NBA Top Shot: Pioneering NFT Collectibles in Sports

NBA Top Shot: A New Way to Ball

NBA Top Shot is a joint digital collectibles venture between the National Basketball Association (NBA) and Dapper Labs, the latter of which released the pioneering non-fungible token (NFT) trading platform CryptoKitties in 2017. NBA Top Shot is a blockchain-based platform that allows sports fans to buy, sell, and trade unique versions of officially licensed video highlights. The project originated in 2019, spent most of 2020 in development, and rose to popularity with upwards of a million registered users in 2021.

NBA Top Shot taps into an enthusiastic consumer base, and drives blockchain adoption by lowering barriers to entry, requiring minimal understanding of the underlying technology itself. Top Shot’s digital marketplace is designed to be intuitive and accessible for sports fans and collectors of trading cards and other sports memorabilia, regardless of their familiarity with cryptocurrencies and blockchain technology. That said, the platform’s underlying blockchain technology provides several irreplicable benefits to NBA Top Shot customers by enabling a wide array of cutting-edge features.

What Is NBA Top Shot?

At its core, NBA Top Shot offers fans the chance to collect “Moments,” which are tradable NFTs that contain a video clip of a specific game highlight as well as other relevant information, such as statistics about the specific game and the player featured in the clip. Each NBA Moment has a unique serial code and a provably fixed total supply, leveraging the Flow blockchain. Moments vary in terms of scarcity and value. As of May 2021, there are five tiers of Top Shot Moments:

1. Genesis Ultimate (1 copy): Available only through special events

2. Platinum Ultimate (3 copies): Available only through special events

3. Legendary (25–99 copies): Found in legendary packs — starting at $230 USD; typically containing six common Moments, three rare Moments, and one legendary Moment

4. Rare (150–999 copies): Found in rare- and higher-level packs, starting at $22 — each rare pack guaranteed to contain at least one rare Moment

5. Common (1,000+ copies): Found in common packs, starting at $9 for nine Moments

At present, there are three ways for people to obtain Top Shot Moments:

• Pack Purchases: Most Moments are first released as part of a digital ‘pack,’ which users can purchase directly from NBA Top Shot. As with a pack of traditional trading cards, purchasers do not know what specific Moments are contained in each pack before making a purchase. NBA Top Shot releases new packs sporadically, and these packs are often themed. Examples include a Christmas-themed “Deck the Hoops” pack released in January 2021 and a “Rising Stars” pack released in March of 2021. Users can sign up to receive email notifications about newly available packs, and once a specific pack type is sold out, it’s out of stock forever.

• Challenges: Top Shot also occasionally issues “Challenges,” which give users a chance to earn new Moments. During a Challenge, users have a fixed amount of time to accumulate a specific set of Moments. Once the allotted time has expired, every user that is holding the full set of required Moments will earn a bonus Moment. The Moments won in Challenges often cannot be found anywhere else. As a result, Challenges encourage users to trade among themselves, thereby adding dynamism and excitement to the market.

• Peer-to-Peer (P2P) Trading: Once a Moment has been acquired through a pack purchase or Challenge, users are free to trade or resell it, much like a physical trading card. However, unlike physical cards, each Moment’s authenticity and scarcity is readily verifiable (via the Flow blockchain), and the full transaction history and past sale prices of each Moment are available for everyone to see. This data helps foster a transparent and trustworthy market environment. Further, while Moments can only be sold and traded on Top Shot’s official platform, the user community determines the fair market value of every Moment after the initial point of sale. P2P exchanges of Moments accounted for more than 95% of total sales value on Top Shot’s platform in first-quarter 2021 — a testament to the aftermarket enthusiasm for Top Shot and the significance of its community-driven elements.

Why Pay for Top Shot Moments Video Clips?

As of March 2021, more than 800,000 accounts were registered on Top Shot, and these users have collectively generated over $500 million in sales. The fanfare seen in 2021 surrounding NBA Top Shot has been undeniable: Packs of all rarity levels have often sold out within seconds, and in February 2021 a Moment of LeBron James dunking on the Sacramento Kings’ Nemanja Bjelica sold for $208,000.

However, some skeptics have questioned why people are willing to pay so much for a video clip that they can watch online for free. One answer could be that humans are collectors by nature. Many fans have long been willing to pay a premium for team- and player-specific totems with little-to-no demonstrably practical value. If a 1952 Mickey Mantle card made by Topps — a piece of paper with minimal production cost — can sell for $5.2 million in 2021, who’s to say what a rare Kobe Bryant highlight NFT will be worth to the right person in a few decades?

Additionally, NBA Top Shot is designing new ways for people to interact with and use their Moments. Dapper Labs is currently working on an immersive gaming experience called “Hardcourt,” which will allow users to create their own custom NBA Moments basketball teams and use their Moments to upgrade their players’ abilities. With Hardcourt, users would be able to control their players in a virtual basketball court, participate in online tournaments, and possibly even compete for the chance to win additional rare Moments.

In other words, while each Top Shot Moment can currently be described as a cross between a trading card and a video clip, these NFTs are slated to feature new functionalities and benefits as Top Shot evolves over time. This game is expected to launch in mid-2021. By combining collector’s items with a familiar eSports interface, Top Shot hopes to broaden its user base and create an entirely new way for fans to interact with the NBA brand and one other.

In addition to the Top Shot team’s future development plans, several NBA players have also seen the value in Top Shots and are contributing to the project in their own ways. The Pelicans’ Josh Hart, for instance, is a Top Shot user himself and occasionally livestreams himself opening new packs on Twitch. Other players have even begun trading Moments for real-life experiences, such as offering courtside seats or a specific game jersey in exchange for a Moment.

The Technology Behind NBA Top Shot

While Top Shot utilizes decentralized blockchain technology to make it easier for users to trace and verify the authenticity and scarcity of their digital collectibles, this project’s business operations are fairly centralized at their base. The NBA selects which game highlights can be made into a Moment, and works with Dapper Labs to decide how many Moments they should mint for each highlight. This is currently a time-consuming, manual process, and the Top Shot team is considering new ways to standardize it — or even to incorporate fans into the decision-making process in the future.

A Moment’s traceable history begins the moment it is minted by Dapper Labs. From there on out, the Moment’s price history, ownership, and time-stamped transaction record will be permanently logged on the blockchain. This provenance, in addition to each Moment’s unique serial code, helps to ensure that each Moment is provably unique and non-fungible. Because all of this information is available for anyone to see, collectors and industry observers can easily determine which Moments the community values most, or see when the price of a specific Moment makes a significant move — and plan their trading decisions or ancillary commercial strategies accordingly. Such a comprehensive provenance structure is possible because every Top Shot Moment is an NFT. These blockchain-enabled collectibles allow users to prove scarcity and ownership in a digital world that has historically been inundated with unsanctioned file duplications and unrestricted content-sharing.

Once a user purchases a pack of Moments, the Moments are transferred to that user’s encrypted wallet within the Top Shot network, where they can be showcased to other users or resold on their P2P marketplace. Top Shot makes a profit from pack sales, and also collects a 5% fee for each P2P exchange. These revenues are divided among the NBA, Dapper Labs, the National Basketball Players Association (NBPA), and outside investors (although the exact proportions of this fund distribution have not been disclosed).

As a result, Top Shot stakeholders — from the blockchain developers minting new Moments to the players featured in the highlights — have a vested interest in ensuring the success of the whole ecosystem, including P2P trades. By operating within a digital system with instantaneous trades, these stakeholders are able to eliminate packaging and shipping costs and avoid third-party authenticators and auctioneers, improving profit margins across the board.

Top Shot Moments: Is There a Catch?

While Top Shot users have clearly demonstrated that many fans are willing to purchase a tokenized asset that represents a specific NBA highlight, other fans may be unclear about what exactly they would be spending their money on. The NBA still owns the highlight footage used in every Moment, and the organization’s media partners still are allowed to broadcast the video clips that are sold as Moments.

Furthermore, if a user violates the terms of service, Top Shot can suspend or delete that user’s account and Moments from the platform without advance notice. In other words, while the track record of each Moment is practically tamper-proof — even for the NBA or Dapper Labs — the Top Shot team has the ability to destroy Moments if it deems the terms of service have been violated. In these respects, buying a Top Shot Moment is significantly different from buying a physical trading card, or even from buying bitcoin, and is more analogous to purchasing a software license (which could similarly be revoked if terms of service are violated).

Overall, it’s important to note that Top Shot was designed as a blockchain-enabled business with a relatively high degree of centralization — especially when compared to well-known blockchain protocols such as Bitcoin. While Top Shot utilizes certain benefits of blockchain technology (i.e., traceability and immutability), it might not meet the expectations of people and institutions who view blockchain as a means to maximize decentralization.

Top Shot has also been criticized for the way the platform handles withdrawals. Though the platform has generated hundreds of millions of dollars’ worth of sales, as of March 2021, only $18.7 million had been withdrawn from Top Shot. This may indicate users’ willingness to keep their assets on the platform to some degree, but it still can take 30 days to get approved for withdrawals, and more than a week for each withdrawal to be finalized once approved (as of 2021). According to the Top Shot team, this delay stems from the fact that the platform allows users to make payments using both fiat currencies and digital assets. As a result, all withdrawal requests are subject to heavy compliance checks to monitor for instances of nefarious activity. That said, Top Shot is aware of concerns regarding its withdrawal process and plans to alleviate the issue by implementing automated clearing house (ACH) withdrawals to U.S. banks.

Top Shot Moments: A New Form of NBA Fan Engagement

While NFTs have been making a splash in the world of fine art, Top Shot has successfully tapped into something less highbrow, and potentially even more accessible to the mainstream. Buying a Top Shot Moment doesn’t mean you’ve obtained exclusive intellectual property rights associated with that Moment’s video highlight, but sports fans have a long history of paying for the right to exhibit their devotion, and Top Shot’s resounding commercial success is a testament to this enduring phenomenon. 

Moreover, Top Shot is actively developing new ways for users to interact with and use their digital collectibles — which could boost the project’s success further. The global trading card business is currently worth $5-6 billion annually. As Top Shot comes up with new ways to modernize this legacy industry and integrate the platform with growing sectors such as mobile gaming and fantasy sports, the project is poised to inspire other brands looking for new ways to engage their followers.