NFT issuance model?

Right now, the majority of current NFT projects issue all of their supply (usually 10k) at once at the beginning of their roadmap. However, NFT projects need to take time to build their loyal communities by executing the roadmap. The demand of NFT is positively correlated with the expansion of their loyal community. The one-time NFT issuance model is very easy to lead to the imbalance of supply and demand, which is either oversupply or undersupply. Both are very unhealthy for the long-term development of a NFT project.

• Oversupply:

  Many good projects start with a small group of communities. The one-time issuance model causes the oversupply situation, which leads to the low price of NFT or even many unminted NFTs at the early stage. It will largely discourage the motivation of the founder and community. These projects are easier to die before executing their roadmap.

• Undersupply:

  Oppositely, some NFT projects are good at creating hype and high expectations at an early stage. It will attract many speculators and flippers which make those NFTs  unreasonable expensive even before they execute any roadmaps. The price of these NFT collections often drop sharply after those speculators leave. And the founding team will get tons of money easily which might reduce their momentum to execute the roadmap as well. And users will start to ask: “where did the mint money go?”

Nouns’s innovative issuance model

Nouns’s daily auctions model solves the problem to some extent. The NFT supply starts tiny and expands at a fixed rate which aligns the expansion rate of the community development at an early stage. Besides that, it also has a transparent and efficient treasury management DAO which rewards those contributors. The treasury also starts tiny and expands gradually when more Nouns are sold.

However, Nouns’s issuance model also has two problems in my opinion.

1. The infinite supply of Nouns can’t guarantee the scarcity of the NFT collection. Scarcity is still very important for current NFT projects. People tend to collect those finite supply NFT projects because these projects can create social status and community attachment for their owners. Although Nouns DAO is able to buy back and stake those surplus Nouns in the future, it’s still a waste of treasury

2. In the long run, the linear issuance model is not aligned with the expansion rate of a community. Many successful communities expand fastly at an early stage and grow slowly later.

Learn from Bitcoin - Logistic issuance schedule

As the most successful crypto project, Bitcoin uses logistic issuance schedule. The supply rate grows fastly at an early stage and slows down at a later stage. The finite supply also guarantees scarcity. 

VRGDA - The better NFT issuance model

I’m excited to see paradigm launch the NFT version - the logistic NFT issuance model from VRGDA. Although it is originally designed for the Art Gobblers, I think it should be applied for more new NFT projects. For example, a 10k PFP project can be issued in 2 years (which is the normal roadmap duration for a PFP project) via VRGDA. This model definitely can align the supply more closely with the expected demand growth of the project over time, which will lead to a more sustainable and healthy development of NFT projects.

At last, Thank @transmissions11, @FrankieIsLost and @_Dave__White_. for creating the innovative issuance model. Appreciate @kzdagoof discussing and sharing some interesting thoughts with me. And also get inspired a lot by the tweet from @0xPrismatic