Thread by @RomeenSheth

The demand for @nba_topshot is insane.

In the past 30 days, they’ve generated $30M of sales and are on pace to be the fastest growing marketplace ever.

We're witnessing the first inning of digital collectibles (DC).

Here's the 101 on DC and why it'll break the internet:

1/ To understand digital collectibles and why they’re so powerful, we need to break down 2 questions: (1) “what is something worth” and (2) “what is a store of value”

2/ What is something worth?

Valuing something is more art than science.

There are all sorts of quant methods you can use (e.g. discounted cash flow, comparables, precedent transactions) but "worth" always boils down to a simple question:

What is someone willing to pay?

3/ What is a store of value?

Anything that captures the "worth" of an item.

The canonical example for this is gold. But other popular physical stores of value include: trading cards, fine art, cars, stamps, comic books and toys / dolls.

4/ Physical stores of value work for 3 reasons:

(1) Culture - We like art, toys, jewelry, etc. They are relevant to us.

(2) Scarcity - we attribute a $ amount to these things.

(3) Credibility - We have tools / mechanisms to diagnose scarcity. (e.g. there's only 1 Mona Lisa)

5/ The credibility point can’t be underscored enough - there’s a whole industry around physical stores of value:

1. Appraisal
2. Storage
3. Transfer
4. Shipping
5. Insurance

6/ But over the last few years, there’s been a major breakthrough. Crypto enables us to transact with trust without a third party / intermediary.

Meanwhile, digitization allows us to slice up anything/everything and turn it into an asset.

7/ So what happens when literally everything digital can be a store of value and the friction of determining “worth” is eliminated?

An explosion of digital collectibles.

Match this with culture and you’ve got magic.

Enter @nba_topshot.

8/ Here’s how TopShot works

1. The NBA cuts highlights

2. TopShot take the highlights and decides how many of each they will sell

3. The highlights are put in digital packs and sold (just like a pack of traditional cards)

4. The highlights sit in the consumer's secure wallet

9/ When a user wants to trade or sell their collectible, not only does TopShot get a cut, but the NBA does too.

This is an interesting implication. Why? Owners of digital assets now have an opportunity to monetize in ways not available to them before.

10/ Traditional licensing was a one time fee. Now the NBA gets a rev share everytime the asset is traded.

This creates a behavior flywheel.

⬆️monetization opportunity = ⬆️digital assets created = ⬆️digital assets traded = ⬆️monetization

11/ The results are 👀

Right now, TopShot is doing more than $1 million in sales on the platform every day and is on pace to be the fastest growing marketplace in history.

For the latest drop, 25,000 people lined up for 2,331 $999 packs (!!)

12/ There are a lot of critiques of the DC space - transaction fees, price volatility, frothiness.

But these criticisms miss the point. It's always a mistake to judge an emerging platform by its current weakness.

The operative question is: If this works, how big can it be?

13/ @pranksyNFT - the biggest power user on TopShots - captured it best:

All markets are immediate and international. No longer do you have to wait for a card to be graded / delivered. You no longer have a card on the mantelpiece, but in the TikTok era, does that really matter?

14/ This is just the beginning. @rohamg - the founder of @nba_topshot - has talked about expanding to other leagues and has got a bunch of players interested.

@SDinwiddie_25, @JaValeMcGee, @Double0AG, @GTemp17 and @andre are all current investors.

15/ I tweeted earlier this year the '20s are going to be a renaissance decade - the themes I was most excited about were: (a) capital markets, (b) fractional ownership and (c) creators.

What we just witnessed was (A + B + C) * 1000.

This isn’t a new chapter. It’s a new book.