NBA Top Shot — How NFT’s are Transforming the Collectibles Market
If you’re a fan of the NBA you’ve likely heard about NBA Top Shot, the sport’s collectible site that's leveraging blockchain technology to allow fans to buy and sell digital NBA Highlights.
According to CoinDesk, in the last 8 months alone, NBA Top Shot has successfully generated $7.38 million in revenue from its sale of digital highlights to fans.
Crypto has made a huge run in the last year and institutions are starting to take notice. The NBA’s involvement in this venture indicates that there are still many untapped opportunities in the space, and is a positive sign for continued growth.
Here’s a non-technical run-down.
What is NBA Top Shot?
NBA Top Shot is a blockchain-based online platform and marketplace where users can buy, sell and trade officially-licensed NBA highlights. It was developed in July 2019 by a joint venture between Vancouver-based Dapper Labs, the NBA (National Basketball Association), and the NBA Players Association.
How does the platform work?
The NBA cuts the highlights and then Dapper Labs decides how many of each highlight they are going to sell. They are then distributed as an NFT (non-fungible token), which gives each highlight a unique identifier that cannot be replicated.
They place each highlight into digital packs, just like regular trading cards, and sell the packs on the official NBA Top Shot website for prices ranging from $9 to $230. The price of each pack largely depends upon the quality and fan appeal of the highlight, and the popularity of the player. After purchasing the pack, the highlight is transferred into your encrypted, secured “highlight wallet”.
What are NFT’s
NFT (Non-fungible tokens) are blockchain-based digital assets that are unique and cannot be replaced with something else. These are in contrast to digital currencies such as BTC and ETH that are “fungible”.
To understand this concept, here are some practical examples.
Let’s suppose your friend lends you $20. When you pay them back, would it have to be the exact same note? Of course not. You have other ways you can pay them back that can replace the $20 bill. You can pay them in 5’s, 10’s or even quarters (if you’re a jerk). This is possible because paper currencies are fungible.
Now let’s suppose you lend your friend your rare, one-of-a-kind Spalding Basketball signed by the late Kobe Bryant. Would it be okay if he returned to you anything else? Absolutely not. A collectible like this is non-fungible.
NFT’s have become so popular among the crypto community because it is revolutionizing the collectibles space. $174 million has been spent on NFTs since November 2017.
The Value of NFT’s
In the current state, a dealer looking to sell a collector's item is limited to their small local market. The other option would be to try and track down a buyer internationally through sites like eBay and deal with all the displeasures of the post office, insurance costs, lost packages, etc.
NFT’s bring the collectibles market to the digital age. It allows dealers to buy and sell in a frictionless manner, turning valuable collectibles into highly liquid assets. This means that transactions that would normally take weeks through traditional means could be cut down to a few minutes.
Opportunities
The collectibles market is a huge space that rarely gets the attention it deserves. According to SportsCardInvestor.com, the sports card and memorabilia market value is estimated to be $5.4 billion dollars, and growing.
The PWCC 500 is an index that tracks the investment performance of professionally-graded trading cards. When compared to the S&P 500, it has reported a 12-year ROI of 175% compared to just 102% for the S&P.
To put this into context, if you had invested money into both trading cards and stocks in 2008, the value of your collectibles would be worth nearly twice as much.
Conclusion
NFT’s are an exciting development in crypto and the success of NBA Top Shot illustrates just how much potential there is for future adoption. If NFT’s are able to penetrate other segments of the collectibles market, it could mean huge returns for investors.
DISCLAIMER: This is not intended to be investment advice. Do your own research and assess your own risk tolerance. Investment discussions and ideas presented by the author are for informational purposes only.
Written by Ivan C.
