The truth about NFTs — the hoops people jump through to get JPEGs will shock you

The truth about NFTs — the hoops people jump through to get JPEGs will shock you
Bored Ape (Image credit: Bored Ape Yacht Club)

Gary Vaynerchuck and Mark Cuban, two influential entrepreneurs making waves on Twitter, can buy a $250 NFT today, show it off to their massive social media following (thus increasing its value), and sell it tomorrow for $10,000. Cha-ching! It’s just that easy. Unfortunately, the average Joe doesn’t have the Midas touch that allows them to leverage online popularity, so profiting off NFTs is more difficult.

So how can ordinary folks successfully flip NFTs?

Many “How to Buy an NFT” guides will direct you to OpenSea, Rarible and Mintable, but the truth is, the best place to purchase NFTs are at backdoor pre-sale events that typically occur on Discord. On top of that, not everyone can participate in these exclusive transactions — only whitelisters have this privilege.

Securing a spot on the whitelist, dear reader, is one of the best ways to maximize one’s chances of making profits from Bored Apes, or whatever silly, cartoonish NFTs are popular these days. I know what you’re thinking: “What the heck is a whitelist?” Like courtside NBA seats or the club’s VIP section, it’s the place everyone wants to be, but only a select few have access to it.

What is a whitelist? 

You may have seen the word “whitelist” in cybersecurity scenarios. For example, if you’ve ever gotten tired of your firewall sending you false alarms about a harmless program, you may have whitelisted the app. Or if you have an adblocker, there’s a good chance that you’ve stumbled upon a website demanding that you whitelist them.

Mutant Mingos NFT The truth about NFTs — the hoops people jump through to get JPEGs will shock you

Mutant Mingos NFT (Image credit: Mutant Mingos NFT)

As such, you can infer that landing on a whitelist means you have access to special privileges. In the NFT world, securing a whitelist spot means that you are among the select few that can buy NFTs at a discount before the public gets their hands on them. To show you a real world example, Mutant Mingos, an NFT art project that features odd-looking, colorful flamingos, offered its whitelist the opportunity to purchase an NFT for only 0.035 ETH ($140, as of this writing). A few days after the whitelisters minted their NFTs, Mutant Mingos then allowed the public to purchase NFTs at a price tag of 0.07 ETH ($280, as of this writing). That’s the benefit of the whitelist — you secure NFTs at discounted prices so that you can sell them to the general public for a profit.

Another advantage of landing on the whitelist is avoiding gas wars, an issue that’s prevalent on the Ethereum network. All blockchains like Solana and Bitcoin require transaction fees, but Ethereum is notorious for being expensive (its fees are based on how congested its network is). 

Ethereum The truth about NFTs — the hoops people jump through to get JPEGs will shock you

Ethereum network (Image credit: Snappa)

That being said, when an Ethereum-based NFT project is rolled out to the public, and thousands are scrambling to purchase one, the gas fees skyrocket. I’ve seen Ethereum gas fees jump to $850, which was three times pricier than the NFT I wanted to purchase. Yikes! If you get on the whitelist, on the other hand, the gas fees are much lower during the pre-sale event. In some cases, I’ve seen smart developers of NFT projects finagle with the backend to help slash Ethereum gas fees to as low as $15 for their whitelisters. 

Whitelisted NFT flippers are the most successful 

If you’re not convinced about the power of whitelisting, take a look at the stats — numbers don’t lie. According to a new study from Chainalysis, whitelisters make profits from their NFTs 76% of the time. Conversely, the ROI rate for non-whitelisters is only 21% (via Bloomberg).

“A very small group of highly sophisticated investors rake in most of the profits from NFT collecting,” Chainalysis said, citing OpenSea data. “This is especially true in minting, where the whitelisting process gives early supporters of collection access to lower prices that result in greater profits.”

“OK, I get it. Whitelists are important, but how do I secure a spot on one?” you may be wondering. This is where things get interesting. You won’t believe the hoops people jump through to snag the crypto world’s most enviable VIP positions.

How to get whitelisted 

I did a little investigating to see what it takes to get whitelisted. Truth be told, most NFT communities operate like pyramid schemes. In order to participate in the presale event, NFT teams often ask their members to invite a certain number of people into their Discord servers before they can get whitelisted. I’ve seen one NFT project ask whitelist hopefuls to bring 20 recruits.

Other NFT projects require members to reach a specified level in their Discord servers before they get the VIP role. For example, the folks behind Lazy Bucks NFT ask their members to reach level 15 to obtain whitelist status.

Lazy Bucks NFTs The truth about NFTs — the hoops people jump through to get JPEGs will shock you

Lazy Bucks NFTs (Image credit: Lazy Bucks NFTs)

Reaching level 15 on a server requires a lot of engagement (i.e. plenty of typing in the general chat), which is often a nuisance for NFT flippers. I’ve seen people spend all day and all night attempting to level up on servers — only stopping to take bathroom breaks or eat — because the deadline to secure a whitelist spot is 24 hours away. Reaching level 15 isn’t a cakewalk, especially if you’re crunched for time.

Some NFT communities prefer using games, puzzles and riddles to hand out whitelist spots. For example, every day at 9 p.m. EST, the Lab Rats NFT team hosts daily games on its Discord server. A popular game I’ve seen on there is pictionary-type competition where members must be the first to guess the subject of haphazardly drawn digital pictures. The top scorer wins a whitelist spot. This may seem like fun, but remember, you can only get whitelisted if you’re the winner of the game — and the competition is stiff. It may take a couple of games before you can secure the number one spot, or you may not win at all.

Social media influencers may have the best edge when it comes to landing on whitelists. Many NFT communities reserve whitelist spots for members with high social media engagement — as long as they shill their project on Twitter at least once.

After you get whitelisted, there are several ways you can get the discounted NFTs. In some cases, I’ve seen team members ask whitelisters to send the money to a designated wallet address. So if the price of the discounted artwork is 0.07 ETH, you’d have to send $280 to the wallet address. Another way whitelisters can get their NFTs is by connecting their Metamask wallet to the project’s website. This is less risky than the former process, but you should always beware of NFT scams — malicious actors can take off with your money and leave you NFT-less.

It’s worth noting that you can’t pick and choose which NFT you’d like to buy. Like Pokemon cards, you won’t know which artwork in the NFT collection you’re getting until after you purchase it. If you’re lucky, you’ll get the rarest item in the series, which increases its value exponentially.

How to successfully flip NFTs without the whitelist rat race 

Whether you’re tasked with recruiting 20 people or spending hours upon hours leveling up on a Discord server, in the words of Sweet Brown, “ain’t nobody got time for that.” NFT flipper Franklin Hatchett explained that he found a loophole that allows him to buy low and sell high like a whitelister.

How to buy an NFT The truth about NFTs — the hoops people jump through to get JPEGs will shock you

Lazy Lions NFT (Image credit: OpenSea/82888A)

Before I dive into Hatchett’s process, let me explain what typically happens during presale events. There are always whitelisters who want to sell their newly minted NFTs on the open market (e.g. OpenSea) almost immediately. At first, they sell their NFTs for the highest price they can possibly get, but without fail, hours will pass and no one takes the bait. Anxious to sell their NFTs, those whitelisters begin dropping the price. At some point, they will start undercutting each other (e.g. a seller drops their price to 1.1 ETH after seeing the cheapest one selling for 1.2 ETH). This is when Hatchett swoops in to snatch a cheap NFT from a desperate seller.

So when does Hatchett flip NFT for profit? Well, he noticed a pattern: many buyers hope to snag an NFT on OpenSea hours before the public sale. Why? As mentioned, the gas price skyrockets as hundreds, or even thousands, of people clog the Ethereum network to mint NFT. After securing an NFT at a discounted rate, Hatchett manages to sell it several hours before the public sale at a high price. “[Buyers] don’t mind paying a premium because they know gas fees will be a lot on the public mint,” Hatchett said. The NFT flipper said he refuses to grind for whitelist spots — he’d rather use that time to play on his Xbox Series X.

Instead of flipping NFTs, consider making them instead. Check out our How to Make an NFT for Free guide to get started.

Kimberly Gedeon

Kimberly Gedeon, holding a Master's degree in International Journalism, launched her career as a journalist for MadameNoire's business beat in 2013. She loved translating stuffy stories about the economy, personal finance and investing into digestible, easy-to-understand, entertaining stories for young women of color. During her time on the business beat, she discovered her passion for tech as she dove into articles about tech entrepreneurship, the Consumer Electronics Show (CES) and the latest tablets. After eight years of freelancing, dabbling in a myriad of beats, she's finally found a home at Laptop Mag that accepts her as the crypto-addicted, virtual reality-loving, investing-focused, tech-fascinated nerd she is. Woot!