The NBA Top Shot platform, since its open beta launch on October 1, 2020, has done approximately $200 million in sales as of March 8. Almost 20 percent of these total sales was during a single day bull run on February 22 grossing over $43 million. Users that invested between $100 and $200 thousand in the beginning tout accounts valued over $20 million in the market. Top Shot has picked up incredible momentum into March, but is it sustainable.
For starters, NBA top shot is a website built for digitally collecting highlight moments from the NBA that’re minted on the blockchain. These moments are more broadly known as “non-fungible tokens” or NFTs. Fungibility refers to the transferability of an item. A $5 bill is fungible because any other $5 bill can be swapped with it in an equivalent transaction. These digital tokens are not fungible because no two are exactly the same due to serial numbers given to individual moments of each set. Additionally, these moments are minted on a de-centralized blockchain ledger that guarantees scarcity of each token.
Though Top Shot has brought NFTs to the mainstream, it is far from the first mover in the space. CryptoPunks, the first non-fungible token built on the Ethereum blockchain was established in 2017 by Matt Hall and John Watkinson. 10,000 NFT art pieces were available to claim for free by anyone with an Ethereum wallet at the time. Just four years later, several CryptoPunks have sold for over $1 million. Not a bad return on a $0 investment if you ask me.
Numerous established blockchains noticed this proof of concept provided by CryptoPunks and raced to start their own NFT projects. Among them included Dapper Labs and their new blockchain Flow. Their first NFT project CryptoKittes gained traction quickly and has an estimated annual revenue of $2.1 million. With one successful NFT project under his belt, Dapper Labs’ CEO Roham Gharegozlou set out for more partnerships to continue developing. To this day Dapper Labs has partnerships with the NBA, UFC, Warner Music Group, and Ubisoft.
So, back to Top Shot. Once Dapper Labs landed a partnership with the NBA and NBAPA, they were able to mint and sell NBA highlight plays in the form of NFT’s on their site. Top Shot distributes moments to collectors in packs of differing rarity. At the bottom is the $9 base set. This pack includes three moments of the base collection for that series. Next is the $14 common challenge set. These packs typically include four base set moment as well as one Limited Edition common challenge card. These challenge cards are included in sets that collectors seek to finish. If a collector has the full set in his possession when the challenge expires, they are gifted a reward moment that is never to be released in packs. This challenge system incentivizes buying on the Top Shot Marketplace, which is where peer collectors can sell moments to each other. The NBA takes their rake here, collecting a 5 percent fee on the seller side for each moment sold in the marketplace.
In addition to these common base set and challenge packs the remaining tiers are Rare, Legendary, and Ultimate. Ultimate packs have been sold for over $1,000 in the past with the price likely to increase in the future with the user growth that’s been occurring in the end of February into early March. Over this time span of time user growth has climbed an incredible 1,129 percent gaining 33,000 new users in just over a week.
But is it sustainable?
NBA Top Shot has been a hot topic in the crypto and sports space in the last week. Many dissenters of NFTs believe Top Shot is just a fad, propelled by investor FOMO from those missing out on early crypto. The surge in popularity has given difficulties to the Top Shot site as well. The marketplace has had maintenance downtime nearly every day and spent the entire day of the All-Star Game offline. Since returning, Dapper Labs has had to limit the number of moments users are allowed to buy or sell in a given period of time. Additionally, new user sign-ups are limited as you now must enter your email to Dapper Labs for them to put you on a waitlist. As of right now, it seems like a lot of users are in it for the quick flip of profit, but a user patient enough to wait a few years could see a handsome reward for their early commitment to the longevity of the platform.