Copebears: Avoiding Undercutters with ERC-5050
A new project just released called Copebears is the first to use the ERC-5050 token standard. The project looks like any other ordinary NFT collection on the surface, but looking deeper we can see that it is implementing new technology while also following what could be the next art trend for NFT collectibles.
Copebears following the new NFT art trend
Copebears is a collection which uses art that is heavily inspired by the This is Fine Meme. The images use layers that critique NFTs and the people that trade them which is becoming a more common trend following the success of God Hates NFTees which blasted past the 1 Eth mark.
With no roadmap or Discord made publically available, the future of Copebears is uncertain. However, there are some hints of a $COPE coin which might come out in the next week or so that was announced through a Twitter post. It’s unsure how this will exactly fit into the NFTs without any sort of roadmap, so we will have to wait and see what happens.
What is ERC-5050
The most interesting thing about this collection is how they have implemented a new Ethereum token standard called ERC-5050. This token was designed by the team behind Copebears to provide some variations to the minting process for NFTs.
The token works by randomizing what buyers will be required to pay for the minted tokens. There is a 50% chance that the token will either require the user to pay for the mint at full price or receive the mint for free.
In order to make this work, the user's wallet needs to supply the full Ether price before minting. Once the wallet is confirmed to have enough funds for the mint then the token standard chooses a random outcome. If the outcome is a free mint then the funds are sent back to the user’s wallet.
The benefits of this new token standard could have an impact on any future NFT projects due to the effect it will have on undercutting token prices.
The current issue with undercutting
Undercutting is when a token is listed for sale below the current floor price. It is a common tactic used by traders to exit projects that they don’t believe will do well. By undercutting the floor price, traders are hoping that someone will purchase the token quickly, thus allowing them to exit.
This practice, while helpful at times, can severely harm a projection and prevent it from truly taking off. When people see undercutting begin, it sends a panic signal that others tend to follow.
As momentum slows down because of undercutting, the floor price begins to drop suddenly; preventing most tokens from holding any sort of value. In essence, undercutting is what causes a pump to dump.
How can this be implemented in the future?
With the ERC-5050 token standard, more projects will be able to preserve a stable floor price because of the variations in mint prices. By shuffling the prices that buyers have to pay, the exit points for their flipping strategies become varied, meaning that massive price dumps will be less common.
When everyone has the same mint price, they have the same exit price which causes projects to fail at specific prices. By incorporating this new standard into major NFTs, we can see the true value that projects deserve without the constant threat of undercutting.
