NBA Top Shot

Background

NBA Top shot is a block chain based trading card market place where individuals can buy “moments” of their favorite NBA player. Similar to baseball cards, users buy 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 their card is the rarity of the card itself. 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.

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.

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.

The Appeal

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 of 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.

Dapper Labs

NBA Top Shot is currently backed by the National Basketball Association (NBA), who has 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.

What is a NFT

NFT stands for 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; 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

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 it increases security.

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

Other Types of NFTs

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.

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 may not be ready for such incoming traffic. This means trading your cards and pulling your money out can be very difficult. Frequent site maintenance, crashes, and bugs may prevent you from selling 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, 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 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.