Crypto tech, digital asset ownership and sports: NBA Top Shot

Its been a busy year in cryptocurrency markets so far. Institutional interest and the tweets of Elon Musk have sent the price of Bitcoin and other alternative cryptocurrencies soaring. However, there’s a new kid on the block(chain), that has been stirring up interest in the past few weeks – NFTs. Looking forward they could be in for a breakout year.

Blockchain technology, defined as a decentralised computer network used for maintaining records of data/cryptoassets that cannot be altered proactively, is most renowned for being the technology cryptocurrency is built on. The essential properties of cryptoasets found in blockchain technology enable its usage as money – scarcity, durability, portability, divisibility and fungibility1. That being said, not all cryptoassets are cryptocurrency, and have different characteristics, such as NFTs.

NFTs

Blockchain technology isn’t just solely used for cryptocurrency. NFTs are cryptoassets/cryptotokens (used interchangeably), which, like cryptocurrencies, can be bought, sold and exchanged over the internet without the requirement for a central place of exchange. The defining characteristic of NFTs however is that they are unique and not mutually interchangeable by their individual specification in a way that cryptocurrencies are. One bitcoin can be traded for another bitcoin without either party knowing the difference. Each NFT has a unique digital hash that distinguishes it from every other NFT, this feature enables NFTs to act as a proof of provenance. We are seeing NFTs being used as proof of real world asset ownership and the technology has caught the attention of some of the worlds biggest companies. Nike have recently patented the term ‘CryptoKicks’ which could signal their intentions to leverage NFTs in the near future3. For now though, intellectual property applications are where NFT’s are really generating momentum. NFT functionality enables value in being able to prove ownership of intellectual property of digital assets such as art, collectibles and even trading cards. NFT platforms have been around for a few years now, but the first to really gain mainstream prominence and commercial success is NBA Top Shot.

NBA Top Shot

The National Basketball Association (NBA) is the first major sports league to explore blockchain technology and the commercial success so far is staggering. So, think about pokemon cards, baseball cards, or collectible cards from any other trading game. NBA Top Shot has taken this idea and created cards, or moments as they’re called, from officially-licensed NBA highlights, collectible on the blockchain. Each moment is an NFT, proof of digital ownership – a difficult concept to grasp. Only a certain amount of each moment, will ever exist or be ‘minted’ – with the laws of supply and demand setting the value of each moment,  generally, the lower the mint, the greater value of the moment, alongside characteristics such as the popularity of the player involved in the moment, quality of the highlight etc.  What highlights end up as moments and how many to ever circulate is determined by the NBA & creator of NBA Top Shot – blockchain technology developer, Dapper Labs, who began this collaboration in 2019. 

 Still in beta, the platform now has over 100,000 active collectors and there have been $140,000,000 of sales in the last seven days alone2. NBA moments can be purchased on the Marketplace or collected as part of virtual pack releases. Packs are currently sold out, and bought immediately by consumers upon renewed availability. Last week there were 100,000 people, including myself, queueing for the chance of being able to buy 5000 packs – safe to say I wasn’t successful. Once moments have been acquired they can be re-sold or placed into a secure highlight crypto wallet to be showcased as the owner sees fit across social media.

Many players are now on board and actively collecting, and even billionaire owners.Mark Cuban, owner of NBA team the Dallas Mavericks has compared Top Shot to the old-school model of collecting trading cards, stamps, art and other collectibles, perceived as stores of value4. Cuban noted in particular how digital ownership minimises the risk of damage or theft in comparison to traditional trading cards. 

What’s next?

Early adopters of the game have, if they’ve chosen to, profited incredibly by the sale. One Lebron James moment recently sold for $200,000.

For many involved, including myself, NBA Top Shot is seen as just the beginning of the commercialisation of digital asset ownership. A Mickey Mantle 1952 baseball card sold in January 2021 for over $5m5. What’s to say the original NBA Top Shot moments with similar rarity won’t be selling for prices similar in years to come?

The trading card and memorabilia market made a resurgence last year during times of the pandemic and my opinion is that NBA Top Shot can build on this resurgence.I fully expect examples based on various other sports to pop in the near future (Football/Soccer is already in place – See http://sorare.com). To some i’m sure the idea of paying money, particularly a lot of it, for a short video clip easily viewable on YouTube seems absurd. The concept of  digital ownership may feel absurd to some – just like the idea of buying digital currency did 10 years ago. Although I’m sure we all now wish we had spent $100 to buy 50 Bitcoin back then – worth approximately $2.3m now. Some users are already feeling the pain of selling their moments early.

Here’s my referral link if you have any interest in joining up – https://www.nbatopshot.com/?referrer=Callum

(Disclaimer: No real benefit of the referral link being used for either of us just yet)

References

  1. https://www.kraken.com/en-gb/learn/what-are-non-fungible-tokens-nft1
  2. https://www.cnbc.com/2021/02/25/nfts-why-digital-art-and-sports-collectibles-are-suddenly-so-popular.html
  3. https://thenextweb.com/hardfork/2019/12/10/nike-blockchain-sneakers-cryptokick-patent/
  4. https://blogmaverick.com/2021/01/31/the-store-of-value-generation-is-kicking-your-ass-and-you-dont-even-know-it/
  5. https://www.si.com/mlb/2021/01/14/mickey-mantle-baseball-card-breaks-record