Make sure you have a clear understanding of gas fees and ownership rules, get a great developer, and then get another developer to audit the smart contract of the first developer.
That’s the advice from the developer of the Hoghomies NFT, considered one of the more interesting and successful NFT projects to launch this year.
Brands are increasingly looking at the role NFTs might play in their customer experience and loyalty programs.
Hoghomies is the brainchild of Hi-Rez the Rapper a US-based musician and artist who first came to prominence on YouTube, where he has 2.4 million followers.
His project incorporates elements of share ownership and loyalty programs. He pays a passive income (equivalent to dividends) to what he calls his OGs (original gangsters) the approximately 60 original holders of the first 75 NFTs.
Hi-Rez’s pass holders bought into the second mint, and receive what are effectively member benefits in a program that would be familiar to any corporate CMO. (OG’s also get these benefits and others).
As an artist with a long history of developing his brand through new technologies (he recently hosted his first metaverse concert, a collaboration with fellow artist Wiz Khalifa), NFTs were a natural play for Hi-Rez. His experience as a developer provides important insights into the kinds of issues brands need to consider if they wish to develop NFTs and the potential pitfalls along the way.
Digital Nation Australia asked Hi-Rez about what he wished he had known before embarking on his program. The first gotcha he identified is the fee structure found on some crypto-blockchains.
“I wish I knew how ridiculous Eth (Ethereum) network fees were. I'm talking about ridiculous. There’s a website where you put your address in, it says I've spent over $10,000 in gas fees just giving people free stuff. You know, just transactions,” he said.
Those fees weren't just from NFTs he stressed, but represent his collective fees on the Ethereum blockchain over the last few years. Those costs were however part of the reason he moved his project onto the Elrond blockchain.
“You look at Elrond and I've spent $10 and I've done thousands and thousands of transactions. But something I would change is that yeah, I wish I had knowledge of network fees.”
He also flags the importance of understanding ownership rules on secondary markets such as OpenSea.
“It’s like you don't necessarily really own the NFT when it's sitting in your OpenSea wallet. It's kind of just owned by the storefront which is kind of annoying to me.”
Again he contrasts the approach in the Elrond community. “A lot of people bridged it over to Elrond now [and] they truly know what ownership is. Now they can pull that off there put it on a ledger do whatever they want with it.”
Next, he stressed the importance of a trustworthy developer team.
“That's a big deal with smart contracts. And then somebody who can audit those smart contracts to make sure you're not getting screwed over by somebody who puts in a backdoor."
That’s a real possibility he suggested. "You see OpenSea get hacked, you see Binance get hacked, you see all these crazy things happen with billion-dollar market cap projects.”
Worth the conquest
Despite the need to learn these lessons as he went, Hi-Rez is pleased with the progress.
“What I wanted to do initially was just get 30, 40, 50 people that really believed in me enough. It wasn't even about money because I didn't realise how much Eth was worth or how much Bitcoin was worth. I didn't think about it. I just was only thinking about the art in that first collection. We probably raised like $50,000 in a month or two.
“It wasn't that my face lit up because I'm like, ‘Well, we can be rich.’ It was like ‘Whoa, I created something bigger than I even thought. I didn't expect it. I knew I wanted to make art and I knew I wanted to have people who supported me already to kind of go with me on this journey.”
One of those early investors was Wryce, a professional esports player (and a member of the DigitalNationES Halo team.)
Already comfortable with some aspects of Web3 technology that he had been exposed to through gaming, Wryce said the concept of NFTs felt familiar to him.
“I did a lot of skin trading in a game called Counter-Strike. [NFTs] looked very similar, and I was pretty successful doing that. So I thought I'd give it a go."
Hoghomies was the first and so far most successful project he has bought into it. Subsequent projects have not proven as lucrative, but he’s happy with the Hoghomies investment.
“With Hi-Rez, because I talked to him on and off for a few years, I knew about him because of his music and how it was involved in the gaming scene.”
Like any good digital native Wryce signed up to the gig economy, to raise over $1,000 that he needed to buy into the OG program by delivering meals all over Sydney for DoorDash. Now, after several months, his investment is paying off, despite what's happened elsewhere in crypto markets.
“Hi-Rez has given all the OGs free NFTs from his other projects, which are worth several thousands of dollars. So it's yeah, all of us have made all our money back from the initial investment.”
Disclosure: Wryce is a member of the Digital Nation esports team and is a paid contractor. No Digital Nation employers own Hoghomies NFTs.