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# Dynamic Pricing for Kiwi NFTs
## Introduction
This document presents an experimental dynamic pricing mechanism for our NFT, using the Farcaster NFT feed as a key visibility channel. Starting from 0.01 ETH, the price will be adjusted based on observed minting activity. The experiment begins on 2023-06-15 and continues until a sustainable, stable price is achieved.
## Motivation
We aim to maximize our NFT's visibility and sales by ensuring it appears on the Farcaster NFT feed at least once every 12-24 hours. Additionally, the goal is to reach an average annual revenue of 48000€ (equivalent to half a yearly salary for two full-time employees) to ensure the project's sustainability. This experiment is not about pursuing excessive profits, but a way to cover our operational costs as we devote full-time effort to the project without a salary.
## Methodology
The pricing mechanism will be dynamically adjusted based on the observed sales.
In June 2023, with ETH priced at 1501.87€, to reach the target revenue of 48000€, the NFT must be sold at an average price of approximately 0.0420 ETH:
48000€ / (1501.87€/ETH * 365 days * 2) ~ 0.0420 ETH
The procedure is:
1. **Check Minting:** Every 12-24 hours, monitor the Farcaster NFT feed for new mints of our NFT.
1.1. **No New Mint:** If no new mint is observed, decrease the price by the equivalent of 10€ to stimulate sales.
1.2. **One New Mint:** If a single mint is found, keep the current price.
3.2. **More Than One Mint:** If more than one mint is observed, increase the price by the equivalent of 10€ to capture the demand.
2. **Repeat:** Continue repeating step 1 until the NFT is consistently minted at a stable price that aligns with our target of 0.0420 ETH.
3. **Emergency Condition:** In case of failure of the experiment, we will revert to a previously viable price.
4. **Gas Cost Consideration:** If Ethereum gas costs become excessively high, hindering our ability to change prices, the experiment might be suspended or modified to remain economical.
This dynamic pricing model aids continuous and rational price discovery while we build our protocol.
It provides valuable insights into what price the market is willing to pay for the NFT and the associated service over time.
If the NFT consistently sells under the required average price, it signals a need to increase the utility value for NFT holders.
## Considerations
### ETH/EUR changes must be reflected over time
The ETH/EUR price is currently hard-coded at 1501.87€. Additionally, the Kiwi News treasury currently isn't actively managed to e.g. preserve value (read: we keep everything in ETH). However, if there are price changes of +- 10% in ETH/EUR, we must strongly consider to update the schedule calculation to keep the model in synchronization with market conditions.
### ETH/EUR volatility can be managed individually
For treasury risk management purposes, and as ETH can be very volatile, it can make sense to continuously pay out the treasury to individuals so that they can self-manage the sent ETH in whatever currency they're comfortable to hold.
### NFT sales prices must be "fun"
It makes no sense to ask a user to buy an NFT for 0.12124123 ETH, so although the 10€ increase would suggest a precise, fixed-point calculation, we will change prices so that they remain readable for humans. For example, if the price is 0.01 ETH and we want to add 10€ to it, we'll just add 0.005 ETH (although current prices suggest to add 0.0066 ETH)
## Limitations
### Model cannot keep up during FOMO-minting
This model only works as long as we have between 0, 1, or 3, 5 minters a day. If we go viral and have 100 minters a day it won't increase the price fast enough and we'll have to manually intervene. But this is something we consider when we face that situation.
### We might not be able to update price every 24h
Right now the calculation is to produce a mint of 0.0420 ETH every 12 hours, but we're committing ourselves to a 24 hour window for now as we want to keep gas costs low.
## Disclaimer
This is an experiment. Expect things to change.
## Additional details
The experiment will be conducted using the following NFT: [Zora.co NFT](https://zora.co/collect/eth:0xebb15487787cbf8ae2ffe1a6cca5a50e63003786)
For further insights into dynamic auction models, we recommend [this document](https://www.paradigm.xyz/2022/08/vrgda) by Paradigm.