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NBA Top Shot, the new crypto highlight phenomenon, explained

Everyone is buying highlights ... but why?

Take a stroll around social media and you’ll see no shortage of people talking about “NBA Top Shot,” a collectible, blockchain-based highlight repository that has been around since July of 2019, but caught fire in the last week with over $50M in revenue hauled in by people still trying to get in on the ground floor of the pseudo crypto currency.

The scarcity is what is bringing people in to Top Shot, and the system is going wild. Right now the highest-priced Top Shot available for auction is a block by Zion Williamson against the Nuggets from January, 2020 — with a ludicrous asking price of $250,000.

It’s addictive and exciting for those involved, and to outsiders the dumbest thing in the world. Why are people paying for trading card-esque “packs” of random highlights, which you can watch for free on YouTube, with no material value? Is this the future of sports collectibles, or a massive grift? And will early adopters be millionaires in 10 years, or the new generation of Beanie Baby collectors?

What is NBA Top Shot?

NBA Top Shot in an online-only collection of NBA highlights which can be obtained by buying “packs” or purchased via auction. Think of it like buying sports cards, but in video form. You might crack a pack and get a highlight of a Steph Curry three-pointer, which is only being produced 99 times. When those 99 clips are gone nobody else will ever get that same highlight, and Top Shot claims you’ll own that clip forever.

The clips are created through Blockchain, which is the same technology that powers Bitcoin, Etherium, and other cryptocurrencies. I’ll spare you doing an extremely poor job trying to explain complicated Blockchain technology, which you can read in detail about here, but the important part is that it’s completely encrypted, impossible to hack, and ensures that it’s impossible to duplicate these files. So, for whatever it’s worth, when you buy an NBA Top Shot it is absolutely yours as a collectible.

So, for the price of an entire house, you could instead buy a highlight of Zion blocking a shot, that exists only on the internet, and can only be bought and sold on Top Shot.

Before you say “well, people can ask whatever they want, it doesn’t mean they get it,” understand that Top Shots of Zion Williamson and LeBron James both sold last week on the site for $100,000 each.

So you can make money off NBA Top Shot?

Theoretically yes, but it’s a little more complicated than you might expect. The tech behind Top Shot is a product of Dapper Labs, a Blockchain service that boasts on its own website that it “uses the power of play to deliver blockchain-based experiences that are made for you and ready for the real world.” What this means is that the NBA and a Blockchain service teamed up to replicate the sporting card market in an online medium, replicating scarcity and rarity to turn these moments into a commodity.

Yes, you can put funds into your account, buy and sell Top Shots and you can have the ability to pull the money out and put it in your bank. However, this is far from the utopia it might seem like at first.

There are three tiers of packs you can buy:

  • Common ($9): Nine common moments, which all have production of 1000+, with no maximum.
  • Rare ($22): Seven common moments, one rare moment, which has a maximum production of 999 clips.
  • Legendary ($230): Six common moments, three rare moments, one legendary moment, which has a production maximum of 99 clips.

There is not an unlimited amount of packs available. Instead they’re released in limited sized “drops” that can sell out, imagine a bunch of PS5s arriving at Walmart and trying to rush at get one. That’s the basic concept here. This ensures the market isn’t saturated, and the scarcity is maintained. Right now that’s driven the system to a fever pitch. Common moments are selling for $20-30 on average right now, meaning yes, if you get a pack drop you’re able to make money immediately — and good money at that. Assuming you’re lucky enough to get a pack.

However, we don’t know how the market will adapt when more are in the wild. Basic logic tells you that if something is bought at an average of 36 cents, it shouldn’t be able to sell for $20 for an indefinite amount of time. Every time there’s a pack drop and more moments are added into the economy the price will be driven down, especially on lesser players or more undesirable moments.

For now, it’s the golden era of Top Shot — especially for people who got in on the ground floor back in 2019 and might have a massive repository of moments. There will undoubtably be stories of people becoming millionaires off Top Shot, and there will be tales of those who were left holding the bag when the eventual crash happens, and the market corrects itself.

So why are people so addicted to Top Shot?

What the NBA and Dapper Labs have created is the perfect storm. A beautiful user interface that marries the thrill of collecting sports cards, with the promise of participating in cryptocurrency. It’s just happened to blow up at the perfect time.

The Covid pandemic trapping people at home got millions of people interested in pursuits they otherwise wouldn’t be, and we witnessed at the back-end of 2020 how many new traders were flooding the stock market. Robinhood boasted introducing a stunning 13 million new traders, and the recent GameStop stock frenzy pushed the idea of trading further into the mainstream.

Lots of people might be confused, or intimidated by the stock market — but they understand the NBA, its players, and feel they have more control over the commodities they’re buying. Plus, Top Shot keeps the carrot on the stick there for the promise of financial independence.

Everyone has FOMO from failing to buy into Bitcoin when it was selling for less than $1, before now swelling to its current value of $53,000, and we’ve seen this with the recent proliferation of Doge Coin, an ostensibly worthless meme coin people are sinking money into now, out of the same dream to see it hit big. Every time new technology like Top Shot enters the market there will be interest, and people believing they can set themselves up for life.

While that possibility remains, it’s also impossible to see the future of the market. Perhaps it will stick around and become a staple of the Blockchain, or people will lose interest and be stuck with dozens of moments they sank real money into, with no market to sell it back to. This is the risk of participating in anything like this, but for now Top Shot is on fire and people are eating it up.