đď¸163 - Burning Will Transform NFT Sports
đď¸163 - Burning Will Transform NFT Sports
**DISCLAIMER: I own a lot of supply from what's mentioned in this episode, and TFM is partnered with NFTU and Candy. However, that does not prevent us from exclaiming our opinions, as we have editorial control here. Take that as you will!â
Whaaatâs up everybody.
This is the first time ever that Iâm writing a post alongside the podcast. Exciting! Going forward, each pod will come with an email, which may or may not contain additional information such as charts and data, as well as a variety of personal lists of what Iâm into this coming week.
It all comes in an effort to grow our community and make more shareable content. I want to expand the podcast beyond just my voice and into an easy-to-digest written format, which wonât match the podcast word-for-word, but rather expand on some of the content.
These will come out every Monday morning.
As usual, thanks for being here! -LG
Todayâs Pod - Burning Will Transform NFT Sports
How Burning Was Born
From the very early days of NBA Top Shot, we knew that burning was going to be a thing.
It was way back on October 5th, 2020, the day after Game 3 of the NBA Bubble Finals. TS did a drop for Eastern Conference Finals and Western Conference Finals packs, and for the first time everâthey didnât instantly sell out!
This was likely due to the fact that the team at Dapper had expanded the supply of what were supposed to be âRareâ moments, from /275 per moment for the Conference SemiFinals set to /999 per moment for the Conf Finals (yes, thatâs how long ago they started overprinting).
As the weeks went on, and the season wrapped up, Dapper eventually pulled the packs from the âshelfâ and let it be known that the remaining supply would be burned.
Thenâa long silence.
Top Shot Winter came and went, and it wasnât until June 8, 2021 (eight full months later), that burning was yet again referenced officially in a blog post about each momentâs supply ticker.
The blog proclaimed that the remaining ECF/WCF supply would soon be burned (which didnât happen until November 30th, 2021 - another six months later). And in reference to other moments being burned: âfor now, that will always show zero as no burn feature has yet been implemented in NBA Top Shot.â
And so, we waited.
And we watched as Series 2 ended, Series Summer â21 (??) came and went, and Series 3 kicked off with a MASSIVE roadmap that promised an astounding 18 sets released in just nine months.
Personally, it was around the Fall of 2021 that I began to publicly (and privately) advocate for reducing supply. I made it known that a solve to Top Shotâs cratering market cap was a major reduction in total supply.
Through the end of the year and the start of 2022. Through every new Dapper product launch (NFL All Day, UFC Strike) and non-Dapper sports collection launch (Candy Digitalâs MLB ICONS, Recur Foreverâs NFTU), we saw the same cycle occur.
The cycle was so simple:
New supply
No utility/challenges
No reduction
Appetite dries up
With no drain, these faucets of sports NFTs were overloading the nascent market.
And I took every opportunity I could to point this out, going as far as to write a podcast pointing the finger beyond these projects and more so at the sports leagues themselves. I used the pod to point out how terms like âcommunity valueâ and âsecondary marketâ were way beyond the imagination of a 100-year sports league business machine.
The episode was #156, titled âWill Sports NFTs Surviveâ (listen on Apple or Spotify).
And then finallyâFINALLYâafter months of promises and speculation, we were told by the NFL All Day team that burning would commence on Friday June 3rd, 2022.
It promised a few things, including a 24-hour burn option for common-only pack pulls and a future 100,000 moment reduction in supply.
Here was the result following Fridayâs drop/burn event (per NFL All Day):
466 out of 1000 packs burned
Thatâs right. Almost HALF the people who opened 3x commons decided to burn them in exchange for a $14 loss.
Thatâs half the people who decided that $14 was an acceptable cost for rolling the dice on potentially pulling a valuable All Day moment.
Not bad for a first time around.
Burning is imminent on many sports projects
Letâs take a look at the list of Sports-Card style projects and their burning status:
NFL All Day
466 packs (of 1,398) burned from WildCard Weekend supply
100,000 more being burned this summer from the Week 13-18 supply (which equates to 5.4% of supply, per Jon Jackson)
Promise of burning challenges coming this summer, utilizing existing supply
NBA Top Shot
Literally starting any day now, as promised two weeks ago
In fact, its so imminent that the video EXPLAINING the crafting was leaked this morning (though it contained erroneous info)
No other details yet on what will be burned
Candy Digital MLB ICON
Announced in April that âcraftingâ was coming to the platform
Revealed that crafting will be on a per-point system, and that the cards you burn will need to feature a majority of the player you are crafting
Example from the Candy Blog:
*note: i freaking love this system, and hope it works well!
ACTUAL BURNING: NFTU from Recur
So this one has gone a bit under the radar.
NFTU, the flagship project from Recur Forever, features former (and current) College Basketball Stars like Ja Morant, Carmelo Anthony, and Kevin Love.
Last month, they actually rolled out a pretty efficient, ticket-based burning system to reduce supply.
It works as so:
Complete a Common challenge
Receive a âPremiumâ Card (next tier up), and a âPremiumâ Challenge Ticket (which is also an NFT)
Complete a Premium Challenge, where you NEED several of the Premium Ticket, to then earn a Rare Card + Rare Ticket.
I really dig this system as it hits two key elements of what I would consider a strong crafting system:
Reduces supply (which in this case, bumped floor price from $1 to $3)
Introduces another token (Challenge tickets)
The Challenges can also be completed multiple times by one user but have a set limit of completions. For example, the challenge below can only be completed 1600 times, which is vital in providing clarity on ecosystem dynamics.
*Note: The First Mint is currently partnered with NFTU to help promote the product. However, including them in this issue was not a contractual obligation.
Burning in the rest of the NFT world
Outside our beloved institutional projects, there are tons of fantastic burning mechanics present in other blue chip NFTs.
We can learn a lot from how other leading projects manage their supply; in fact, it would be wise for the sports project to follow their leads, as many collectors and users likely overlap and would understand these mechanics off the bat.
Notable projects with burning mechanisms:
Damien Hirst The Currency: 10,000 unique pieces wherein owners have the choice to burn their NFT for a physical version. A year from release, all remaining digital and physical supply is burned, capping the total pieces at 10k.
Pixel Vault: Shortly after the genesis NFT (Punks Comic Issue #1) sold out, owners had to make the choice between burning it for the Founderâs DAO token (an exclusive club/DAO), or keeping their issue. And the choices havenât stopped since!
Huxley: One of my faves, and similar to PV in terms of a comic theme. Collectors must burn varying supply of issues #1-3 of the comics, in order to earn a Genesis Token, which is then burned for a PFP. This reduces overall comic supply, but also balances the PFP supply.
Now youâll notice that each of these examples requires a difficult choice, a vital part of a great NFT project.
Youâll also notice that these projects have either made their burning dynamics crystal clear from the very first day (Hirst, Huxley), or completely omitted any future details to let the genesis NFT act as a sort of Matryoshka doll (Russian doll), where the original piece constantly opens into new possibilities (Pixel Vault).
These projects know that for their collectors, NFTs are a journey, not just a destination, and that choice-based gamification maintains interest.
Before we dive into the actual crafting and impacts on sports project, I think we need to zoom out and look at the top level goal of these projects. What are they trying to do exactly?
Sports League NFTs: Whatâs the goal with burning?
On the surface, many of these projects (NBA, NFL, MLB, etc.) like to market themselves with the classic web3 tagline of âthe future of fandom.â
Its a line that insinuates that this is a sophisticated spaceship-like product that will transform your mundane TV-watching sports experience into a whole new experience.
And honestly, I donât fully disagree with the taglineâs meritâ âregardless of where this all goes, sports league NFTs have already birthed a new paradigm of collecting and connection. Personally, Iâve used these collections to return to leagues I had long left behind (like the NFL) and those I had never previously bothered with in the first place (like the UFC).
But from a business standpoint, future of fandom is not a bottom line.
These are consumer tech products at the end of the day, and with so much VC money behind them, their success metrics are pretty straightforward:
Active Users
User Retention
Customer Lifetime Value
Users engaging. Users spending. Thatâs it.
For any NFT project to achieve this, it needs to develop and stimulate an incredibly active economy. One that sees people engage regularly and spend often. A strong mix of super users, passive users, and returning users, coupled with excellent reason to buy/sell/trade on the regular.
In their current, non-burning states, the Sports League NFT projects have seen their daily active volume slowly disintegrate, and only peak during one period (supply drops). Itâs been incredibly difficult to drive new users and overall demand.
In the case of a product like NBA Top Shot, which went from 200,000 people in pack queues at the peak to somewhere between 10,000-30,000 users now, they need to stimulate that economy by targeting two key groups spenders, each with a completely different level of NFT knowledge:
NFT Degen Traders, some of which might be returning users, and all of which are active on a weekly basis.
The general public and fans of the league, most of which still have never heard of the product, but have maybe seen NFTs on the news.
Not an easy demographic to hit.
And thatâs why each of these products has now turned to gamification (a.k.a., a series of difficult choices) to get their metrics back on track.
Despite the dreamy message of future of fandom, these projects have all had to ditch the âcollectible-onlyâ aspect and resort to what their communities (and I) have been clamouring for: burning.
How They Can Be Burned
With goals, demographics, and challenges out of the way, we can finally turn to the far more exciting part: what we are going to burn NFTs for.
Inevitably, a burning mechanic introduces some type of secondary token into the economy. Doesn't matter what it is, even if the token is NOT an NFT or on the chain - itâs heavy duty for a project to introduce some type of ulterior element.
The burning buckets below range in tiers of complexity, and implementing them will inevitably will come down to the courage of the project leads and the appetite of the community for gamification. And in some cases, the willingness of the league partner/licensor to go along with it.
Fandom Rewards
Complexity Scale: 2/10
Sending people to games. Doing Discord AMAs with famous players. Giving new forms of interesting access. Merch.
This is the low hanging fruit of sports league NFTs. Itâs so low hanging in fact, that it should be expected. I would go so far as to label these Benefits of collecting, not Rewards, as the latter implies that you needed to keep earning points to get thereâ , whereas Benefits come with the initial purchase.
Potential Functions:
Trade NFTs for exclusive merch
Trade NFTs for game tickets
Trade NFTs for content access (Pay Per View, League Pass, etc.)
Iâd love to see something offered that is truly exclusive. Regular people can just pay for tickets, so these rewards need to reflect a type of exclusive fan club. Something unique.
Basic Crafting
Complexity Scale: 5/10
If youâve read or listened this far, then this is self explanatory; you burn NFTs in exchange for a different one (and ideally fewer than how many you started with).
The NFTU system referenced above is already there, as was the WAX/Topps MLB system from early 2021. This is the simplest and most straightforward way to burn NFTs, and one that many if not all collectors would welcome into the ecosystem.
Its a great way to amplify challenges by making them high stakes, and to emphasize my favorite part of all this: difficult choices for collectors.
Potential Functions:
Trade 5-10x NFTs for 1x Rare One (and various levels of this)
Trade NFTs for credits + other NFTs
Trade NFTs for AllowList to new drops
Trade NFTs for AllowList to other projects
In the case of the last two, these AllowList spots could also be specific NFTs âticketsâ, making them valuable on their own (should the burner not want that drop, or see more value in selling prior to it). Kind of like selling your spot in the Apple line.
New Token
Complexity Scale: 9/10
A new tokenâ âwhether its in-game credits, trade tickets (like on Top Shot), or a challenge ticket (like on NFTU)â âwould mark the ultimate complexity hereâ . But it would also fully commit these projects to gamification.
In the case of Top Shot, the trade ticket system essentially functions as a burn mechanism (although those moments do get recycled into trade ticket packs, which kind of feels like using your houseâs grey water to water your plants), with the tickets acting as a key to high-value, unreleased series 1 NFTs.
However, that still feels like a half commitment to the system. Trade Tickets were introduced over a year ago, and yet they are not NFTs, cannot be withdrawn or exchanged, and have no clear future. Yet they mark the most exciting part of a fully gamified card collecting system: a second currency.
Potential Functions:
Token-specific supply release
Token-specific fandom rewards
Token-specific bid/offer system
Token-specific staking (topic for another day).
The end game for a second token, as you can see with the options outlines above, is to give these projects far more autonomy in their economies.
Ecosystem Balance
Complexity Scale: 11/10
Not for the average collector, and in fact something the project leads themselves would have to work diligently to craft.
But the absolute best and most complex use of burning would be to bring artificial balance to the ecosystem by dramatically reducing supply (Thanos-style).
I know the meme makes it seem simple, but the long term ramifications would be very challenging for the average user to understand, as it implies that the devs can and will reduce supply at will.
To balance the power struggle, supply reduction could be decided by community vote where collectors give input on WHAT is burned and HOW MUCH.
Burning as Marketing
Complexity Scale: 0/10
All of these functions also serve a secondary purpose for the sports projects: marketing!
Nothing would ramp up excitement more than a big ass billboard right on each projectâs website that proclaims âNFTs BURNED TODAY: XYZâ.
This would signal to veteran collectors that supply/demand is being prioritized, and let new users know that they need to keep an eye on the economics (whichâ âagainâ âwould signal a full commitment to gamification).
And why stop there. Burning should be an EVENT.
Last Friday, Dave Feldman, VP of Marketing at Dapper Labs, joined us on Twitter Spaces to discuss NFL All Dayâs inaugural burning drop.
During that session, we joked with him about a literal game show, where people burn 1000+ NFTs to earn the chance to compete in a âDeal or No Dealâ style show where they can either earn tons of money, cool NFTs, or just a lump of coal.
You canât tell me you wouldnât watch that!
The Impact of Burning
There are many effects that burning would have over time on each project and community. Itâs impossible to predict them all.
However, here are some of the potential ones:
Short Term (3-12 months)
Leave a hole in the supply. As these projects move to burning, some may get very aggressive (again, Thanos-style), which would literally decimate the current supply and likely drive up floor prices. Iâm talking like as low as 25% and as high as 50% reduction in active supply. This would be great and very dramatic.
Bring people back. Thousands of people started their NFT journey with Top Shot, and many of them are sports fans. Yet, they are aware that most of these projects are designed similarly to NBATS, where the supply is outpacing the demand. With a proclamation of ecosystem balance, these degens could come streaming back in.
Growing pains. Whatever the new system is thats implemented; it wonât be perfect for a while. There will be errors. Collectors will use the system in unexpected ways. It will be chaotic.
Long Term (1-3 years)
Reshape how projects release supply. Imagine a world, where a project like Candy Digital spends the entire baseball season releasing supply, and the entire off season burning 50% of it in challenges. You could literally name the latter âCRAFTING OFF SEASONâ or something like that. It would be the ultimate way for these projects to keep fans/collectors engaged year round, so hopefully some of them see it that way!
Make users care about economics. NFTs, one way or another, are largely about investing, and itâs not asking too much for people to learn how markets function. Over time, with burning implemented, supply/demand would be a topic of much discussion, and would turn many average users into far more knowledgeable traders. Which isnât a bad thing!
Burning fails. Yes, a very real possibility. Iâm a burning maxi, so obviously Iâm optimistic and trying to push a narrative where burning rights the ship. But thereâs a very real scenario where burning dynamics bounce right off the ecosystems, barely making a blip, and where we soon discover that apex of NFTs is actually 10,000 supply profile pic projects. Certainly hope Iâm wrong there ;)
What We Really Want
Itâs no secret that sports league NFT projects are ready to move to the next phase (otherwise, Iâd be writing about something else). The Top Shot boom is long over, and selling endless supply of no-name players is not a long term strategy, nor will it continue for very long without some kind of major change.
At the end of the day, itâs important to remember what truly is the driving force here: money.
People want to make money.
NFTs are the most volatile, scam-riddled market there has been in a long time, and most collectors (myself included) are driven by the potential to make oodles of cash, or at the very least, accumulate assets that are worth lots of cash.
The possibility of making money, even if itâs small amounts, is what has driven many in this market since the Cryptokitties days. And it will continue to drive it until new use cases are developed for the technology.
Very soon, one of these projects will find the perfect balance of gamification, burning, predicting, grinding, and passion-driving. One of these will find a way to reward its users for paying attention, playing the game, and burning appropriately.
And the one that does will be the second coming of NBA Top Shotâwhether itâs them or someone else!
On My Mind This Week
NFL Rivals NFT Game Coming Soon on NFT Evening
Communities Arenât Buckets - Theyâre Clouds by Joey DeBruin
ENS DAO is Planning PFPs by ENS DAO
Dynamic NFTs and Their Use Cases by Chain Link
Moar At The First Mint
Top Shot Newsletter: Itâs ShowTime by GhostofGregOden
Live Show June 2nd: NBA Finals Showdown by The First Mint
Pod #162: Soulbound Tokens Are Coming by LG Doucet
Pod #161: Prep for NFT Winter by LG Doucet
Pod #160: What To Trust in Web3 by LG Doucet
About The First Mint
The First Mint is a web3 media company. We make. We write. We talk. We listen.
nice submarine stack