Old People’s Guide To NBA Top Shot
There is a digital gold rush happening right now and a lot of people are scratching their heads trying to make sense of it. Enter NBA Top Shot, which has gone from niche to over $125M worth of transactions in less than a month. It sits at the intersection of sports and blockchain: think digital versions of the packs of collectible cards you had back in the ’90s. NBA Top Shot is wading into unchartered territory for many people, so I’ve decided to resurrect my “Old People’s Guide” format to explain this new phenomenon.
Before the basics, two quick things:
1) To keep things high-level, I’m simplifying everything. For example, there are 5 types of Moments. But for simplicity (and the fact that two are not currently released yet) I’m focusing on the three available types.
2) Shout out to Drew Austin. He got me into NFT’s and NBA Top Shot. My only regret is that it took a week between him telling me about it and me actually taking action. That was an expensive mistake. Drew has built an impressive portfolio in a short time and is someone to watch in this space — https://momentranks.com/account/drewsventures
On to the basics:
Quick gut check of where you are.
Do you understand what the words “trading cards” mean?
I’m talking about baseball cards, basketball cards.
Babe Ruth. Michael Jordan. Mickey Mantle. Lebron James.
Do you understand these words?
If so, great, this should be easy. If not, this might be a bit harder for you.
Let’s say you own a Michael Jordan rookie card in mint condition. Mint condition means you put it right into a case when it came out of the pack. If you own that, it could be worth hundreds of thousands of dollars. There are only a handful known mint condition Michael Jordan rookie cards. If you own one, that’s awesome.
Several years ago, Dapper Labs started off as a company called CryptoKitties. They offered people the ability to buy a digital kitty. Everyone thought it was a bit odd / funny / weird. And were even more puzzled when they were able to land some of the biggest investors in the world (Union Square Ventures, Andreessen Horowitz, etc). CryptoKitties stayed this odd and mysterious company / asset, and evolved into a company named Dapper Labs.
The Dapper team continued to grind and they eventually partnered with the NBA and came out with the concept of a digital collectible called a Moment.
It’s not a physical card, it’s purely digital. It is a highlight clip from a game and associated with a player.
Furthermore they use the blockchain so everyone can transparently see and understand ownership.
So lets say they make only 50 of a “Moment” where Lebron James is dunking a basketball or Steph Curry hitting a three point from half-court. They know which #1, #2, #3 to #50 is because it is a public ledger. You can see who owns which Moment.
Good so far?
Great.
The next thing to understand is that there are three levels of Moments (five really but two have not yet been released and will only confuse you). They are:
- Common Moments: usually 1 of 1,500–15,000
- Rare Moments: usually 1 of 250–999.
- Legendary Moments: usually 1 of 25–99.
There are two ways to acquire Moments: the first is when a pack is newly minted, known as a “drop,” and the second is through a secondhand marketplace transaction.
Pack Drops
When NBA Top Shot announces a Pack Drop — thousands of people scramble to get to their computers or phones to get on line to get a pack of Moments (akin to buying a new pack of cards). When it is a Base Common Pack Drop, Dapper typically gives 10 minutes’ notice. When a Common (Cool Cats, Got Game, etc), Rare or Legendary Pack Drops, the company provides at least 6 hours’ notice. People wait in a virtual line for their turn to buy the pack.
The virtual line is randomized. So let’s say there is a Common pack drop and they have 50,000 packs. As soon as you join the drop you get a countdown clock until the drop is happening. When the clock goes to zero, you get placed randomly on the virtual line. If you get placed, in this situation with 50,000 packs, below 50,000 you will get the opportunity to buy a pack. If you are above 50,000, your odds diminish. Occasionally, some people might not have the money to pay or leave the line, and so you are eligible to purchase. But if you are number 90,000 on the line, then you are likely out of luck.
The Common packs sell for between $9-$15 a pack, while Rare ones range from $50–150, and Legendary sell for $200+. The most recent Legendary one was $999 and it sold out in seconds and only 2,500 got them (a cool $2.5M in revenue for Dapper in seconds). Packs are really hard to obtain and as NBA Top Shot is growing with demand off the charts, it is pretty rare to score a pack during a drop.
Marketplace
The Marketplace is a second hand market in which you can buy and sell Moments that you own. The Marketplace shows the live market value for each Moment. Several million dollars flows through the Marketplace daily. The Marketplace is the easiest place to acquire Moments, and is also where a lot of new people start their NBA Top Shot journey.
There are several nuances to assessing value in the Marketplace. One of the major delineators is the card’s “Series.” At the present, two Series for NBA Top Shot: Series 1, which spanned the 2019–2020 series, and the current NBA season 2020–2021 (Series 2).
Topshot Moments also have Serial Numbers, which are vital to the store of value. Similar to owning artwork, the earlier numbers in a series are more valuable, so owning “Moment #1” is more valuable than owning “Moment #19”. But it’s not a linear set of values. The second most valuable is the last one in a series, and the third most valuable is jersey number corresponding with the player’s number. So if it is Michael Jordan (not currently available as a Moment) — with his #23 jersey, then #23 is third most valuable.
Challenges
The final construct in NBA Top Shot is Challenges. Challenges are ways to unlock even more value through scarce Moments. For example, get these 10 Moments (from packs, marketplace, whatever) and unlock this Moment you can’t get in a pack. These are typically unlocked through bundles, or through participating in one-off programming.
Part of the appeal of NBA Top Shot is that it provides access to the concept of blockchain without needing to understand fintech. I purposefully stayed away from the more complex crypto products to do, but non-fungible tokens (NFTs) have been a consumer-friendly way to access the crypto markets. The graph below is the best visual of the differences between fungible, non-fungible, tangible, and intangible assets.
Future
The above should give you a primer of what NBA Top Shot is with as little jargon as I could manage. I’ll end on where I see the future of NBA Top Shot or NFT’s going.
I think this is the first inning. It may seem frothy but I think there is a long way to go.
I love the NBA and think it is the perfect starting point. But don’t forget about MLB, NFL, NHL, Tennis, NASCAR, Boxing, and the biggest one — Soccer/Futbol.
Sports leagues will see the success with NBA Top Shot and follow suit.
Who wouldn’t want a Ronaldo free kick goal Moment or a Messi nutmeg Moment?
It’s going to be wild.
And then when you take it a step further and think about other pieces of content — Moments from TV and Movies. I can see the Marvel Cinematic Universe, Harry Potter Universe, and many others creating Moments of limited size and making them available.
Who wouldn’t want a Legendary 1/50 Thanos Snap from Avengers Infinity War Moment?
The future is bright and I hope this article helped clarify what it is. You may think it is crazy that people would want this but when you break it down to its core it isn’t very different from other collectibles (like baseball cards) and the value is in the eye of the acquirer.
See you at a future pack drop!
