On So Few NFTs, So Many NFTs Because X is not handling the thread well today, here it is with all 65 tweets in single tweet format. Probably better to share this version. 1/ Are NFTs the scarcest assets in the crypto universe? Are NFTs an endless no-barriers-to-entry stream of good, mid and worthless tokens? Buckle up. This is a long one. 60+ 2/ A few days ago, we discussed that a necessary, but not sufficient factor, for Bitcoin’s success was its 21M hard cap on tokens. If you have not read this thread, go ahead and read it now 3/ Today, I am going to ignore the other factors of Bitcoin’s success and focus on the scarcity aspect. A common phrase was: “If every millionaire wanted to own a bitcoin, there are not enough bitcoins to go around" 4/ There are 58 million millionaires globally, so, even ideally, they can each own 0.36 BTC. In fact, much less because many people have more than 0.36 BTC and many non-millionaires own some BTC . So the real number is much lower, below 0.1 BTC for sure. 5/ Of course, this assumes something very important. That *anyone* wants to own a BTC. Without demand, scarcity does not matter at all. Bitcoin Rhodium is a BTC fork that you have never heard of with 2.1M tokens (10x more scarce than BTC!) but obviously nobody cares. 6/ Value accrual in non-cash-flow-generating tokens like bitcoin is a meta-game. Not “picking which one is better?” but a game of “picking which one everyone else will think is better” With no cash flows to provide a check, value accrual is purely self-referential. 7/ This meta-game was easy. You took 1 look at Bitcoin and the goofy coins / forks and it was totally obvious that you should just buy BTC and chill. From 2009 to 2020ish, with the exception of “you should have bought ETH early,” BTC maxi was crypto life on easy mode. 8/ The fact that it was easy is a huge part of its success. You just said “you want exposure to crypto? Go to Coinbase and buy some BTC” True for your friends 10 years ago. True for nation-states now. No hard decisions needed. 9/ Now, let’s come back to NFTs. Are NFTs scarce or plentiful? Well, there are obviously endless NFTs like there are even more fungible tokens. But the NFTs that have started to climb the meta-game mountain are unbelievably scarce. 10/ Gonna share some numbers. Trigger warning: these examples are just what I am coming up with on the fly – I will miss some, they are not statements of artistic quality, they are not price predictions. It is giving a rough sense of meta-game NFT rarity. 11/ Impossibly Rare (~3,000, 100% certainty) Rare Rare Pepes, a few “historical” NFTs, early “important” 1/1 artists, early “important” generative art, top punks, a tiny number of editions, maybe TBD some top non-punk PFPs (not sure tho). 12/ Here is how to think about certainty. Imagine that any top NFT collector discovered they inherited an Impossibly Rare NFT from their uncle. Would they be happy? I assure you that every single one of them would be happy. 100% certainty. 13/ Even the Impossibly Rare tier has Ultra-Mega-Impossible sub-tiers. They don’t matter for the purpose of this thread, but I think the top 50 collectors would have 75% overlap on which of the Top 3,000 are in the Top 300 and in the Top 30 too. 14/ If you have any doubt about this, imagine if I got to pick 3 NFTs from @CozomoMedici 's collection or he got to pick 3 NFTs from @6529Museum. Among the thousands of NFTs we have collected, is it random which ones we would pick? 15/UltraRare Tier: (30,000, 75% certainty) I would put in this category: “all punks” (so that is 10,000) and the best 20,000 NFTs that are not punks. The way to think about this list is: “You have unlimited budget but only 30K slots” 16/ I think the first 20K slots are easy & people will argue about the last 10K Would I take “any punk” and “any Fidenza”? Yup But do you prefer an AlignDraw, a Harvest, a Terraform, a good mfer, a Botto Meme Card? This is where “buy what you love” kicks in 17/ Rare Tier: 1 million tokens / 60% certainty This is the broad list. All major PFP, generative, art collections and all major 1/1 artists can comfortably fit into here. Q: “Are there many NFTs I want that are not in my top 1 million?” A: “Not really” 18/ So something like this is my count: Rare: 1,000,000 tokens UltraRare: 30,000 tokens Impossibly Rare: 3,000 tokens You Have Got To Be Kidding Me Rare: 300 tokens LOL Rare: 30 tokens 19/ And my certainty of the endpoints of the range is something like Rare: 60% UltraRare: 75% Impossibly Rare: 100% You Have Got To Be Kidding Me Rare: 100% LOL Rare: 100% 20/ Now it does not matter if you think the right numbers are 50/500/5,000/100,000/2,000,000 or 10 / 1,000 / 10,000 / 100,000 21/ What about Tezos, Ordinals, Solana? The number of meta-game NFTs there can be counted in the numbers above. They do not change the total materially in my view. Most rare NFTs remain on ETH and Counterparty. 22/ The main point for me is that the total good NFTs tokens available to buy in the NFT world are like 5% of BTC’s token count and the exceptional ones are 0.05%. And as a percentage of “all fungible tokens” it is some number too small to even calculate. 23/ So in a field that has “provable scarcity” as an absolute core principle, there is not a shadow of a doubt that the scarcest, rarest, most apex tokens are and always will be NFTs. 24/ So there are 58M millionaires. If each of them wanted to have a rare NFT (1,000,000 tier) only 0.017 can own one. But this is not possible because many whales have more than 1 rare NFT and many non-millionaires hold NFTs. The real number is below 0.001 25/ For Impossibly Rare Tier, the real comparison is with billionaires. There are not enough available to go around for each billionaire to have one, for each major museum to have one. 26/ OBJECTION!: BTC has a fixed supply. People will just make more NFTs, not buy your bags!!! True! People will make more NFTs and I encourage them to do so! And a very few of those NFTs will become important and join the pantheon of “Rare Non-Fungible Tokens” 27/ Will it be a random function? Will the Top 3K NFTs in 2030 be very different than the top 3K NFTs in 2025? My guess (80% confidence, up from 70% in 2021) is that power laws kick in and the lists will be relatively stable, progressively more stable as you get rarer. 28/ Will any 2025-2030 NFT make Top 30 list? I doubt it. How about Top 300? Also really hard, tbh. Top 3,000? I think there may be 50 or 100 or 200 that turn over Top 30,000? Yeah, sure, maybe 2K or 5K will turn over Top 1M? maybe 250K to 300K will turn over. 29/ I was pretty sure about this in 2021. We just have done a whole cycle and very few new collections got socially constructed in the bear market. If we go through another bull market and this holds, it is a lock 30/ This is two questions: a) do current “good” NFTs stop being “good NFTs?” (protocol fails) b) do new “good” NFTs join the current “good NFTs?” (supply expansion) I am almost completely unworried about a) that, I dunno, nobody is going to want a Ringer in 2030. 31/ And I am not very worried about b) bc it will happen, good new NFTs will emerge and there will be supply expansion and WHO CARES because even with 1.5x or 2x or 3x supply expansion of “Rare” NFTs the number is still tiny. 32/ The hurdle for making it into “Rare” is still manageable and into “UltraRare” hard but somehow doable, but the other categories are getting very tight. Like with BTC, it is easier being early, than being late. 33/ The reason for the cultural power laws in the end is biology. It is inevitable that it will happen. This is discussed here 34/ Side note for emerging artists: It is 1000% in your interest for the prices for established NFT artists to go up. Ethereum wouldn’t have made it if Bitcoin had not made it first. Solana would not have made it if Ethereum had not made it second, and so on down the line 35/ So, to summarize on Rare NFTs - They are ridiculously rare - Consensus on what the good ones are is much closer to 100% than 0%. - Even with some supply expansion, they are the scarcest asset in crypto 36/ Now if this is the case, why is not (yet) reflected in their market cap? Some thoughts on this at the end. 37/ Now what the other side of NFTs that I talk about a lot. NFTs-for-all, NFTs for consumer adoption of self-sovereign wallets, NFTs-for-identity, plentiful and abundant NFTs. Yes! Yes! And Yes! This is the Fun™ use case for NFTs and it is great also. 38/ There will be billions of NFTs, but these NFTs are closer to a consumer product, closer to a consumption good, closer to a superior form of a consumption good (provenance, trackability, no wear and tear), a superior gaming good. 39/ They are Chicago Bulls baseball caps, but virtual. They are your receipt for your $100 donation to your church but a generative art piece for your wallet by a local artist. It is a spectacularly good use for NFTs and for crypto (one of the best) and it will also happen. 40/ A huge % of the confusion in the popular perception of NFTs even within crypto is that people look at this category of NFTs and think “you have got to be kidding me, I am now a reborn BTC maxi” But this is a category error. 41/ When you mint some goofy 0.01 ETH PFP mint, you are not doing it to replace BTC in your portfolio or to hand to your grandchildren. This is also true of Boden or Fartcoin or whatever. Nobody is confused that Fartcoin is the new BTC. You are just messing around. 42/ so NFTs are simultaneously an ultrarare, slowly inflating group of apex crypto assets and a vast playground of high-turnover fun consumer products. Just like “fungible tokens” are everything from BTC to SOL to Skibiddy Toilet and Fartcoin 43/ Very few people understand this distinction, including very few crypto people. It is ok, the pool is nice and warm and they will all join the pool party one day. 44/ Now why is the market cap of NFT 0.3% of fungible coins? Why is the nth $PEPE token more highly valued than the actual OG Rare Pepes? 45/ There are several factors: - the space and the tooling for the space is very immature - every design decision is backwards - the design decisions are backwards because the large players so far (marketplaces) have partially misaligned incentives 46/ #1 The story, the meme. "21M BTC, digital gold" is a good meme. Buy some NFTs, good luck figuring out which ones are good, is not a good meme. The 1-5 liner will not be as simple as BTC but it needs to get better than it is today because today it is tragic. 47/ #2 The presentation Every major website: opensea, foundation, superrare, art blocks, manifold hides the good NFTs. All their algorithms show trending or mints (aka the Fun case of NFTs) so if you come to their website, discovery is literally trash tier 48/ I do not see any obvious chance that this is going to change on marketplaces because they are trying to drive volume, not social construction. I may take this on in 2025 tbh because it is getting worse not better. 49/ It is impossible to socially construct NFTs when someone NFT-curious comes to the NFT sites & sees random NFT slop. They take one look, think “what is this weird junk?” and “what am I supposed to buy?” & then peace out and go to a CEX/DEX to do something comprehensible. 49/ To make #2 more clear. Imagine if you went to Messari and CoinMarketCap and for every day of every year, not only were BTC and ETH not on the home page but it was all but impossible to find them anywhere on the website. These are our NFT front-doors today. 50/ #3 Marketplaces by default focus on the crappiest NFTs in each collection. Wait, what do you mean? Every marketplace lists by floor price. I get the logic, they are trying to recreate a fungible order book but they are non-fungible assets 51/ When you list by floor price, by definition, you are putting front and center, above the fold, the worst NFTs in every collection. No retailer, restaurant or CEX would do this. What is the alternative? Both FP and tiers aka the CryptoPunks website, still the best! 52/ #4 no CEX coverage This is obvious. It is 2025 and we have less CEX coverage of NFTs than Litecoin had in 2013. 53/ #5 Unit Bias Unit bias is a real thing and things that could help in some, not all cases, like fractionalization are also possibly illegal in Gensler’s SEC (we will see what happens next). Even if legal, their UX flow is even more complex. This needs work too. 54/ #6 Valuation Valuation presentation is also junk. Opensea is showing floor prices for all pieces in a collection. People have random listings, order books fragmented. It may or may not be good to buy BTC at $94K today but if you do it is the right price today. 55/ So helping people know the right price to buy a given NFT at any given point in time is another issue that needs to be solved. Again, not unsolvable. I basically know +/- 10 or 20% the right price to pay for most Rare NFTs or can figure it out, so it can be scaled. 56/ Back to the Pepe example: You see frog, you like frog, you want frog. Behind door 1: click on $PEPE in one of 50 different easy ways, minimum buy $10 Behind door 2: XCP, Counterparty, ETH, Emblem Vault, which one to buy, what is fair price, send help! 57/ Imagine if you told someone about BTC in 2013, they go to all the crypto sites, cannot see BTC, go to Coinbase, also no BTC, they have get some other coin, move to own wallet, dig through other sites to find BTC, swap, nobody knows the right price for BTC, etc, etc. LOL 58/ So what is happening now is understandable and will not be fixed in the immediate term. But it is fixable. Early BTC tooling was also junk but eventually we figured it out and, hey, now you can buy it at Schwab in an ETF. 59/ And now we will have real momentum. There is a lot of literal computer programming that needs to be done to make the experience more seamless and the cost of that is going to plummet with LLMs. 60/ And I think and hope that crazy SEC excesses where things like "do not point on your project site to the marketplaces" will also end and teams can do the work to make their collectors' lives easier. 61/ Some day it will be easy to buy NFTs At that point, imho, good luck getting your hands on one whole unfractionalized real OG genuine Nakamoto Rare Pepe. We are 5 years away. My guess was 2030. My guess remains 2030. 62/ What about NFT-adjacent fungible coins? I understand why people do it. It is an attempt to solve the problem above, to scale holders. It is just inelegant. These tokens are generally not actually linked to the NFTs themselves beyond the initial airdrop. 63/ I have no objection to it. I understand why teams do it. It will work in some cases and not work in most cases. I have some ideas about how it can be done differently but I need to mull them over more. Not for today. 64/ So, to summarize: - Rare NFTs are very rare. The rarest of those are the apex assets in crypto. - Fun NFTs are not rare and are a great consumer and community use of crypto. - NFT messaging, tooling and distribution is still toddler-level. - We will fix it. 65/ As always, the future is bright. Everything has aligned now, to take our shot, to give it our best to build a decentralized trusted layer for society. We have 4-5 years now with crypto, AI and a generally pro-tech orientation. This is the window. LFG. Happy New Year! 66/ ps @RaoulGMI pointed out that there is going to be exponential growth in crypto-wealthy. He is correct, I did not mention it because I take it for granted but I will add it here because this is part of the logic.