Something rather typical happened for an atypical reason on Feb. 25: A community within NBA Twitter was mad online. No, these weren't Denver Nuggets fans up in arms over their close loss to the lowly Washington Wizards, despite a 34-6-6 performance from Jamal Murray. Nor were they frustrated Los Angeles Clippers fans complaining about their team's stars being unable to do much against a Memphis Grizzlies squad that only just returned to a .500 record. They weren't even fans preemptively whining over their favorite superstar getting snubbed from this year's All Star Game.
No, this was a relatively new group of people, sitting on the intersection of hoops fandom, memorabilia collection and digital investing, while looking to get into what's been described as the next big thing for those who belong to any of those three crowds: NBA Top Shot. Before getting into what tilted some of that base last week, let's first get into what Top Shot is, exactly.
What is NBA Top Shot?
NBA Top Shot is an online company launched by Vancouver-based blockchain company Dapper Labs, and backed by the NBA, that allows users to procure a collection of digital basketball highlights, and then show off that collection to others. To get these NBA highlights, which are referred to as "moments," actual money must be spent in some way, either through purchasing digital packs containing a random assortment of these moments, or through spending money in the marketplace.
These moments range in designated rarity, and are artificially scarce based on where they land in the rarity scale. The tiers include:
- Common, which are moments that can have over 1,000 digital copies: These moments can be purchased in Common Packs, starting at $9 for nine moments, for example.
- Rare (150-999 digital copies): These moments can be found in Rare Packs and above, starting at $22. The example Top Shot gives of this kind of pack contains seven common moments and one rare moment.
- Legendary (25-99 digital copies): These can be found in Legendary Packs, starting at $230. The example Top Shot gives contains six common moments, three rare moments and one legendary moment
- Platinum Ultimate (3 digital copies): These are only availably through auction.
- Genesis Ultimate (1 digital copy): There are also only available through auction.
The process to purchasing these packs are similar to queuing up to buy something at any store. You have a reserved spot in a digital line based on when you click the link to purchase, and if there is still product remaining at the time your position in line comes up, you get to purchase a pack. Once the packs are sold out, they're gone indefinitely.
If this is all still reading like a foreign language to you, there are two things to note: First, you're not alone. A common refrain among those who are outside of the Top Shot community and only just hearing about it for the first time is based in confusion and usually sounds something like "I feel way too old to understand this." Second, it can certainly get much more complicated as this new trend is connected to blockchain technology and speculative investing. For the sake of those who are just now learning of this, we'll take things slowly before moving on to the latter of those two points.
'Next level NBA collectibles'
In Top Shot's own words, it is providing "next level NBA collectibles." In other words, this whole experience can be generously compared to card collecting, just in a digital format. It's what initially drew many to the process, including Alex Xu, a member of the founding team at 0x.org, a not-for-profit that helps developers build their own decentralized cryptocurrency exchange.
"Growing up I collected Pokémon cards and I'll never forget the thrill of opening a pack, hoping for a holographic Charizard," Xu told CBS Sports. "When I heard of NBA Top Shot in January, I bought a pack and the nostalgia immediately hit. As an NBA fan, owning specific moments from my favorite players was a concept that was so cool. I've been collecting moments ever since."
It feels worth mentioning that Xu has become such a fan of Top Shot that he brought a sign celebrating the company to a Utah Jazz game that was later confiscated because "it was too big," he said.
This also applied to Kentucky basketball blogger Big Blue Drew, who connected his interest to being reintroduced to sports trading cards.
"Top Shot was mentioned to me by a friend in the hobby so I checked it out just for a laugh," Big Blue Drew told CBS Sports.
He went on to explain that its comparison to investing in cryptocurrency piqued his interest even more -- especially since this was something he could get into earlier in the product cycle than, say, Bitcoin -- and further research helped notice that things like Top Shot could become a huge market.
"Then I paid some attention to Top Shot's user base grow insanely fast all while on a glitchy beta platform," he continued. "Coupling that with the clear support of the NBA, I was at least sold that the idea had a legitimate chance to scale."
The growth is something of a selling point for the company as it's still in its beta stage. When Brian Windhorst of ESPN wrote on Top Shot on Feb. 16, the numbers were as follows: "Top Shot has gained traction with more than 50,000 users having bought in and spent more than $65 million in the process, according to crypto tracker CryptoSlam."
That same tracker now lists over 88,000 buyers and over $278 million in sales, as of March 2.
Speaking of sales, as is the case with collecting trading cards, there's the potential for financial gain that serves as an incentive to get involved. A collection of moments can start in the aforementioned marketplace where users can simply buy these clips off other users. One extreme example of how much money someone could make from this stems from a LeBron James posterizing dunk on Nemanja Bjelica in 2019. That moment sold for $208,000 less than a week ago, from a user named "Sparky_24" to another named "jesse."
A six-figure buy-in isn't required to get started, of course. Big Blue Drew, for example, purchased his moment, a Keldon Johnson dunk from earlier this season, for $100 -- though the actual sale went through for $90 -- while other highlights can be available for much, much less.
The financial aspect is icing on the cake for some. Take Josh Bhagratie, for example, who as a founder of his own clothing brand and someone who works in basketball media, loves the products built around the sport.
"Combining that passion with an opportunity to invest in a basketball-related product that could pay off in the future; it definitely ticks all the boxes for me," he told CBS Sports.
Xu gave a similar answer.
"I'm interested in markets, crypto, and the NBA, so Top Shot is at the intersection of all of these interests," he said. "It's just a bonus now that these moments I have fun collecting can go up in value over time."
Where the financial impact features more broadly is in the skepticism some have expressed over this product.
How the NBA fits into all of this
The question one might fairly ask after seeing the hundreds of thousands of dollars users have spent on a rather short video clip is what exactly are people getting for their money? Pretty much every "moment" is available to watch for free somewhere on the internet -- purchasing one doesn't give buyers a copyright over the clip, nor does it give them a unique viewing experience of the play -- and this thing that people are spending real currency on isn't something that can be held in anyone's hand.
There's also the very real possibility of a market crash, as is often the case with any sudden boost in investment toward a particular product. There's been many examples of sudden investing booms turning out to be nothing more than a house of cards, but one doesn't need to look any further than Dapper Labs -- the blockchain company which runs the wallet that NBA Top Shot uses -- as an example.
Here's what Windhorst noted in his reporting about the last time Dapper Labs got involved in a speculative digital market that got overinflated:
Like any investment, especially one that spikes like Top Shot has, there is the reality that it could collapse. Dapper Labs' first major project was called CryptoKitties, a game launched in 2017 that involved virtual cats. Like Top Shot, it became very popular and values of the digital collectibles exploded -- one digital cat selling for more than $170,000 -- only for the items to plummet in value after the fad passed, bearing some resemblance to the Beanie Babies craze of the 1990s.
Where NBA Top Shot has an edge over CryptoKitties is in the first part of its name: NBA. The league and the NBPA are in direct partnership with this market, which lends an air of trust for some fans in the process. It's a connection that obviously won't dismiss everyone's concerns outright -- the fact that the NBA still makes money even if everything were to come crashing down to zero tomorrow feels less than ideal -- but it provides some comfort to those who have gotten involved with Top Shot.
For instance, when I asked Bhagratie what compelled him to put money toward NBA Top Shot moments, he said it was because of the "involvement of the league and their past history of being able to market their players and the game itself. It's something I trust and can see being huge in the form of digital collectibles."
Xu, after countering the concern of these moments being fully digital with the argument that the world is trending in that direction -- a trend that the coronavirus pandemic has only accelerated over the last year -- also cited the league's backing as a reason for his investment. "I'm comfortable owning digital moments because they're officially licensed by the NBA and the players association, so I know there's a trust authority behind these collectibles which makes it feel safer for me to invest in them."
The league's support can also serve as a wrecking ball to barriers to entry over other speculative digital markets. Just as Ros Gold-Onwude did, and explained on ESPN's SportsNation, someone can very quickly go from simple curiosity to full-blown immersion.
Perhaps the NBA knew the clout it had developed over the last couple decades could finally be parlayed into an endeavor that is as far-fetched and futuristic -- to those new to ideas such as this one, at least -- as it is lucrative. It's likely no other American sports league can boast more about the type of relationship it has with its own fans, especially ever since Adam Silver took over as commissioner.
Yet like any sort of trust, it can, of course, erode over time, especially if certain issues aren't dealt with in a timely fashion. For example, upsetting users recently was when a scheduled drop of Premium packs was postponed indefinitely -- though later rescheduled a day later "to make this the best experience and as fair as possible for all collectors," according to the announcement. Top Shot frustrated many with the delayed pack drop as this was the first time that a large portion of the community that recently joined Top Shot would be able to purchase the kind of Rare Pack that was dropping since many weren't early adopters of the product.
Things seem to calm down once the reason behind the postponement was eventually explained to be due to "issues with botting activity" -- or the issue of people using computer programs to purchase products of limited quantity within milliseconds (i.e. faster than any human possibly could).
The replies to the tweet that provided this explanation were fairly positive this time around, but one has to wonder how many more delays will be tolerated, especially when botting has been so pervasive in online purchasing environments even before the COVID-19 era began. As Casey Taylor explored in this story for Vox, it's an issue that has even made its way into the market for furniture meant to entertain toddlers.
The delays are being regularly tolerated for now -- even by actual NBA players wanting in on the action.
One key to Top Shot's future success lies in handling the bots and delays properly.
"The way they choose to handle pack releases moving forward is probably the most important piece to this puzzle in the short term," Big Blue Drew posited.
And if nothing involving packs becomes a problem to users, perhaps an inability to withdraw the money they made through selling these moments will. As Dan McQuade of Defector.com discovered, only a minority (about 6,000) of users of the digital wallet connected to Top Shot are allowed to withdraw money, and the approval process is being done manually. The one person McQuade spoke to that actually could withdraw money, around $3,000 worth, has yet to see it hit his bank account.
At the same time, those are bridges that Top Shot has yet to cross, and it's debatable whether it will ever have to go near them to begin with. The people I spoke with, at worst, have an apprehensive excitement over the future, and, at best, have excitedly shared their favorite moment in their collection -- Xu says his is Luka Doncic's overtime game winner in Game 4 of the Mavericks' series against the Clippers, where he's one of 200 people who owns the moment. If that trend holds, then the NBA will have scored an and-one by creating something that simultaneously adds a new topic of conversation for arguably the biggest online fanbase in American sports, and makes them loads of money.
The only thing that would be even better for them is if that highlight could go on Top Shot as well.