Tokenized Whitelisting for NFT Projects
Artwork by Milad Fakurian
The XRP Ledger is one of a kind. Although the blockchain has seen a lot of innovation over the years, it has also experienced its fair share of controversy and has taken part in large public spectacles. It is therefore not surprising that, when it comes to the development of NFTs, the XRPL community members decided to look at the other blockchains and think to themselves: ‘boring, we can do better’. As such, they opted for a different type of whitelisting which will briefly be described in this article.
What is An NFT Whitelist?
Typically, when a project develops an NFT series, project owners enable the initial distribution of that NFT through a process called ‘whitelisting’. This procedure consists of getting your wallet address approved to mint the NFT in question. This is usually executed at a reduced price to reward early buyers, often seen as supporters of the project. Furthermore, the process is designed to prevent “gas-wars” on the Ethereum blockchain, by designating a specific time upon which a certain wallet can mint the NFT.
Whitelisting is a process that caters to the ERC-20 mechanics, where gas prices are very high. Although it is currently the most prominent minting network, it is not without its faults. You see, whitelisted traders have a significantly higher chance to make a profit on an NFT re-sale (post mint). Consequently, whitelisting can create a sense of pressure on interested collectors to buy into a project before having the time to conduct meaningful research.
How Is it Tokenized?
Tokenized whitelisting is currently the dominant way to purchase an XRPL NFT. This process consists of issuing an IOU (I owe you) which gives the holder the option to mint the NFT once they are mintable. Although this process was implemented in anticipation of the XLS-20d protocol release, it has given projects and investors a new perspective on how to market and launch their series. In fact, tokenized whitelisting has given XRPL NFT investors plenty of time to research and follow a project before deciding to buy-in. Additionally, being able to track the data of the IOU token has given project owners valuable insights as to what a community responds to and, thus, how to create value for the HODLERS.
The trend of tokenized whitelisting was kicked off on the XRPL by the XPUNKS in October 2021. After a positive reaction from the XRPL community, others quickly followed suit and have now collectively created a unique NFT ecosystem. Although tokenized whitelisting may remain the norm in the future of the XRPL (especially after the XLS-20d implementation), it has brought a fresh perspective to the development of NFT projects and their respective communities. Perhaps even some of these positive elements will be carried over post-XLS-20d release by new projects in the space. For the time being, however, IOUs will remain a part of the XRPL ecosystem and they will play an integral role in the development of new communities and projects.