What happens when you take the world of cryptocurrency and merge it with the sports card industry? Probably something that looks a lot like NBA TopShot, a platform for buying, selling, and collecting digitized player "moments". Since the announcement of a partnership between Dapper Labs (a blockchain based company) and the NBA in the summer of 2019, and the subsequent launch of the beta version of the TopShot site this past Fall, the buzz has been consistently growing around the potential of the platform. If you've read this far, you've probably got a ton of questions, such as: What on Earth is blockchain? Who would want to buy a "moment"? And why does any of this matter?
Blockchain and Non Fungible Tokens (NFTs)
Before we get into the TopShot platform itself, it would be useful to understand what makes the technology behind it so special. Blockchain is a digitized record keeping system in which "blocks" of information recorded in chronological order are "chained" together to form an unchangeable record of events. It's gained popularity due to being the basis of cryptocurrencies such as Bitcoin, but it has many other uses due to its security and transparency.
Non Fungible Tokens, or NFTs, are digital assets that are given unique identifiers that differentiate them. No two NFTs are the same, and using blockchain, the history of a given NFT can be tracked from person to person dating back to their creation. According to coindesk, NFTs can be "a wide range of unique tangible and intangible items, from collectible sports cards to virtual real estate and even digital sneakers."
The Sports Card Industry Meets NFTs
$5.4 BILLION. That's how big the estimated size of the sports card market is, according to Sports Card Investor back in July 2020. That's a massive amount of money for some trading cards your mom probably threw away when you went to college. As someone who has participated in this marketplace, it's decentralized, disorganized, and can resemble a black market of sorts thanks to the lack of safeguards in place. A majority of the transactions take place over ebay, craigslist, or in variety stores, where verifying and authenticating the merchandise can be difficult. And if you do want to get something authenticated, the costs can be far too high for a casual collector.
The NBA thinks they've found a way to perfect the sports card marketplace through their partnership with Dapper Labs, developer of NFT collectibles such as CryptoKitties (a real thing that real people spend money on, I promise!). By turning to NFTs to digitize sports collectibles, you take out all of the shadiness of the sports card industry. Every "moment" on NBA TopShot is given a unique serial number identifier that is tied to your account through the blockchain, meaning no need for authentication and a much lower chance you get ripped off in a McDonald's parking lot.
What is a "moment" and why would anyone want to buy one?
The moments available for sale on NBA TopShot's marketplace are essentially highlights for a specific player, similar to how a baseball card is a photo of a player with statistics on the back. Each highlight is given a tier (common, rare, legendary, etc.) and it is known how many are in circulation. The rarity of the moment, the number available, and the performance of the player are all factors in the price of the moment on the open market. These moments can be found in "packs", where most moments are first introduced, and then are resold on an open marketplace regulated by NBA TopShot.
You may find yourself asking, can't I just go watch a player's highlights on Youtube? Why would anyone pay for that. Dallas Mavericks owner and famous tech entrepreneur Mark Cuban has your answer:
And the statistics of the platform back up Cuban's assessment. Millions of dollars are changing hands on the platform each day. Several moments have been sold for $100,000 on the marketplace, with hundreds of smaller but still significant transactions also occurring. Just this past weekend, there was a release of just over 2,600 of the "legendary" packs for $999 a pop; these packs had a queue of over 25,000 people waiting in line, with most collectors going home empty handed.
What's next for NBA TopShot?
While it's only been available to the public for a few months, TopShot has exploded in popularity and will only get bigger. As it's a system still in Beta, there are plenty of issues with the platform, including the pack launches (a bug in the aforementioned legendary pack release led to people being able to skip the queue and purchase), difficulty withdrawing funds, and struggles with handling bots and people using multiple accounts to game the system. It's likely the Dapper Labs team that developed TopShot is a little shocked themselves at how fast it's grown, and they'll continue to make improvements towards a more finished product. As of now, there are an estimated 50,000 collectors on the platform that currently own a moment, although that number is growing each day.
It's likely as a result of the NBA's success (so far!) with the pioneering platform, we'll see other sports leagues try to get in on the action. Besides being a major moneymaker, it seems to have increased fan engagement with the league through social media, on Twitter and Discord. Whenever a cool highlight happens during a game, excited fans will tweet with the hashtag #topshotthis, in hopes that it will be minted into a moment. And at any time in the day, you can log onto the TopShot Discord server and discuss trades, trends, and up and coming moments with hundreds if not thousands of like minded collectors.
In addition, one of the goals of Dapper Labs in partnering with the NBA is to get more people involved with Blockchain and cryptocurrency who otherwise wouldn't interact with the technology. You are allowed to pay using cryptocurrency on the platform, and in fact, Dapper has their own token called FLOW which will likely become a common currency for payment on the TopShot platform in the future.
Although a young and imperfect platform, NBA TopShot has already displayed tremendous potential to upend a massive industry, while also driving fan engagement and enjoyment of the game.