I have come across another income NFT opportunity I want to share with you.
Here at the start, I want to be clear that this is a very complex investment. It may take time to wrap your head around this business and how you buy these NFTs.
But this project aims to bring a hugely popular online auction model to the NFT world… which leads me to believe it has massive income potential. So, it’s worth taking the time to understand it.
The NFT project is called DegenLabs.
The team behind this project plans to mimic the success of DealDash, an online retailer that uses a modified auction model to sell brand-new items at deeply discounted prices. One example: A DJI Air 2S Drone with backpack—a combo that retails for well over $1,700—recently sold for $116.92.
When the team told me that they were producing a DealDash site specifically for NFT auctions, I immediately knew it was likely to turn into a big money-maker.
So, let me tell you about this project and how you invest in it.
What is DegenLabs?
DegenLabsis a rebranding/spin-off of a previously successful project called Skullbots.
Skullbots have been around for a good while now. The project is currently made up of three collections: Gen0, Gen1, and Gen2 (also called Skullbots: Bikers Club).
Meanwhile, the future DegenLabs project will be made up of two NFT collections: King Demons and regular Demons.
To get a King Demon or regular Demon, you’ll need to own one of the Skullbots collections and burn them (meaning permanently destroy them in a specific, technical process). Then you’ll be able to collect one or more King Demons and/or regular Demons.
King Demons will share in the revenue that DegenLabs generates from its new DealDash-like website, as well the bespoke gaming services it builds for other NFT communities.
The regular Demons will not share in any revenue, but they will earn something called “bids” that can be used on the new site. And those could have their own value.
The New Auction Site
DegenLabs has already soft-launched its new auction-style marketplace for Skullbots owners to test out. It’s pretty solid.
Just as DealDash offers the opportunity to snag products below market price, the DegenLabs site gives users the chance to pick up quality NFTs at prices well below their current floor price (the lowest price at which that particular NFT collection currently trades on an NFT marketplace such as Magic Eden).
The auction winners could then immediately re-list those NFTs at the floor price for a potentially meaningful gain.
Here’s how the auction site works:
DegenLabs will go out and buy a quality NFT at its floor price on a secondary market.
It will then list the NFT for auction on its own site.
The starting bid is always $0.01 and there’s a countdown timer that begins at 10 to 15 seconds.
Bidders cannot bid whatever price they want. Instead, each new bid only moves the price up by one additional cent, and resets the timer to its original starting position.
If no new bid arrives before the timer hits zero, then the last bidder wins the auction and can buy the NFT at whatever the winning bid was.
So far, so simple. But here’s the key point to understand…
To make a bid, you need bid tokens. And those tokens cost $0.15 to buy… even though each one can only push up the bid price by $0.01.
So, DegenLabs can go off and buy some floor model NFT for, say, $100, then put it up for auction in the new marketplace. Bidders then use their “bids” to push the price to some level where a winner emerges, say $15.
This is a huge arbitrage opportunity for bidders. They can win an NFT for pennies on the dollar, then turn around and quickly sell it at the floor price and bank a potentially large profit.
On the surface that seems like quite the crummy deal for DegenLabs. Buying an NFT for $100 and watching it sell at auction for, say, $15 would seem like a great way to go bankrupt quickly.
Alas, not so. It’s actually hugely profitable… because of those bid tokens.
As I noted, each “bid” costs a bidder 15 cents to buy. An NFT that sells for $15, thus requires various bidders to have used 1,500 “bids” as they pushed up the NFT’s price.
At 15 cents, those 1,500 “bids” cost a combined $225.
Now, not all bids need to be purchased. Some can be earned through loyalty rewards and such. But for the sake of simplicity, the math works like this:
- DegenLabs spends $100 on the NFT.
- Bidders spend $225 on “bids” to try to win the NFT.
- DegenLabs sells the NFT for $15 to the winning bidder.
- In all, DegenLabs spent $100 and brought in revenue of $240 on that NFT—a $140 profit.
The revenue potential is why I’m so eager to own King Demons.
DegenLabs’ Other Business
In addition to its new marketplace, DegenLabs also runs a casino/sports book, and builds bespoke wagering games for other projects.
At the moment, it has partnered with more than 40 other projects on these games.
DegenLabs builds the games for free, and allows projects to keep 100% of that project’s own in-house tokens that are used for wagering. If, however, the wagering is in Solana, then DegenLabs keeps most of that. (Those SOL profits DegenLabs collects also go into the revenue-share for King Demon owners.)
Ultimately, DegenLabs aims to house all its games under a single roof, and all tied in to the auction marketplace. Here’s how that will work:
- Gamblers/gamers will earn loyalty points that become “bids” they can use in the marketplace.
- The marketplace will attract gamblers/gamers and others who want the opportunity to grab quality NFTs at bargain-basement prices that they can then resell at a profit.
- The two new DegenLabs NFT collections—Demons and King Demons—will either share in the revenue generated by all of this, or will earn Demon Points that can be turned into “bids.”
How to Get a DegenLabs NFT
As I noted earlier, Skullbots currently has three collections. Each of those collections will morph into a DegenLabs Demon or King Demon in some fashion through a process by which the old collections are burned.
Before I tell you what that burning process looks like, let me define Demons and King Demons.
- Demons are the regular NFTs. They will earn 50 Demon Points per day that can be turned into “bids” used in the marketplace.
- King Demons are the superior NFTs. They will earn 100 Demon Points per day, and collect a share of all the revenue DegenLabs earns through the marketplace and its gaming business. Early on, about 1,800 to 1,900 King Demons NFTs will exist, and at max, about a year from now, the population could top out at 2,500.
Now, as for that burning process, this is what it looks like:
- Skullbots Gen0 = Burn 1 and collect 2 King Demons and 2 Demons.
- Skullbots Gen1 = Burn 1 and collect 1 King Demon and 1 Demon.
- Skullbots Gen2, Biker Gang = Burn a Level 10 Biker and collect 1 King Demon.
Note: If you burn a Biker Gang ranked #420 or below, the DegenLabs team will give you a free regular Demon along with your King Demon. But the rarity must be based on the original Solrarity rankings. You can determine that by going to Solrarity.app, clicking on the “Join Us on Discord” in the middle at the top of the page, and then following the directions on the Solrarity Discord page for determining an individual NFT’s rank.
Also note that with the Biker Gang, you need to boost the NFT to Level 10. That’s accomplished by buying Skullbot Biker Gang Prospect NFTs and upgrading to Level 10. (More on that below.)
After burning your Skullbot, you can claim your Demons and King Demons.
However, you will require a “Summons,” which is sort of like a whitelist token that allows you to mint your NFT. You can buy a Summons, win them various ways on the Skullbots Discord page, or win one at auction on the new DealDash-like website.
In the testing phase, Summons tokens have been selling for $0.31 to about $3.81 on the DegenLabs auction site. (At present, as the site is in beta-testing, it’s open only to existing Skullbot owners.)
The Summons tokens typically go for between $6 and $10 on a site called Raydium, a decentralized crypto exchange on the Solana network.
The Best Way to Get a Demon or King Demon NFT
Question is: When buying Skullbots to burn, which collections make the most sense financially, based on current floor prices for each collection, and based on the NFTs you will collect through the burning process?
Well, I’ve done the math, based on SOL at $25 per token:
You can see that the most cost-effective way to mint is spending 11.5 SOL on a Gen1. Your U.S. dollar cost is $287.50, and in return you’re collecting two NFTs for that price—or $143.75 per NFT.
Obviously, these prices are going to change because of the changing value of SOL and the changing floor price for the collections. Moreover, there are only a few of these NFTs for sale at these prices.
At time of writing, the Gen0 collection has just 9 NFTs for sale, and only one at 25 Solana. The rest range from 28 to 69 Solana.
Skullbots Gen1 has just 11 NFTs listed for sale—two of them at 11.5, and the rest ranging between 12 and 20.
Skullbot Biker Gang has nearly 200 listed, though only a few at the price of 2.14 Solana that I’ve noted in the chart above. Sometimes you will see them pop up for less than 2 SOL.
Finding a Biker that’s ranked #420 or lower is really just a game of luck. I would suggest you use the filter function on Magic Eden to search by “Moonrank: Rare to Common” and then scroll and look for those ranked below about 1,000. That’s because these are ranked by Moonrank, not Solrarity, and those two can be wildly different because of the different rarity algorithms they each use.
You will need to cross-reference any NFT with Solrarity to ensure that it is #420 or below, and if you find one and buy it, make sure you screenshot the Solrarity ranking so you can prove its ranking if you have to. (I just poked around and I see one or two that fit the ranking requirement, and they’re priced at 5 Solana.)
And remember: You must boost your Biker to Level 10 with Skullbot Biker Gang Prospects.
Each Biker Gang is at least Level 1, so at most you will need nine Prospects. But before you buy any, check your Biker’s level by opening your Phantom wallet, clicking on your NFT collection, and then clicking on your Biker. Scroll down to his attributes and you will see his level. Some may have already been upgraded to various levels.
You will combine your Biker Gang NFT with each Prospect individually at this website. Each combination requires a five-minute cooldown, so you will have to go through this combo process several times to completely level-up.
Mint Information and Revenue-Share
The DegenLabs mint will happen later this month, so pay attention to the Announcements channel on the Skullbots Discord page, and through the Skullbots Twitter feed.
King Demons will mint first. None will be made available to the public… they will only go to those who have burned one or more of the various Skullbot collections.
As for regular Demons, 9,696 will exist. Between 6,500 and 7,000 will be available to the public through whitelists and various discount phases, with the rest going to those who burn Skullbots. The team has not yet announced the mint price.
So, you might rightly be thinking, how much could a King Demon spin off in rev-share?
It’s not clear. The team hasn’t yet determined the exact revenue-share for the King Demons. But here’s my back-of-the-envelope estimates:
Right now, DegenLabs is pulling in between 30 and 50 SOL per day in fees from its various games. And we know that between 1,800 and, at most, 2,500 King Demons will ultimately exist over the next year. So, let’s be ultra-conservative and assume that 30 SOL per day is the most DegenLabs will earn, and that 2,500 King Demons will exist.
Simple math says each King will earn 4.38 SOL over the next year, or $109.50 with SOL at $25.
If you happen to buy a Gen0 at 25 SOL, then each of the two King Demons you collect will have cost you $156.25 each, so you’re pocketing a pretty nice 70% annualized return on each one. That doesn’t include the value of the regular Demons and the “bids” you can use to buy NFTs for cheap and resell them at higher prices.
At worst, with a Biker ranked above 420, you’re capturing a 49% annualized yield. Again, that’s not too shabby.
Now, to be clear, those estimates are based on a 100% rev-share, which isn’t likely. The team was paying out 90% in one of its previous projects. This is just to give you a bit of back-of-the-envelope math.
But I will emphasize that I am using conservative estimates that do not include income from the new marketplace, or new partnerships DegenLabs is likely to pick up once the marketplace is open and other projects see the opportunity.
So, there’s a lot of potential for income here.
