NBA Top Shot

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NBA Top shot is a blockchain based trading card marketplace where individuals buy and sell “moments” of their favorite NBA player. Users buy these moments with hope that they increase in value over time similar to baseball cards. Players’ moments can increase in value in several ways: player skills and popularity increase, the player winning awards, or their team getting better. NBA Top Shot acts as a form of cryptocurrency that has created a new place for trading with benefits and risks for all who use it and enjoy the NBA atmosphere.

Background and Appeal

Image showing what the moments appear like on the site

There are many factors that go into the value of a card with one of the most important being rarity. Some moments have less cards out there than others; some may be 1 of 50 available, while others may be 1 of 5000. As one might expect, a lower number of cards for a moment means that an individual card is worth more. Each moment has different editions of the card, for example a certain Lebron James dunk moment has Cosmic, Holo and Metallic Gold versions. Each of these versions vary in price by significant margin with the limited edition releases costing much more than the base edition of the card. The current marketplace has over $230 million in transactions with prices varying from as low as $16 and or as high as over $200,000.

You can buy individual cards directly on the marketplace or you can purchase packs that have a variety of unknown cards in them. Packs may contain valuable cards or duds, making the purchase of packs risky. Like buying stocks, you purchase the moments with the hope of the price increasing and then selling them to make a profit. There is high risk in this procedure; if you purchase a card and the price drops you lose money, but if you can sell at the right time, users can make significant gains. A sale begins when a user posts their card on the marketplace for a certain amount of money, and then other users can purchase it if they think they are paying a fair price for it, or if it is a card they are interested in adding to their collection. Different than stocks however, you can sell your card for any price. This means there are no set prices, you can pay a different price for 2 identical cards depending on who is selling.

As claimed by the CEO of the company, what sets NBA Top Shot apart from other blockchain platforms is the lack of knowledge about cryptocurrency and blockchain needed. Very little knowledge is needed on such topics. Instead, success more importantly depends on knowledge what is in demand. This allows the platform to attract people that are relatively new to the cryptocurrency scene, as well as those that are more interested in the basketball aspect. With respect to the basketball side of NBA Top Shot, the frictionless marketplace is very appealing to users; people are able to purchase and trade digital cards smoothly without having to worry about traditional trading card problems, such as the quality of the physical card. Additionally, the history of cards, such as when and how much they sold for, is information that is publicly available, promoting transparency of transactions. Lastly, the appeal of NBA Top Shot can also be attributed to a feeling of self importance of owning something that is highly sought after.

What is a NFT

Logo for Flow Coin, the blockchain behind NBA Top Shot

NFT stands for non-fungible token, which means it is a form of cryptocurrency that represents a unique item that can’t be duplicated. A typical cryptocurrency, like a bitcoin, is fungible because you can trade one bitcoin for another that is identical. Think of NFTs as selling unique pieces of art; you are trading one piece of art with a different piece of art. On the other hand, cryptocurrency is like trading a dollar bill for a dollar bill.

Blockchain and Dapper Labs

Like cryptocurrency, NBA Top Shot moments are traded and held on a blockchain for increased security. Blockchain is a database that is used to store transaction history for

Dapper Labs logo

things like cryptocurrency and NFTs. It works differently than other databases in that data is stored in blocks and then chained together. Data comes in to the open block and when the block is full a new block is created and chained to the previous. This allows for a decentralization of data, meaning no one company can own it increasing security. You can buy cryptocurrency coins for these block chains (Etherium coin and Flow coin).

NBA Top Shot is currently backed by the National Basketball Association (NBA), who has licensed these moments out to Dapper Labs, a Flow blockchain rather than an Ethrium blockchain that most NFTs are hosted on. In 2018, the building success of Cryptokitties allowed them to spin off and create the company Dapper Labs creating more NFTs and improving their company

NBA Top Shot Affect

There are positive and negative affects of online trading and cryptocurrency and this is one of the first times we have seen it in the world of sports. Some have welcomed this online transaction with open arms and interest and others are less exciting referring to its negative affects on the users.

NBA Community

Image showing Josh Hart reaching out and helping other NBA players understand Top Shot

Players and personnel involved in the NBA have received NBA Top Shot in a very positive manner which was surprising to many in the NBA community. Many players are excited about the potential of this platform and have talked publicly about how impactful they think it can be. There are even current and former NBA players who have invested in Top Shot such as Michael Jordan, Kevin Durant, and Klay Thompson. In total, there has been over $300 million raised for the platform, bringing the total valuation to $2.6 billion.

Mark Cuban, famous investor on Shark Tank and owner of the Dallas Mavericks, is also very optimistic about Top Shot. He says, “Top Shot has the biggest, most rabid community right now... There’s 122,000 buyers for Top Shot… but it’s tiny versus the future market so this is only going to get bigger.” Essentially, Cuban believes that Top Shot will continue to rapidly grow because it already has an extremely passionate fanbase that is experiencing rapid growth. NBA players have also been actively involved with promoting and supporting Top Shot. Of the players, Josh Hart (guard for the New Orleans Pelicans) is one of the most influential supports of the platform. From buying and selling cards to promoting it publicly to the media, Hart is one of the faces of Top Shot within the NBA player community. Furthermore, he says, “You can’t ruin it. It’s digital. The value will be there all the time. It’s not like you have an amazing Kobe card, and something happens to it. You put it in your pocket, it gets washed and then it’s ruined. So there’s that aspect to it.” Hart enjoys trading digital cards on Top Shot and is excited about the future of the platform.

Benefits of NBA Top Shot

Screenshot of pack market on NBA Top Shot's website

One of the obvious benefits of NBA Top Shot is the ability for NBA fans to make some money on something they love and are interested in. Collectors can purchase moments of their favorite players and watch their prices potentially rise making the card more valuable than what they paid. This offers an advantage because investing in something like this can be seen as more fun, if you are a big NBA fan you can gather more enjoyment from owning your favorite moments than if you invested in some arbitrary stock.

Another benefit that NBA Top Shot offers over physical trading cards is the ability to see what each card you have is selling for. In typical trading cards, there is a assumed value as you can't track how much every single person in the world is selling your card for resulting in the possibility to undersell or overpay for a card. As Mark Cuban said, this allows for a "consumer friendly, efficient marketplace".

The enjoyment that comes from opening packs is also an added benefit. While they may be addicting (as described below), opening packs provides a level of suspense that many find enjoyable. This can also be very nostalgic, as Alex Xu, a founder of ox.com which helps people build their own decentralized cryptocurrency exchange said, "Growing up I collected Pokémon cards and I'll never forget the thrill of opening a pack". . Opening packs is something a lot of people used to do as kids, and this is just a grown up version that plays to adults suspense and nostalgia.

Potential Risks Involved

As with any form of transaction, especially in the online marketplace there are always risks and possible flaws in the system that users must be aware of before entering.

Poor Website/Unstable Servers

Screenshot of message from Dapper Labs about NBA Top Shot website issues

NBA Top Shot launched in October of 2020 and already has hundreds of millions in sales. This extraordinary growth means the site may not be ready for such incoming traffic. Frequent site maintenance, crashes, and bugs may prevent users from selling their card when they want to. This causes the Top Shot market to experience increased volatility, meaning the price of a moment can change dramatically before a card is purchased or sold. Timing is important when it comes to getting the most value out of a moment and therefore this could deter potential investors from joining the marketplace.

Excess Cards Created

Dapper Labs is adding new cards and releasing new packs on a daily basis. As the sheer number of cards on the market increases, the current cards are devalued. Cards that are rare, or have less copies out there, are worth more than cards with thousands of copies. If repeat moments continue to be added, the current cards for those moments decrease in value. If a lot of different moments are added, all moments are devalued because the whole market becomes flooded.

Top Shot is a very popular new form of investing which is both a downside and an upside. The influx of new investors and increased excitement means prices are increasing drastically, however if cards continue to be created rapidly, these prices will then fall across the whole market. NBA Top Shot should be seen as a risky investment with the potential to make or lose a lot of money.

Pack Gambling/Addiction

One possible ethical issue of NBA Top Shot is the addiction that comes with gambling on packs. The platform is inherently designed in a way that encourages users to try their luck by purchasing packs. This can be very addicting, especially if something of high value is pulled; once a highly valuable item is pulled, it is almost human nature to want to purchase more, with hope of achieving equal or greater success. This can lead to an addiction to opening packs, which more often than not has negative consequences. Such addiction towards opening packs is already present on other platforms and games, and it has led to people spending thousands upon thousands of dollars in their own money. While purchasers do indeed receive the items, the implementation of a pack system and potential addiction from opening packs has been and always will be a major ethical concern.

Other Types of NFTs

There are many other types of NFTs out there with popular ones revolving around music and art

Art

NBA Top Shot is just one of many NFT market places out there. The most common form of NFTs is digital art, which works very similarly to physical art collecting. Users can purchase digital files of art which are unique, similar to how a physical painting is unique. People can however duplicate the files, but these are just copies much like how famous paintings have prints. This allows for digital artists who used to struggle to make a living because of having to give away free art to online platforms to make some money. Some of these online pieces fetch top dollar in bidding wars, including a piece by an artist known as Beeple, who sold an NFT art piece for $69 million

Music

Another popular form of NFTs is music, whose market place works slightly different than art’s market place. Buying an album from an artist in the form of a NFT is like buying one of a limited number of records. These cannot be duplicated or downloaded, which brings about a certain feeling of exclusivity when owning them. This is huge for artists as it is a new way for them to make money from their music. The internet was promised as a way for for musicians to connect with their fans make more money is a way physcial copies never let them. Over the years however, the music industry has found a way top keep musicians from making money, as only about 12% of revenue from streaming goes to the artist. Musicians can sell limited edition versions of their records or release short music videos where they take a much larger cut of the profits and the consumers get a collectable version of their favorite music.

Certifications

You can also receive certifications and licenses in the form of NFT’s. The benefit of using NFT for things like this is the ability to reduce the amount of time needed for verification. It is also beneficial because holders of the certifications can store them easier without the risk of losing copies or deleting files. Finally, the obviously represent a unique non-fungible object because each one is tailored to the specific person who received it.

Collectibles

The basket that NBA Top Shot falls under is collectibles, which is what Cryptokitties, another NFT created by Dapper Labs, falls under as well. In the case of Cryptokitties, you could purchase unique digital kittens which could be "bred" online to receive more unique kittens. Obviously, Top Shot are collectables like baseball cards; you purchase a moment of a NBA game, which is a basketball collectable.