"The Original Source of Cards" Today, I found myself with some free time and thought about $cards. I currently only have an observation position in $cards. $cards has high revenue but low gross margin; in the crypto space, a 30-40% gross margin is not high. The turnover speed is slow. You need to buy and then sell. But the inventory cannot be replenished. High turnover, high revenue, but low profit. It's similar to traditional wholesale businesses, not like the protocol layer in the crypto space. Such platforms still have inventory. Is this inventory appreciating or depreciating? That's also a risk. Normally, a high inventory and low margin wholesale business should be valued very low. In fact, $cards is seen as a typical poor business in Buffett's eyes. Busy all year without making money, just earning a bit from inventory. Inventory is a type of liquidity risk, and buybacks are also a liquidity risk. The reason the platform can operate is that in a low liquidity market, the platform bears the liquidity risk. The discount is the liquidity compensation that the platform receives. Due to competition, this compensation will ultimately fail to cover the liquidity risk that the platform has taken on. In the stock market, this is terrible, but in the crypto space, it's very different. Because 99.9% of projects in the crypto space are trash. Poor but temporarily viable things can stand out in the crypto space. One question: how big is the market, and how large is the crowd? It's enough, in the tens of millions. The number of people is sufficient. The market size is 7 billion at the primary level, and several hundred billion when including the secondary level. Many KOLs are already calling out for $cards. I also took my initial position at this level. Hehe, I didn't research this thing in time before because I was out having fun. Platforms like $uni and $hype have 0 inventory, with revenue equal to gross margin; their financial models are very different from $cards. The gross margin for crypto protocols is 100%. In the crypto protocol layer, the default is 0 cost, at most paying a bit of gas, which is still paid by users. The income from the protocol has no marginal cost; it doesn't require inventory or stock. Where does this gross margin come from? It comes from the platform acting as the largest liquidity counterparty, taking on liquidity risk. Whether it's opensea or uni, users are each other's liquidity counterparties, earning fees themselves. They do not rely on providing liquidity and inventory. Of course, I understand that in traditional industries, a gross margin of 30-40% is considered high. How should valuation be assessed? If based on the crypto PS, it can achieve a very high valuation. If viewed through the PE of wholesale businesses, it would be very low. Moreover, the upstream of this wholesale business is unstable, with only one source manufacturer. In the stock market, such a business would be considered poor. But in the context of crypto + RWA narratives, it feels different. Another issue is that there are not many barriers. There’s also the problem of being choked by Binance. Smart you, silly brother asks you a question: Assuming I am a competitor of $cards, I would take all the cards from cards, completely rob them, and not redeem them. Aren't you giving me a discount? I take all at a discount, then slowly sell them at market price on my own platform. Or my protocol offers a slightly better discount to redeem cards, breaking through cards' inventory. Haha, how should cards respond to this? Have the small protocols learned? To summarize: $cards is a poor but temporarily viable business that cannot be falsified. In the crypto space, it has tapped into the RWA narrative, opening up a whole new market. It has the potential to break into a crowd of tens of millions in the short term. In terms of price, I think it's not a good price for small funds anymore, because even if it reaches 2 billion, it's only about 3 times. For large funds, it depends on their risk appetite. P.S. Silly brother has been intermittently watching while visiting friends and family; if there are any errors, feel free to point them out.