A fair (and fun) token distribution for the Mexico City Collection

Mexico City Collection Drop

Status: Closed, outdated, comment period ended. For the final sale mechanism, review our tokenomics here.

tl;dr

We propose a new drop mechanic for the Mexico City collection that increases the number of available units while maintaining price discovery across individual artists in the collection through secondary market activity.

Here is the abbreviated plan:

  1. Announce the complete lineup for the Mexico City collection prior to the drop and release eligibility requirements for the drop (e.g. require holding a GTMX and a Citizen to participate in the drop)
  2. Conduct a GTMX sale to fund the ongoing operations of the team between London and Mexico City, as well as secure real-estate and necessary licenses to operate in Mexico
  3. Conduct a dutch auction with a rebate to purchase a “blind” mint pass for 1 of n artists in the Mexico City collection. All mint pass buyers pay the same final clearing price. The mechanic encourages participants to enter at the highest price they are willing to pay, but enables everyone to end up paying the lowest market clearing level (or resting price).
  4. Reveal the corresponding artists for the blind mint passes after the auction ends but before the event starts
  5. Conduct the event from November 14-21 and mint the Mexico City collection artists IRL

Background

In An improved auction method for bundled token drops (e.g. city collections), we outlined several first principles for designing drop mechanics:

  1. Fairness: don’t completely lock low-income people out of participating, give them at least some chance to get in. For token sales, there’s the not quite identical but related goal of avoiding high initial wealth concentration and having a larger and more diverse initial token holder community.
  2. Don’t create races: avoid creating situations where lots of people are rushing to take the same action and only the first few get in (this is the type of situation that leads to the horrible auctions-by-another-name that we saw above).
  3. Don’t require fine-grained knowledge of market conditions: the mechanism should work even if the seller has absolutely no idea how much demand there is.
  4. Fun: the process of participating in the sale should ideally be interesting and have game-like qualities, but without being frustrating.
  5. Give buyers positive expected returns: in the case of a token (or, for that matter, an NFT), buyers should be more likely to see the item go up in price than go down. This necessarily implies selling to buyers at below the market price.
  6. Maximize artist revenue: If artists do well, we do well. We want to continue to produce outstanding results for our Artist Partners and having a reputation for positive financial outcomes is a key aspect of that relationship.
  7. Reward existing CryptoCitizens: Community members who have participated in ecosystem building, governance, and minting events should have a higher-than-average chance of participating in drops.

Assumptions

  • All 333 GTMX holders intend to participate in the Mexico City Collection drop
  • We can bundle (and unbundle) multiple mint pass smart contracts under the same collection on OpenSea during the pre-reveal period
  • Artists are in favor of us experimenting with a novel drop mechanism

The Plan

One more time for the people in the back:

Pre-Drop

  • Announce all of the participating artists in the Mexico City Collection
  • Announce the drop dates for both GTMX tokens as well as the Mexico City Collection drop
  • Sell 283 GTMX tokens via a fixed price (e.g., 3 ETH) sale Dutch auction fixed price with a presale on [app.brightmoments.io](http://app.brightmoments.io/ (see comments below for discussion on this)
  • Take a snapshot of all GTMX holders 24-48 hours before Mexico City Collection drop

The Drop

Tokenomics

  • Starting price: x ETH
  • Resting price: x-C ETH
  • Price paid by Individual Mint Pass Buyers: Market Clearing sellout level or Resting price
  • Price paid by Mint Pack Buyers: Purchase Price at time of transaction confirmation
  • Auction Duration: 1 hour
  • Tokens sold: ~70% of total mints (i.e. if there are 8 artists with 100 mints each, the drop would sell 560 mint passes)
  • Eligibility criteria:
    • Mint Pass: CryptoCitizens who hold at least 1 GTMX token.
    • Mint Pack: Buyers must hold a GTMX + a CryptoCitizen from each city (e.g. CryptoGalactican, CryptoVenetian, CryptoNewYorker, CryptoBerliner, CryptoLondoner) & a minimum ETH amount (e.g. 8 ETH the day before the sale to meet the minimum)
  • Wallet Limiter: 3 Mint Passes per GTMX held, or 1 Mint Pack per full CryptoCitizen set held

Purchasing

  • At each price band, collectors can purchase a Mint Pass that is randomly selected from a blind assortment of n artists
  • There is also a button to purchase a Mint Pack for the cost of n artists * the current price band (e.g. if the price band is 1 ETH and there are 8 artists, the price of a mint pack is 8 ETH). This is the only scenario when purchasing buyer pays non-market clearing price.

Here is a rough mockup of a potential UI based on the Mirror Dutch Auction template

Post-Drop

  • Once the drop is complete, buyers will hold a Mint Pass corresponding to a specific artist ID (e.g. Mexico City Artist 1, Mexico City Artist 2, etc.)
  • All Mint Passes will be grouped into a single collection on OpenSea (e.g. Mexico City Collection Mint Passes) to allow for easy filtering and liquidity for buyers
  • We will reduce secondary fees on pre-revealed Mint Passes to 0% on OpenSea to facilitate low cost trading between collectors
  • No one (not even the Core Team or the artists) will know which artist a given ID corresponds to
  • We will allow some time for secondary trading for those who want to diversify their collection (i.e. if you ended up with two Artist 1 Mint Passes, you can trade with someone that has an Artist 2 mint pass)
  • After a period of time has passed, we will use RCS to assign participating artists to ID numbers. This information will be published via a signed post using the brightmoments.eth Mirror page.
  • After the reveal, the metadata for each Mint Pass will be updated to reflect the artist name. Additionally, the collections will be broken out into separate collections to improve liquidity for specific artists and to accurately reflect floor prices. At this point, we will reinstate secondary trading fees to compensate artists who are benefiting from secondary market activity based on their reputation.

Summary

We believe that this drop mechanism achieves the stated goals from An improved auction method for bundled token drops (e.g. City Collections) while maintaining accurate price discovery for an arbitrary number of artists.

Reviewing the goals:

Fairness: A-

  • This mechanism assures that all GTMX holders will have an opportunity to participate in a dutch auction where supply of Mint Passes > Number of Individual Participants. Not every potential buyer is guaranteed a mint since it may sell out, but they will have the opportunity to purchase at a price that is fair to them.

Don’t create races: A-

  • The dutch auction mostly addresses this issue. It may become a race in the final price band, but the majority of the auction will not depend on when you submit your transaction due to the rebate mechanism.

Don’t require fine-grained knowledge of market conditions: A-

  • Dutch auctions are great for this, since you can simply purchase at a price you are comfortable paying. The bands should provide some indication of expected value, but the blind nature of the passes does not advantage sophisticated buyers over novices.

Fun: A+

  • If nothing else, this will certainly be an engaging drop. We hope it will also be fun and not too stressful.

Give buyers positive expected returns: B

  • This is an area that we have concerns. The price of the Mint Pass should be the average expected cost of the individual artist Mint Passes post reveal. There is quite a bit of guesswork that will go into this, but it means that the clearing price of the blind passes may represent a premium to the expected value of a particular artist’s Mint Pass. However, due to the token-gating limiting the number of participants in the dutch auction, we believe that open market post-sale demand may make up for the premium paid in the dutch auction.

Maximize artist revenue: A-

  • Artists will split the proceeds of the dutch auction, as well as have the opportunity to benefit from secondary sales post-reveal.

Reward existing CryptoCitizens: B+

  • This area needs refinement. Ideas include offering a GTMX discount for Citizens up to a certain amount, setting aside an allocation of Mint Passes to be sold to a randomly chosen subset of Citizens following the dutch auction, and increasing the purchase allocation during the sale for GTMX holders who also hold Citizens.

Next Steps

  1. Gather feedback from CryptoCitizens and broader generative art community
  2. Confirm drop mechanism & Mexico City collection artists
  3. Announce artist lineup and sale dates
  4. Do the damn thing

FAQ

Q: Why not set a fixed price for the mint pack / mint passes?
A: It’s difficult to accurately set a single price for a wide range of artists across various mediums. Setting varying prices creates a large amount of complexity based on subjective measures of previous work, especially for projects that are still in development.

Q: Why not reveal the artists immediately after the drop?
A: After the drop, it will be possible for individual mint pass buyers to own multiple tokens from the same artist ID. In these situations, we want to allow time for buyers to diversify their mint pass holdings to achieve a better distribution of mints across the collection?

Q: How will you conduct the rebate?
A: TBD. There are (at least) two potential options:

  1. Conduct the rebate manually. After the sale, the Core Team would review the on-chain transactions to the marketplace contract and return any funds exceeding the clearing price for mint pass buyers.
  2. Build a rebate function directly into the smart contract.

Q: How do I know that the artists IDs are truly random?
A: We will use ChainLink VRF to produce a series of 10 random numbers that will be used to map the artist IDs to the corresponding London Collection artist. See Control as Liability for rationale on why we (the Core Team) nor the artists would even want to know this information.

Q: How do you decide how many Mint Packs are available?
A: TBD. We will probably do something like 20% of the available mint passes, or ~200 Mint Passes / 20 Mint Packs total. This number should be large enough to meet the number collectors who hold a Citizen from every city, but not so low that it reduces supply artificially.

Q: Why not do separate dutch auctions for each artist?
A: Price fatigue. Artists that conducted dutch auctions earlier in the series would have an advantage over later artists, as collectors will likely lose interest / expend liquidity.

Q: Why not allow people to choose a specific artist ID during the drop?
A: We want to reduce the probability of a single actor cornering the market on a specific artist ID to extort high prices from those who want to assemble an a la carte mint pack in secondary trading. Assigning random mint passes during the drop will reduce the chances of this happening.

Q: Will there be a wallet limiter during the auction? Why?
A: We think so. Since this is a token-gated auction, a wallet limiter doesn’t face the same exploits as in a typical drop, when a determined actor can simply fund multiple wallets. Due to the GTMX requirement, there is a non-trivial economic cost to minting more tokens that permitted by the limiter. Having a limiter increases the chances that everyone who meets the eligibility requirements will be able to purchase a mint pass.

I recently became a Cryptocitizen through the purchase of a CryptoNewYorker on the secondary market and I have collected pieces from previous mints. I am new to the community and the Mexico City Collection will be my first effort to engage directly with the token distribution process. I’m happy to hear the views of others, but below are my initial thoughts on the proposal for token distribution for the Mexico City Collection:

  1. Perhaps the sale of the GTMX token should be carried out by way of a Dutch auction rather than a fixed price. The fixed price mechanism all but ensures that a nasty gas war will ensue. The fixed price also necessarily means that Bright Moments will not be receiving the greatest proceeds possible from the sale. That is, Bright Moments will be leaving money on the table, so to speak, and the excess demand for GTMX tokens will accrue to Ethereum miners, not Bright Moments.

  2. More generally, I don’t think the Dutch auction mechanics set out in the recent proposal should rely on a rebate. In my view, the better approach is for bidders to bid the highest price they are willing to pay for mint passes and GTMX tokens - and then pay that amount (if it is a high enough bid). The rebate mechanism that has been proposed will inevitably be gamed by participants. Instead, bidders should bid with the certain knowledge that their bid, not some lesser amount, will be the amount that they pay. (This approach has been adopted with success by Art Blocks.) This also maximizes the revenue from the sale.

  3. As I understand it, since the first CryptoCitizens event in Venice, all series produced by artists have been limited to 100 outputs. This made sense when the community was much smaller and when Bright Moments lacked the widespread recognition that it now enjoys. But the community now numbers in the thousands and it is not clear that limiting all series to 100 works is ideal. With each new city event, the number of Cryptocitizens grows while the quantity of new art available to members remains the same. Would it make sense to consider increasing the number of works to be released by the artists? (I recognize this may be controversial and obviously should be done only with the support of the artists.)

As I said, I’m a newbie here and I welcome the comments and constructive criticism. Thanks!

This is a good idea. The reason for doing a fixed price sale is mostly an engineering constraint. We want to conduct the sale before we leave London to have enough funds to begin the next phase of our journey. Introducing a dutch auction on our marketplace would be significant engineering hours that would likely push the sale date back. That being said, maybe we can explore a “manual” dutch auction where the price steps down on the marketplace over a period of time.

cc/ @gitpancake @brougkr

Counterintuitively, I think the total amount raised using the rebate model will be greater than or equal to a non-rebate dutch auction. From a philosophical standpoint, it seems odd to charge two individuals different prices for an unrevealed mint pass. If everyone knows they’ll pay the sellout price, they will be incentivized to enter the auction earlier, knowing that it may go lower.

Sounds like a fun experiment :slight_smile:

This is a good point. By splitting the sale into separate blind mint passes we hope to increase the number of individuals who can participate. It also makes comparing projects across collections easier if they have the same mint size.

I am hesitant to change the size of the individual projects (i.e. from 100 to 1,000), which leaves us with two options:

  1. Include more artists in the city collection (e.g. going from 6 in London to 8-10 in Mexico City)
  2. Conduct more “out of band” minting events (e.g. 100 PRINT, translucent panes)

Thanks Holden!

I’m down with the idea of more artists if you can pull that off. Sounds like fun!

By revealing the artists included in the Mexico Mint before the launch, and selling mint passes via dutch auction, Bright Moments and the artists will receive fair market value for the respective drops, which in my opinion, is fair.

The quality and attention to detail in the experiences that BM provides for minters and artists is top tier. Both BM and the artists themselves certainly deserve FMV for the work.

Depending on the artist lineup, this will likely price out a few rungs of interested parties/existing holders/early BM supporters. Still, I think this is perfectly fair in allowing fair market price discovery for the work and related value flowing through to BM/the artists.

In interest of proper price discovery for the GTMX to be used in gating the mint pass drop, I’ll also add a vote for dutch auction for the CryptoMexicanos, but understand time constraints around dev and receiving funds for planning/executing Mexico City.

Though I do have one idea that I think will add value to existing holders, get these parties closer to being able to afford the mint pass drop, and potentially provide price discovery for GTMX without a dutch auction.

Why not airdrop the 333 GTMX that go to existing CryptoCitizens holders prior to the mint pass drop, or potentially even the GTMX public sale?

This way, at least some lucky CryptoCitizens holders will be one step closer to being able to afford the mint pass sale, bypassing requirement to purchase a GTMX. I think this is also a fun and fair way to reward existing holders. The number of mint passes allowed for purchase per GTMX could then be recalculated, which will also support a wider distribution.

And if you do this airdrop even before the GTMX sale, you can use the secondary market as price discovery for the GTMX public sale. For instance, whatever the floor of the GTMX tokens on secondary immediately prior to the GTMX public sale can be the price of the GTMX tokens for the sale. This is just an idea, and secondary in importance to just doing the airdrop at some point prior to the mint pass sale to provide value to existing holders.

Also, I may have missed this in reading the proposal, I’m curious why 283 GTMX tokens for sale rather than 333? Again, just curious.

Thats my 2, or maybe 4, cents :slight_smile:

Based on the tokenomics policy here, the airdrop to existing Citizens is a minting reservation, not a GTMX token. We introduced this policy for London due to supply issues we were experiencing with Golden Tokens and it seemed to work well for secondary demand so I would suggest keeping it in place for Mexico.

Since the GTMX sale will probably take place before the end of CryptoLondoner minting, that restricts our ability to do the airdrop since not all Londoners will be represented.

That means that the total number of participants in the Mexico City collection sale is capped at 333, assuming that every GTMX holder also has a Citizen to meet the eligibility requirements.

We have already sold 50 GTMX via our Mint Pack sale for future cities in January. See here for more details: CryptoCitizens Mint Pack Drop | Jan 14 — Bright Moments

Ah, sure, makes sense on the 283 GTMX for sale.

Regardless of the GTMX sale date, as long as the Mexico City collection sale is purposefully scheduled to occur after the Londoners are finished minting, BM could airdrop the Mexicanos minting reservations just like done for London, and then grant those winning wallets access to the Mexico City collection sale.

Seems like a win-win for all. You will also have more people participating in the dutch auction, which could lead to higher final resting place for the auction as well.

I want to avoid a scenario where someone purchases a Golden Token and doesn’t have the ability to purchase at least one Mint Pass. If people are buying GTMX with the explicit understanding that it’s the only way to participate in the sale, it would be dilutive to introduce additional eligibility slots after the sale takes place.

Given that the Mexico City collection mint passes are scarce (i.e. 1,000 total, less any holdbacks for the artists and DAO allocation), doubling the number of spots will mean that some “eligible” buyers won’t be able to purchase.

We could potentially set aside a fixed # of mints to raffle to CryptoCitizens, understanding that this will be a small % of the total collection, although that doesn’t seem to address the issue since most people still won’t be able to collect. @jamieb raised this as well recently. Quoting him:

  1. I still think we should consider variable collection sizes. 100, 500, 1000. This would be more inclusive, it would allow for the artist with the lowest floor to have earning parity through scale with smaller collection size / high floor artists, this is friendlier for emerging artists who need lower entry points bc they are less well known, and this may create more secondary volume. We’re heading down a path where we are adding a 1000 new citizens per city, but keeping the opportunity to participate in our core value proposition (gen art collections) the same. This is probably not sustainable (why buy tokens when you can’t win?). Not sure how to reconcile that with the Dutch auction model or last price dynamic, but as our community grows the opportunity to participate has to grow with it (IMO).

My response:

We should continue to offer “supplementary” minting opportunities (e.g. Spongenuity, Fingacode) outside of our City Collections. IMO, our City Collections are our version of Curated and keeping the supply constrained will allow us to continue charging a premium. Having the opportunity for everyone in the community to collect generative art via more affordably priced open-editions, off-city mints, and special airdrops will create a better collecting experience without diluting our premium brand for the City Collections.

Reflecting on the feedback from London Collection Drop Retrospective, one of the largest areas of consternation was from Golden Token holders who didn’t receive a Mint Pass in the London Collection drop.

Examples:

One modification to the sale would be to set aside 333 Mint Passes from the public DA in reserve for GTMX holders. These Mint Passes would be available for any eligible participants to claim at the resting price after the conclusion of the sale.

This would reduce the number of Mint Passes available in the public sale by 333, but everyone who holds a GTMX would be given the option to purchase at least one Mint Pass. They would still need to exercise the option, but this would remove the segment of unhappy buyers who met the eligibility criteria but missed the chance to mint for non-financial reasons.

Participants in the DA would participate if they wanted to acquire >1 Mint Pass, but wouldn’t be required to do so.

To summarize:

  • Each GTMX would allow the holder to mint up to 3 Mint Passes
  • 1 Mint Pass would be held in reserve for each GTMX holder to purchase at the end of the DA
  • Anyone who wanted to purchase >1 Mint Pass could do so by participating in the DA
  • If you hold more GTMX, you could purchase more Mint Passes (e.g. 2 GTMX = up to 6 Mint Passes, with 2 guaranteed in reserve)

To conclude my contributions to this discussion, I will add that any concerns for GTMX not getting a minting spot would be alleviating by recalculating the mint limit per wallet address. If you gave GTMX holder wallets 2 max mints, with at least 1 guaranteed, and each airdropped minting reservation wallet 1 max mint, no parties will “miss” out, while also providing a wider distribution.

That being said, I understand the concern about dilution of GTMX value by expanding the eligibility.

Thanks for the healthy discussion. Best of luck with the drop!

Hi @jiwa – after thinking about this, I believe I have a solution that finds a good middle ground between maintaining the exclusive purchase window for GTMX holders while providing Citizens (incl. those who win minting reservations) with an opportunity to purchase a Mint Pass at a below market clearing price.

First, let’s consider the scenario where there are 10 artists in the lineup: 100 Mint passes per artist x 10 artists = 1,000 total mint passes

Here’s a rough draft of how the Mint Passes for a 10 artist lineup could be distributed:

In this model, 333 Mint Passes are set aside during the sale for GTMX holders as a guaranteed option to purchase (“Reserved (GTMX)”).

Since GTMX holders will have at most two purchase opportunities in the Dutch Auction, the total number of buyers in the “Dutch Auction” segment is 666. If we also included winners of minting reservations as eligible buyers in the “Dutch Auction” segment, it would raise the total number of eligible buyers from 666 to 999, assuming no duplicate wallets.

This is around a ~1/3rd dilution in the expected value of the GTMX, which isn’t a show-stopper, but certainly makes the value proposition for GTMX buyers a bit harder to swallow.

There’s also the non-zero cognitive overload of explaining additional buying criteria. One of the most frequent criticisms that we hear from the broader generative art community is that our project is too complicated to understand / we make people jump through hoops / etc. I’d like to keep it simple, understanding that we have a certain baseline of complexity due to our membership model and project tokenomics.

With that in mind, it’s possible that not everyone who is eligible to purchase a Mint Pass via the GTMX reserve will choose to do so. In this situation, we may have a number of Mint Passes that we can redistribute to the community through a raffle to purchase.

Here’s what that might look like:

If we decide to do this, we would need to determine whether all CryptoCitizens would be eligible for the raffle, or only those who win the CMX minting reservation airdrop. This seems like a good governance vote, but it would need to be done before the minting reservation airdrop takes place so people aren’t biased. This is a nice practical application since voters would need to put themselves in the shoes of those who don’t win a reservation (see here for more on why this is interesting) \

Wdyt?

Generally think this proposal makes some good progress in alleviating the issues with the London mint pass releases.

One question: I don’t see why the full mint pack purchasers would be treated differently than the single pass purchasers in terms of the DA refund mechanism. It would make sense to me if neither has a rebate (so a DA like Art Blocks does them), or I also see the argument for having the rebate. But I don’t see why mint pass purchasers would be entitled to a rebate but not mint pack purchasers, when the “overpayment” is magnified in that case?

Thanks Simon!

The Mint Pack is the only way to guarantee receiving a Mint Pass from every artist in the collection during the primary sale. It also only requires 1 GTMX, as opposed to needing multiple GTMX if you are trying to assemble a Mint Pack via a la carte Mint Pass purchases.

The fact that Mint Pass buyers get a refund reflects the uncertainty of the random artist assignment during the sale.

In addition, the lack of a rebate will cause Mint Pack buyers to wait until later in the auction to purchase so as to minimize the externality of buying at a higher price band. Since there is an order of magnitude less supply of Mint Packs (e.g. 10 Mint Packs compared to 100s of Mint Passes), this will result in more accurate price discovery for the full Mint Pack. Not providing a rebate for Mint Packs will also reduce the chance that a single buyer with lots of liquidity can outbid others at a higher-than-expected clearing price and wait for the rebate after the sale.

Rebate DA is a good idea. Similar to Vickrey auction mechanism, maximizes buyer intention to bid on their own valuation of the mint pass instead of waiting for the lowest price in classic DA. Also, one important point is everyone will pay a same amount for the mint price. It’s fair for everyone. I am looking forward to participating the DA.

That’s fair enough, thanks. Was there discussion about owning additional citizens allowing for more mint pass purchases, vs. # of GTMX tokens being the only factor? As in, if I have a complete set of 5 citizens + a GTMX token, maybe that means I could get as many passes as if I had 2 GTMX tokens? I don’t really want a 2nd GTMX token, and seems reasonable for complete set holders to have some additional access on the randomized passes?

Agreed, this is a solid middle ground @philm. The heart of my initial suggestion was to provide those holders who win a minting reservation similar benefits to what GTMX buyers receive, as they are all soon to be CryptoMexicanos together.

Providing early access to the Mexico City collection for minting reservation winners, if supply remains, ahead of the public, is a value add to holders.

Appreciate the consideration!

Will there be a way to see how many full set holders there are? I’d like to go for a mint pack but I’d need a Galactican. With only 10 packs available I’m curious if it might be better to get multiple golden tickets and mint multiple single passes

See this great community created Dune dashboard: Dune

I haven’t verified the numbers myself, but it’s nice to have a secondary check on the Core Team for things like this.

The final snapshot number might differ due to us manually adding wallets that had a full set split across two wallets. In these cases it wouldn’t meet the definition from the query above, but it would appear as a valid wallet in our final snapshot.

Looks like the ballpark is 50-100.

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Interested to see the final mechanics. Nice to see how well thought out everything is. I think it’s important for the team to understand that there’s no possible way to satisfy everyone in any sale but this seems a good plan so far. Personally I was happy with London’s sale but I can see how some people felt shut out with the limited availability of single mint passes. One interesting dynamic might be the timing of which artists will be involved… I’d be happy to wait until after the sale and trust in BM’s track record of delivering exceptional artists and minting experiences. Having one or two big name headliners announced presale will drive up the DA price though so I imagine that might be beneficial if there is a shortcoming in money needed for team logistics and overhead (gallery space, payroll etc). The benefit to waiting on artist lineup announcements would be lower resting price (I would assume) and more opportunities for those with limited resources (like me… lol) to participate. Has this been considered. Is it already decided one way or the other? A lot of info above. Hope I didn’t just miss it. Thanks