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In November of 2019, Jayson Tatum of the Boston Celtics stepped back and hit a game-tying three-pointer against the Los Angeles Clippers. Later, a video clip of the moment was issued as a one-of-a-kind “Moment” on blockchain and was then sold in a pack of Moments for a few dollars on a website called NBA Top Shot. A few months later, the “owner” of this video clip sold it again for $2,200. That represents a return of a couple thousand percent — for what is essentially a version of footage that’s available to anyone. Except this one, like a unit of a cryptocurrency, was watermarked as one-of-a-kind and was in essence a commodity that could increase (or decrease) in value precipitously.
Since last October there are now new kinds of sports cards to collect called NBA Top Shots. Think of them like the old kind of trading cards, except these are moments from NBA history instead of just a picture of someone. And they’re underpinned by the technology that drives cryptocurrency so you never have to get them appraised or authenticated. They attract many of the same types of investors who’ve been driving up the price of bitcoin. Top Shots, which are kind of like souped-up highlight GIFs, are produced by a Canadian company called Dapper Labs in full partnership with NBA and the NBA Players Association, and are released in numbered series on blockchain as unique, individual digital collectibles. (The Dapper team, by the way, also brought us the 2017 blockchain collectibles phenomenon CrypoKitties.) Investors in the business include the Miami Heat’s Andre Iguodala, Spencer Dinwiddie of the Brooklyn Nets, and the Orlando Magic’s Aaron Gordon, plus the usual VC suspects in Silicon Valley. Other sports leagues have made their own versions, too. The legacy trading-card company Panini sells digital versions of its traditional cards on blockchain, as do a growing number of top European soccer clubs such as Juventus, Cristiano Ronaldo’s team. And someone paid over $100,000 for a virtual Formula One race car in a blockchain game called F1 Delta Time. But Top Shot is by far the most popular in North America.
New packs of Moments often sell out within minutes of their official release. Roham Ghareghozlou, the CEO of Dapper, said on a recent podcast that the company sold $2 million worth of Top Shot packs during its two-and-a-half-month, invite-only beta period. “Any inventory we’re putting up is basically getting snapped up in less than a minute,” he added. (Dapper borrows from hypebeast culture to promote the pack releases as “drops,” creating frenzied demand.)
What makes them fun (and potentially financially dumb) is that you can buy and then sell them for thousands of dollars more than you paid in a highly volatile and extremely speculative secondary market. Here are a few examples of Moments that have increased (or not) in value:
This game-tying Jimmy Butler three-pointer against Atlanta in a December 2019 game; sold in October 2020 for $1,100.
The Jayson Tatum crossover stepback mentioned above; sold in October 2020 for $2,200.
This Jakob Poeltl block from a July 2020 game against Sacramento. Now worth about a dollar.
And this monster LeBron James dunk against the Kings last year sold just a few weeks ago for $6,500. The new owner has the Moment — #35 in an edition of 49 from Top Shot’s higher-priced “cosmic” set — back on the market, and the asking price is $8,990.
So how exactly does it work? Good question. We’ll show you.
Step One: Understand (at least a little!) how it works
If you understand crypto and blockchain, feel free to skip this paragraph. For the rest of us: Dapper, the parent company of Top Shots, operates a proprietary blockchain called Flow. What’s a blockchain? You’ve probably heard of bitcoin and Ethereum. These are cryptocurrencies — digital assets that people own and trade in the form of “coins.” The value and ownership history of these coins are stored in an encrypted digital ledger, aka a blockchain, that authenticates the buyer, seller, price, and other transaction data. The whole point is to give the currency integrity and ensure sure there is no fraud or piracy. Unlike fungible cryptocurrencies like bitcoin, all 21 million of which are identical and have equal value (currently around $17,000 USD) digital collectibles like Top Shots are part of an ascendant asset class called non-fungible tokens (NFTs). Your eyes are glazing over — WE GET IT AND WE’RE SORRY. But NFTs are a lot simpler than they sound. All you really need to know: they’re one-of-a-kind digital assets whose value varies widely based on scarcity and desirability, and whose legal owner is forever enshrined in the blockchain.
Step Two: Buy yourself a pack of Moments
First, you set up an account on Top Shots, then you’re ready to buy a pack. Even though Moments are on blockchain, you don’t need to know a damn thing about crypto. Top Shot takes Visa and MasterCard. Packs contain three to as many as ten Moments with varying degrees of rarity, just like old-fashioned trading cards, and many of them are relatively inexpensive. Right now, for example, you can pick up a Got Game pack with three Moments for $9. These are cheap because they’re from the “common” set of Moments, the least rare plays.
Because you don’t know how many Moments there will be, or whether any of them will be valuable or feature your favourite players, the act of “opening” each pack — and clicking on the individual card for the big reveal — takes you back to your childhood, when you had that same tingle of possibility each time you ripped open a pack of Topps and stuffed that stick of chewing gum in your mouth.
That’s not the only way to get Moments though. Top Shot has built something they call “challenges,” in which the object is to collect every Moment of a certain kind; the reward for completing the challenge is an “exclusive” Moment that you can only get in a challenge.
Step Three: Decide if you want to sell your Moments
A lot of people (we hope!) will buy and collect Moments simply because they love basketball. But users interested in treating Top Shot as a way to make money will follow the same basic premise of investing in just about anything: buy it, hope it increases in value, and sell it.
Just because a lot of these one-of-a-kind assets are valuable doesn’t mean they all are. In fact, most aren’t worth much at all. For example, that Jakob Poeltl block. As with the trading cards of yore, that’s the nature of the beast. For every superstar card with a low serial number that might fetch big money, there are countless cards that are essentially worthless — except whatever they’re worth to you. As with all limited-edition collectibles, the lower the serial number the better. Top Shot adds a fun wrinkle to this dynamic: serial numbers that match a player’s jersey number are worth even more.
Step Four: Put your Moment up for sale
If and when you are lucky enough to land a card that turns out to be worth a ton, all you have to do to sell it is list it in the Marketplace section of Top Shots with the asking price, which is determined by you. All the other details — set, serial number, etc. — will be automatically included. When you sell, you can have the money transferred to your bank account or your Ethereum wallet.
So... is this a “real” investment? It depends on what you mean by real. Like fine art and rare wines, it’s an investment that works better if you love the thing for its own sake, not just as an asset. And digital collectibles like NBA Top Shots are even more of a gamble than art or wine because luck plays such a key role. Which Moments you get in your pack is a game of pure chance. There’s a bit more skill and knowledge involved in playing the secondary market. But even then it’s probably better to think of this as a game in which your “return” is the entertainment value of the hunt for the choicest cards and the lure of building a collection you enjoy owning.
We at Wealthsimple, do not believe in gambling — or speculating — with money you will actually need. When you’re speculating, you should do it with money you would be OK never seeing again. Anything else is gravy.
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