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The Billion Dollar Opportunity

The Billion Dollar Opportunity

Breaking down the opportunity for NFTs to digitize physical collectibles...

Matt O'Brien
September 26, 2023

GM frens,

In today’s edition of The Ground Floor we are breaking down the opportunity for NFTs to impact the physical collectibles market...

Digitizing Physical Collectibles

One of the biggest challenges the Web3 world continues to face is finding new use cases that can drive additional consumer adoption.

In the last 3 years, one use case that has very clearly found product market fit is digital artwork, and more broadly digital collectibles minted on chain.

In recent weeks one use case that has increasingly appeared on the crypto twitter timeline is the digitization of physical collectibles in large part due to courtyard and their successful digitization of Pokemon trading cards.

The Opportunity

Consumer adoption of digital collectibles is a major trend that has been underway for many years with an ever increasing number of people paying to purchase skins (cosmetics) in video games, and the advent of NFTs ushering in an era of people purchasing a wide array of additional digital collectibles.

Nonetheless, the total market for digital collectibles is estimated to be less than 2% of the total value of the market for physical collectibles.

If NFTs accomplish nothing else, then they have already become a better means of collecting collectibles.
The market cap of collectibles sits at $434 billion.
The total market cap of NFTs sits at $6.5 billion.
Plenty of market share to take with what we have already.
— Luca Netz 🐧 (@LucaNetz)
6:04 PM • Sep 22, 2023

The goods news for those advocating for the continued adoption of NFTs is that the market for physical collectibles stands to benefit from the issuance of digital tokens / counterparts minted on chain for a variety of reasons:

1) Ease of Authenticity

One of the biggest benefits of blockchains is the immutable ledger they provide that can be relied upon to confirm the authenticity / provenance of assets.

In the case of physical goods, the successful implementation of blockchains does require a trusted 3rd party to confirm the authenticity of the physical goods prior to the issuance of a digital counterpart with companies such as Courtyard working to establish an industry standard.

With Courtyard serving as the trusted 3rd party, consumers can in turn purchase digital tokens that represent ownership of physical assets without any concerns as to the assets authenticity ~ with the ability to redeem the token at any point.

This is a significant improvement for both buyers and sellers.

In the case of people seeking to sell a physical collectible on eBay ~ it’s necessary to develop a track record of receiving positive reviews in order for buyers to trust the authenticity of the item they are selling.

For buyers, the benefits of these tokens comes in the form of a frictionless ability to trust the authenticity of the assets they are purchasing, in addition to the ability to keep their physical collectibles vaulted ~ redeemable at any point.

2) Global Markets

Digital tokens that represent ownership of physical collectibles creates an opportunity for collectors all around the world to own these items.

This will encourage new participants to collect physical collectibles ~ increasing the overall market for physical collectibles.

Additionally, these global markets unlock the ability for collectors to receive loans against their physical collectibles they own as we have seen.

Looking Forward

The digitization of physical collectibles presents a major opportunity to increase the adoption of NFTs, should this technology have a meaningful impact on the ease of authenticating and owning physical collectibles.

In 2023, we are witnessing the very earliest exploration of this idea, and it largely remains to be seen what type of long term impact this technology (NFTs) will have on the physical collectibles market ~ positive, or negative.

Optimistically, should the digitization of physical collectibles succeed, we will see a very large cohort of new consumers adopt NFTs for reasons related to the improvements this technology can offer ~ a very positive development for NFTs.