How free market entry affects market quality: Evidence from non-fungible tokens

Abstract

The rising popularity of non-fungible tokens (NFTs) has led to an increase in the costs of minting digital assets into NFTs. This presents a threat for marketplaces that wish to attract NFT creators. To address this, some platforms allow creators to mint NFTs for free (lazy minting). Although this option is preferred by many, it remains unclear what the impact of lazy minting is on the market. In this work, we use data from Rarible to investigate how work quality is affected after lazy minting is introduced. We find that after the introduction, average market quality reduces by about 13.6%, while we estimate that existing creators who shift towards lazy minting reduce their work’s quality by about 8%. We further estimate that lazy minted tokens receive fewer likes compared to other similar tokens. We discuss how we contribute to the literature and how we plan to extend our work.

Publication
Working Paper
Giannis Kanellopoulos
Giannis Kanellopoulos
PhD candidate
Dominik Gutt
Dominik Gutt
Assistant Professor
Murat M. Tunc
Murat M. Tunc
Assistant Professor of Information Systems

I am an Assistant Professor of Information Systems at Tilburg School of Economics and Management.

Ting Li
Ting Li
Professor of Digital Business