Why dillution is the demise of your favorite NFT project - and how to get around it 🧵

For a long time, dillution was one of the main value propositions of NFTs. It was ponzi-like. Own an expensive NFT & you get free ETH dropped every few months in the form of new NFTs. (2/16)
{The set of BAYC + all the airdrops it's received is showing signs of life... up above 150 ETH on the back of stronger $APE.}
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However, it becomes increasingly clear that this isn’t sustainable. Why? Well... It's like with every ponzi. In order to keep making money, new people have to come in. In bear markets, however, this doesn't happen. On the contrary, instead of joining, people leave. (3/16)
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The demand goes down. With each further drop it becomes less. With every further dillution, the general demand for the entire ecosystem decreases. Doesn’t sound great right? (4/16)
I hear what you are saying, "okay Wale, that may be true in bear markets, but as soon as the next bull market comes all those JPEGS will be worth a fortune, right?" Well, not necessarily. Because the NFT space doesn't work that way. (5/16)
NFTs today are largely speculative assets. When you buy an NFT, it's either with the prospect that it will appreciate in value or at least that you'll get new drops that you can sell for a few bucks and thus increase the total value of your investment. (6/16)
The NFT space is basically always about the future. That's why Apes, Mutants and Kennels did so well before the Trial of Jimmy the Monkey. That's also why people buy Moonbirds rn, because there might be an announcement coming soon. (7/16)
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In other words, if your project shoots its ammunition too early, dillutes too soon, then the entire ecosystem can lose value. People want something to look forward to when they buy an NFT. (8/16)
If the main collection doesn't carry the project anymore, since investors rightly have enough after the 20th or 30th drop, then this value driver disappears. If the IP itself is not strong enough to carry the ecosystem alone by then, the entire project is doomed. (9/16)
Too many drops aka high dillution can also be a reason why new investors don’t buy in the first place. At some point, it just becomes too complicated. Just look at my RTFKT thread. The mere fact that there’s even a need for it shows that the level of dillution is high. (10/16)
So why do projects dillute at all? Easy, because we all like a good Ponzi, even if we don't want to admit it. The @doodles team got super much pressure after their non-dillutive Space Doodles drop to finally deliver value in the form of a "real" airdrop. (11/16)
After resisting for a short period of time, they folded and dropped Dooplicators to their holders. Btw if you're wondering "Space Doodles?" that just proves my point. Don’t worry tho, your boy Wale got you: (12/16)
Yet dilution doesn't always have to be bad if done thoughtfully. An additional collection can give people an entry point into the ecosystem at a lower price while rewarding existing holders. It can also help build the IP further. (13/16)
The goal should be to deliver the drops in such a way that people can still be exited about future and you slowly but surely prepare the project to stand on its own two feet through its IP. Don’t do it too early tho or people will lose interest. (14/16)
Unfortunately, far too many projects today still focus only on the next drop, the next dillution. And that is often not even the fault of the founders. We as holders and investors need to change our expectations. Long-term view instead of just "wen airdrop". (15/16)
Tldr: Dillution in and of itself can be a positive thing. However, if projects dillute too early and too much, the entire ecosystem can be destroyed. Projects that manage to find the middle ground will be the ones that succeed.