Lemon or Peach : What Will Sellers Mint under Free Minting Policies in NFT Marketplaces?

The boom of non-fungible tokens (NFTs) in recent years has led to blockchain congestion and higher gas fees for users. To alleviate these problems, “lazy minting” has been implemented in some NFT marketplaces, allowing creators to mint NFTs without transferring on-chain, and thus avoid upfront gas fees. However, lazy minting may exacerbate adverse selection in the market and threaten the sales performance of existing sellers. To investigate whether and how existing sellers should adopt lazy minting for better sales performance, we empirically analyze the implementation effect of lazy minting in OpenSea, using a multiple-period difference-in-differences method. Our study has three main findings. First, existing sellers adopting lazy minting mint more user-generated NFTs and successfully trade more NFTs without compromising their perceived value. Second, lazy-minted NFTs have higher perceived value on the buyer side, although the existing sellers set more competitive prices because of zero minting costs. Third, higher prior reputation of existing sellers builds up their personal brands, thereby avoiding the negative effect of adverse selection. Our study contributes to the literature on NFT marketplaces as well as personal brands for mitigating adverse selection. It offers important practical implications for upfront cost management and selling strategy formulation in similar scenarios.