NBA Top Shot

Background

NBA Top shot is a block chain based trading card market place where individuals can by “moments” of their favorite NBA player. Similar to baseball cards, users by these moments in the hopes that they increase in value over time. Players’ moments can increase in value in several ways, such as the player getting better, the player winning awards, the player having good games, or their team getting better. Another factor in the value of its card is the rarity of it. Some moments have less cards out there so some may be 1 in 50 and some may be 1 in 5000. A lower number of cards for a moment means that an individual card is worth more.

Currently the market place has over $230 million in transactions. The prices vary drastically with some moments being worth as little as $16 and some of the most expensive worth over $200,000.1

You can buy individual cards directly on the market place or you can purchase packs that have a variety of unknown cards in the them. The packs may contain some very valuable cards or they may contain duds, making the purchase of packs very risky.

Dapper Labs

This is currently backed by the National Basketball Association (NBA), who licensed these moments out to Dapper Labs, the company behind Top Shot and other NFTs. They are also behind other successful and popular NFTs like Cryptokitties, which gained popularity back in 2018. In 2018, Cryptokitties spun off to create the company Dapper Labs. After their success with Cryptokitties, Dapper Labs wanted to create other NFTs, which is what led to their creation as a company.2

What is a NFT

NFT stands for a non-fungible token, which means it is a form of cryptocurrency that represents a unique item that can’t be duplicated. So, 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, if you trade one piece of art for the other that is obviously two unique items. Whereas cryptocurrency is like trading a dollar bill for a dollar bill.

Blockchain

Like cryptocurrency, these are traded and held on a blockchain for increased security. Blockchain is a database that is used to store transaction history for 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 then when the block is full a new block is created and chained to the previous. This allows for a decentralization of data which means no one company can own it and increases the security.3

Most NFTs are on the Etherium blockchain, but Top Shot is on the Flow blockchain. You can buy cryptocurrency coins for these block chains (Etherium coin and Flow coin). The flow blockchain was built by Dapper Labs to house NBA Top Shot.

Other Types of NFTs

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.

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.

You can also receive certifications and licenses in the form of NFT’s. These are obviously unique because of the fact that they are personalized to the person that receives them. This saves time because less time is required for verification of these certifications than if they were in the form of paper copies or digital copies.

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 you could “breed” online to receive more unique kittens. Obviously Top Shot are collectables like baseball cards are collectables, you purchase a moment of a NBA game which is a basketball collectable.

Potential Risks Involved

Poor Website/Unstable Servers

NBA Top Shot launched in October of 2020 and already has hundreds of millions in sales. This extraordinary growth means the site was not ready for the traffic it received. This means trading your cards and pulling your money out can be very difficult. Frequent Site maintenance, crashes, and bugs means you may not be able to sell your card when you want to and because this market can be very volatile, you could see the price of your card drop drastically before you’re able to sell it.

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. As stated early, cards that are rare, or have less copies out there, are worth more than cards with thousands of copies. So, if repeat moments are added 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.