Olivia
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Mr. Lullaby
@mrllulaby
Joined January 2019
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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
https://t.co/NVxWKzHCdl
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
https://t.co/JVZ4zhsurD
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.
My highest conviction "set it and forget it" investment for the next 10 years is crypto art. For me it's the most compelling, enjoyable and interesting area in all crypto.
Massive crypto wealth creation, along with monetary debasement, will drive incredible demand for scarce desirable assets (digital real estate or, well, digital art). Younger generations are more attracted to digital assets than most physical assets.
If, as Saylor says, BTC is Manhattan real estate then the best crypto art or NFT's are the scarcest, most desirable block space of all. It is blindingly fucking obvious...
Also as people go up the crypto wealth-curve, you soon realise that physical property is expensive to hold as an investment and is better as a lifestyle asset. Art fills that gap and crypto art is ultra-cheap to custody for extended periods. Like property, it can be used as collateral too, if you so desire it.
Additionally, we are in the process of creating a mechanism for tokenizing culture and community (or more clearly, creating tangible value out of a previous intangible). Culture at a meta level is of humanity-level importance to us. It makes us human and web3 enables this.
We are already seeing the Lindy Effects of the art that is deemed to be of long lasting cultural or artistic value and this is akin to the 2013 to 2017 bitcoin cycle that truly established bitcoins https://t.co/s1B385kUJ4 far only a few crypto artists have reached true Lindy Effect but I expect many more from 2018 to 2021 to accrue massive long term value (and new artists too. Art and culture are never a finite snapshot in time).
Art has always been upstream and at the nexus of culture, status and money and it will remain so. It is a truly human pleasure and will only accelerate in a less humanistic, more digital world. Art is a time capsule for culture and is always of humanity-level importance. It is an ultra high form of memetics after all, and memes are an ultra condensed form of societal messaging and history.
On the financial side, most quality art pieces are priced in ETH and will tend to outperform ETH over time. For example Beeple series have probably 3x'd ETH performance this year. Seriously valuable art will likely stay on ETH (and to a lesser extent BTC) due to the security needed to secure large single value pieces.
But most of us in this space don't think of it in terms of money as @punk6529 alluded to in a recent thread. Most collectors are trying to build the best collections possible in these early days and also act as Patrons to the space to help it flourish. The days of flipping art NFT's (vs pfp's) is largely over. The game now is to buy and hold the best artists (new or older) and demand will only grow over time while supply gets taken off the market for decades. There is realistically very little supply of established art currently and it will keep shrinking. You don't have much time before everything get entire re-rated.
But in the end, the crypto art world is an incredible community of passionate artists, collectors ,patrons all made up of misfits from art, tech, finance and elsewhere, all trying to create a new asset class and new art mediums. The mediums will change massively over time as holograms and holodecks become the dominant substrate for digital life.
The other thing that is true is that it's not an easy journey into the art world and can feel intimidating and confusing. But luckily, we have an easy first step via culturally relevant pfp NFT's and is the right entry for most. Community social signalling and status will only increase in necessity in our increasingly digital world.
Cryptopunks
Bored Apes,
Grifters (stupidly undervalued)
+ more
Ultra bargain buys are @CryptoDickbutts which have big cultural lore, are hugely loved and have Punks "if you know, you know" allure and are less than 1ETH
Then I'd look at MFers and @rektguyNFT
Start there and before you know it you'll soon end up deep down the art rabbit hole..
Crypto is the only payment rail that checks all 3 boxes: fast, cheap, global.
Under 1 second, and 1 cent, anywhere in the world.
Like water, payments flow to the path of least resistance. There is only one conclusion you can draw from this: the % of global GDP running on crypto rails will increase dramatically over the next 10 years.
It replaces central banking with decentralized banking.
Rather than setting interest rates by fiat, rates get set by markets.
Example below. Lenders set a price, aka an interest rate. And borrowers decide to borrow at that rate.
No Fed.
No centralized rates.
Just markets.
imagine a system where anyone can trustlessly loan anyone else money without a rent-seeking intermediary in the middle
where you don't have to ask a bank for permission in order to borrow
where borrowers get the most efficient rates possible, backed by trillions of dollars of pooled capital from around the world, creating the largest lending pool(s) in the world
where you are not bound by the financial conditions in your home country
where all loans and their collateral backing are 100% transparent
where the borrower cannot steal your money and the lender cannot steal your collateral
where other obligations on either of their books cannot affect these loans if they otherwise go bankrupt
you don't have to imagine
this is the world being built on Ethereum DeFi, and it is legitimately world-changing innovation
... and then for gen art
Chromie Squiggles
Memories of Qilin
Photon's Dream
Paper Armada
Automatism
Para Bellum
Anticyclone
Blind Spots
Subscapes
The Opera
Divisions
Meridian
Fontana
Fidenza
Ringers
Gumbo
Edifice
Phase
Glass
Bent
Ori
i think many miss the point on why big financial firms might want to go onchain
bottom-line is that there are many parts of the financial system which don’t operate as true free markets
tokenizing securities onchain creates conditions where markets can become much more open, accessible, and transparent
a good example would be the ability to use tokenized securities as collateral in automated onchain lending, even if regulated and whitelisted
right now these systems are super opaque and are at the crap terms a single financial provider (your brokerage) sets. while you can change custodians, it’s a pain for retail
in the future, anyone will be able to lend directly against them, creating an actual lending market- one which is transparent and cheaper than any single custodian could offer
and why would Blackrock etc. do this? because all they care about is more AUM, and having the ability to borrow against assets more efficiently will likely create conditions for much greater AUM
this is the game right now
and the stakes are likely bigger than the Manhattan Project
gn & gl 🫡
AI agents is how all users will eventually interact with blockchains. Agents don’t care about UX, interacting with 1 chain will be as simple as interacting with 1,000,000 chains.
Agents will be the power users of interoperability tech🦾
One things for certain
Crypto AI (especially agents) is headed into a mega bubble.
With more models like o3 going live, we’re entering an era where people will dream bigger than they ever have.
These models are *already* solving problems not even the top 1% of humanity can solve.
Strapping these tools into agents will make them seem like a genie to 99% of people.
Now add a token to that and you’ll get the largest coordinated accumulation of capital into a single sector the world has ever seen.
Oh, and we’re entering *another* prolonged period of fiscal stimulation from the leading economies in the world
Plus the most pro-tech US government we’ve ever seen.
We really are living at the convergence of the craziest bull run we’ll ever see.
Most can’t fathom this.
Once these valuations break people’s assumed ceilings, that’s when the real madness starts.
Lock in.
1/ On how to make it in crypto as a normal person.
There is one rule only: SURVIVE!
@Nitro_Labs Mr. Lullaby#9016
@0xAllen_ mrlullaby.eth
Jomboy just called A.J. Pollock's second home run of the game on a 3-0 count
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Onwards. 🖤
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